Byline: Katherine Bowers

REDMOND, Wash. — Amid dot-com retrenchments and its own retail struggles, Eddie Bauer’s five-year-old Web site is something of a bright spot.
The e-tail operation, born in 1996 as a rudimentary shop on America Online, now accounts for 30 percent of the company’s $450 million in direct sales — including online and catalog — or roughly $135 million. Eddie Bauer’s total sales are $1.8 billion.
Most significantly, EddieBauer.com remained profitable in 2000, despite a disastrous year, where the retailer’s comparable-store sales fell 9 percent and its catalog sales dropped 3 percent. During the same period, its Web sales grew 130 percent, prompting parent company the Spiegel Group to call EddieBauer.com a “major growth vehicle in direct sales.”
“The Web site is becoming more significant every year. When the stores turn around, the [profit] margins will be even greater,” said Eric Beder, an equity analyst with Ladenburg Thalmann & Co. Inc.
Beder predicted that the Web site will grow another 30 to 50 percent for fiscal 2001.
But the e-tailer’s growth has left some analysts asking whether its online success is coming at the expense of Eddie Bauer’s catalog and retail operations.
In its latest earnings report for the month of January, the overall bad news continued for the outdoor lifestyle brand. Retail sales sank 6 percent, while catalog sales dropped 15 percent. But once again, e-commerce sales stayed buoyant, up 112 percent during the same period — although those staggering percentages are easier to achieve working from a smaller base number.
“In some respects, it’s hard to figure out exactly why the Web site is doing so well when the stores are not,” noted Beder.
Jeff Klinefelter, a senior equity analyst with U.S. Bancorp Piper Jaffray, said when there is “particularly slow or negative growth [in other channels], you can clearly point to customers migrating across channels.”
Use the phrase “channel cannibalization” and Eddie Bauer executives wince. They are quick to paint a more complex picture of how customers purchase.
“Certainly industry data bears out that [e-commerce] growth would come out of the catalog business,” said Mark Staudinger, Eddie Bauer’s vice president of Interactive Media. But, Staudinger added, since the Web site always gets a burst of business after a catalog drops, it’s tough to measure whether the catalog or the Web site is actually drumming up the activity.
The Web site brings in about half as many new customers as the catalog, though Staudinger said he expects the e-commerce site to catch up. The company advertises on more than 100 Web sites, including AOL and Yahoo, and plans to ink additional deals to spread its roots further in cyberspace.
Certainly, there are significant financial incentives for Eddie Bauer to move a portion of its catalog — and even retail — business online. Not only is it a cheaper way to acquire a customer, but a Web order costs mere pennies to process, while a catalog order costs a couple of dollars, said a spokeswoman for Eddie Bauer, which is based here.
The company has already realized a measure of success coaxing catalog customers online. Order tracking, which launched in October, allows customers to check their accounts to find out when an order will ship or if a credit has posted. Calls and e-mails requesting order status have since dropped 50 percent, said Susan Knight, a vice president who oversees customer service.
Although she declined to divulge specific cost savings, Knight pointed out that order tracking has allowed her to handle the Web site’s rapid growth without hiring additional service representatives.
The company is also working to reverse consumer perception that the Web site carries a smaller selection than the catalogs or stores.
“Interestingly, consumers’ perceptions are the exact opposite of reality,” noted Mark Nassutti, Eddie Bauer’s divisional vice president of brand and retail marketing. “Consumers believe that retail stores have the most selection, followed by catalogs and the Web site.”
Along with men’s wear and the home division, EddieBauer.com carries roughly 600 women’s styles, 40 percent more than the catalog or stores.
Certain products — such as Eddie Bauer Kids — are only offered online, while other items premiered on the Web site before they hit retail or the catalog. Swimwear, for instance, was available online in November, four months before appearing in the spring catalog.
The timing benefits both sales channels: the Web site captures a cruise swimwear business, while the catalog gets an early read on sales patterns that helps build an effective inventory.
In the next few months, Eddie Bauer will begin testing personalized e-mail marketing campaigns designed to quickly and inexpensively do what the catalogs already do: create an occasion for the customer to shop.
According to analysts, Eddie Bauer needs to stay focused in order to compete with Web outfits LLBean.com and LandsEnd.com, both of which have well-run Web sites offering products similar in price and styling to Eddie Bauer’s.
Internet consultant Gomez Inc., which covers all three portals, has four times ranked Eddie Bauer as the number one apparel Web site for service, functionality and selection. But Barrett Ladd, a senior retail analyst for Waltham, Mass.-based Gomez, said EddieBauer.com’s lead over its competitors is slim.
Lands’ End strength has been its steady introduction of new technologies, such as live chatting or virtual models. But the Web site is hindered by a visually overloaded home page and a “clunky” checkout process, Ladd said. Some items on LLBean.com, she added, can’t be viewed close-up.
She cited Eddie Bauer’s color swatching, which allows consumers to switch a style’s color, as an important feature that neither L.L. Bean nor Lands’ End has.
In practice, the differences among the three Web sites are subtle enough that consumers haven’t indicated an overwhelming preference for one over the others. The three companies currently jockey for position among the top 10 most-visited apparel Web sites in monthly traffic reports released by New York-based Internet consultant Jupiter Media Metrix.
During December’s online gold rush, for example, the three ranked second, third and fifth of all apparel Web sites, with Lands’ End drawing 1.8 million unique visitors, Eddie Bauer attracting 1.7 million and L.L. Bean drawing 1.5 million.
“[The Web sites] are pretty much competing head-to-head in terms of apparel,” said Heather Dougherty, a retail analyst with Jupiter.
But, with its 451 stores accepting Web returns, EddieBauer.com has a significant advantage over L.L. Bean and Lands’ End, both of which have only a handful of outlet stores.
“I don’t think that advantage can be underestimated,” said Dougherty.