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Managing E-Commerce

As the channel grows, so grows the job: Five e-commerce chiefs steer a course through shifting terrain

After years as a store manager with Dillard’s, Macy’s and Neiman Marcus, Kristen Montella knew retail merchandising. And after a few years as director of merchandising at the web sites of Direct Holdings Worldwide’s TimeLife and Lillian Vernon Inc., she knew what it took to make an e-commerce site run. Last June Montella discovered another skill: making the business case to new top management looking for operational efficiencies that the e-commerce group would fare best by continuing as a standalone department.

In May Sun Capital Partners acquired Lillian Vernon from Direct Holdings, separating it from Time Warner’s TimeLife music and video site. One idea explored by the new owners was whether Lillian Vernon’s online channel should be folded into the overall marketing function at the company. Montella believed that would hinder the channel’s performance, and it wasn’t long before she found herself marshalling information to prove it.

“I had a half-hour’s notice that our new CEO would be calling me for a discussion about the structure of the online group,” she says. The eventual outcome of that two-hour phone conversation and others that followed was that LillianVernon.com remains a separate department within a company with deep catalog roots.

“After thinking about it, it has to be,” says CEO Mike Muoio. “It is so different. There are so many things that are web-specific, and so many functions have to be managed that are external to the traditional distribution of catalogs.” In September Montella became Lillian Vernon’s vice president, online.

New management, the channel’s rapid growth in sales contribution and an increasing understanding of what it can do as a marketing vehicle are earning e-commerce a new place in the corporate structure at more multi-channel retailers. Oversight responsibility for the channel is being lifted out of where it once resided in departments such as marketing and I.T. and given its own dedicated top management with vice president or director status.

But that’s not to say every retailer that has made this move is defining the job function and title in the same way. Responsibility can be sliced into discrete job functions and parceled out accordingly—e-commerce site operation vs. online marketing, for example—or rolled up into a broader role in which one executive has oversight for all things digital. It’s a function of resources, demands on time, the talent on board and the vision at the top.

Lillian Vernon’s new owners and management, looking for economies and ways to spread the load, wanted to review all options before making any decision about corporate structure going forward, including that of folding e-commerce into the catalog marketing department. Under the previous ownership, Montella had helped develop a team she believed could keep driving performance out of the online channel—if it could keep operating as it had been.

Part of the strength of the site, she argued, was the collective experience and expertise of the team. Including those who had been handling online marketing as well as site operations, e-commerce also had its own dedicated I.T. staff, which meant it didn’t have to wait for six months to get new applications up and online.

“Because of that, we can turn on a dime. We can react to trends and catch the wave when we see it happen. The catalog group, because of the nature of catalogs, works at a very different pace, and they work much farther ahead. It’s just a different mentality,” says Montella.

She also had numbers to support her case. With steady sales growth over the past few years, Lillian Vernon’s web site this year is expected to account for well over 50% of overall sales. Ultimately, the decision was made to keep things as they were. With overall responsibility for merchandising, marketing and technology at LillianVernon.com, Montella’s dedicated team includes a designer, a copywriter, two merchandisers, two marketers, a producer and a tech team. Site quality assurance is outsourced.

Though an increasingly large share of total sales come in online, Montella notes that most web sales are catalog-driven and estimates only 20% of online sales volume is incremental. “There would be no web site without the catalog,” she says. Montella returns the favor as a member of the companywide leadership team, providing customer data uniquely available on the web that affects other departments as well. It’s an example of how Lillian Vernon’s new management is integrating the online channel more tightly with the rest of operations, even though e-commerce remains a separate unit.

A different arena

For a marketplace at first glance so similar to that of the U.S., Canada’s differences are significant. It doesn’t have the U.S.’s tradition of catalog sales, most of its population is clustered in urban areas within easy distance of major shopping centers and its mainstream population has been slower to embrace the Internet.

Those factors all play into how the role of e-commerce director has evolved at Toronto-based Roots Canada. Roots, perhaps best known in the U.S. for outfitting Olympic teams, has 130 stores in North America and 30 in Asia , and operates a wholesale and custom goods business in addition to its customer-facing web site. James Connell is the top e-commerce executive, reporting directly to the company’s founders and owners. But his job doesn’t stop there: for the last year he’s been director of e-commerce, digital marketing and new media, the first person at the company to hold that combined title.

Connell started at Roots in 1997 doing POS training and store openings. The web, though a personal interest of Connell’s, had no place in company operations at that time. Since then, Roots started an e-commerce site that sold cross-_border, shrunk that to an informational site that pushed visitors to buy Roots merchandise online at Sears Canada, relaunched e-commerce in the U.S in 2002 to distribute U.S. Olympic team products, and pulled out of the Sears Canada agreement to relaunch Roots’ own Canadian e-commerce site last June.

Connell had transferred to Roots’ e-commerce department, then part of I.T., when it opened in 1999. When Roots later handed its Canadian e-commerce to Sears, the e-commerce department turned into an online marketing department. It later separated yet again into a purely e-commerce function, residing within the marketing department. The end of the Sears agreement has now put Canadian e-commerce back under Roots’ own roof. With that, Connell has assumed responsibility for e-commerce, digital marketing and, under the new media component of his title, “generally anything that is new and emerging,” he says.

Any of those roles might amount to a full-time job, but how the job is structured in addition to where e-commerce is on Root’s evolutionary curve keep it manageable, Connell says. He is able to delegate much of the actual management of the online store to a manager of e-commerce operations. Similarly, a digital marketer who actually sits in the marketing department reports to Connell, and his other reports include a couple of web designers. The I.T. operation is outsourced.

With oversight for the non-store channels, one of Connell’s challenges is balancing resources and efforts for those functions. One of the plusses of his three-part role is sitting in on meetings for retail operations, design of products and creation of relevant product lines, offline marketing, and the b2b operation. “The role is key because it touches on so many other departments,” he says.

Web sales are still a small contributor to privately owned Roots’ sales and there are several reasons why. Most of Canada’s population lives close to a Roots store. For a long time, e-commerce was viewed at the company mostly as a way to distribute U.S. Olympic products. Throw in early web experiences far less user-friendly than is typical today and the fact that Canada had fewer catalogs to accustom people to buying remotely, and there wasn’t a lot of impetus for Roots to develop its online channel.

But that has changed, Connell says. “Now people are starting to see the benefits of operating an online store as a profitable business and a revenue generating opportunity,” he says.

If that’s the case, might Connell’s broad role, and especially its combination of online marketing and merchandising, again be divided as the business grows? That’s one potential scenario. But right now? “I believe this configuration works best, given the company’s objectives for growing the channel,” he says.

Splitting functions

Intimate apparel retailer Bare Necessities started 30 years ago as a single store. Though the company now operates four stores, the founders saw the Internet as the key to growth, launching BareNecessities.com in 1998. The channel got its own vice president from the start, with that position covering site operations and marketing, including online and store-based marketing.

“The aha moment was when we realized there are really two distinct jobs we want done. We want to bring people to the site, then when they get there we want them to have a great experience and buy,” explains CEO Noah Wrubel. With what it says is 60% annual growth since 1998, Bare Necessities had reached the point in its evolution online at which it needed to split those jobs.

The channel’s initial vice president had been handling it all with the help of three director-level positions. After splitting up the two job functions, Bare Necessities in October hired Jessica Jackson, a 20-year veteran of Victoria’s Secret, as its first dedicated vice president of e-commerce. While the original vice president, now vice president of Internet marketing and new business development, now focuses on driving traffic to the site, Jackson’s role is to optimize the site experience for shoppers once they arrive.

Her position’s function is part technical analyst, part creative director. For example, it’s her job to understand conversions as well as where people are dropping off the site, and then sand down points of friction that are causing the drops. With no full-time data analyst on staff, she needs to determine key metrics to follow and what merits testing on the site. At the same time, she’s charged with putting more brand personality into the site experience, a must as the company seeks to expand business.

“So one of the challenges from a marketing content and creative point of view is, how do you take what is a visual brand and put that into 72dpi, make it look fabulous, and make it have the impact you can have from a billboard or printed page or store window,” she says.

Jackson has a seat at the strategic planning table alongside top management and the two other vice presidents. She works especially closely with the vice president of Internet marketing and new business development and the executive vice president of merchandising. That underscores the fact that though the company has divided responsibilities among more people as it has grown, those people depend in part on knowledge the others have to get their own jobs done. “You can’t market the site,” she says, “without knowing what is going to be big in fashion, where we are going to spend our time and effort on creative development first, who the big vendors are, and where people are going on the site.”

Family business

The vice president of e-commerce at J&R Electronics Inc. didn’t have to carve out his role from another job title or undergo corporate restructuring to define his responsibilities. Jason Friedman designed the job himself over time, but that’s the opportunity—and the challenge—of being in the family business.

Friedman, son of the founders of J&R, started working there as a teen. That was after the 35-year-old company had started growing from a tiny Manhattan storefront selling records into a megastore covering one city block, and after it had launched its catalog business. After graduating from college in 1995 with a background in database programming, Friedman was in law school when his parents asked him for help in putting up a web site. “It was a side project while I was in law school, but it quickly snowballed. I quit law school and I’ve been here ever since,” he says. The product database he built for the company at that time is still the product catalog it uses today.

Friedman joined the company full-time as database programmer in 1997, recently garnering the title of executive vice president. Though his responsibilities now encompass more than the online channel, Internet retailing is viewed as the future of the company and remains his primary role. Compared with how the job might have evolved in a non-family business, Friedman had more ability to call his own shots and define his role as the company’s web business gained on its catalog business.

When the web business was starting to take off, he tapped into the deep institutional knowledge surrounding him. Relative to the rest of retail, J&R doesn’t have a lot of turnover: 20% of its staff, for example, has been with the company for 15 years or more. To populate the fledgling e-commerce department as it separated from the catalog department, Friedman searched out top prospects already employed at the company in other departments, approaching those with skills he saw as a fit for the new channel and pitching them on the opportunity.

Hitting up established departments for top employees could rock the boat in other organizations, especially when a new department head is—as Friedman was—a 25-year-old, and Freidman acknowledges that when establishing his new role and the new e-commerce department, it didn’t hurt to be the bosses’ son, with his own long-term experience in the business. Otherwise, he says, “In the beginning, I probably would have had to do a lot more convincing and I would have had a harder time taking buyer, catalog and warehouse resources,” he said.

Today e-commerce operates as a standalone department in J&R and Friedman heads a dedicated team of 50. And he doesn’t need to convince anyone anymore that the web is a key channel. With online sales estimated by Internet Retailer at $43 million, it has become one of the biggest parts of J&R’s business.

Not just liquidation

When a retailer offers an average 700 new SKUs per day, there will be a lot that sells and some that doesn’t. Such is the case at retailer Jewelry TV, which thought it figured out an answer to that problem a few years back: the Internet.

“It was the place we were going to put everything that didn’t sell on TV,” says James Thome, vice president of e-commerce at Jewelry Television. “It didn’t have its own P&L, didn’t have its own budget or revenue goals. It was more of an afterthought.”

But that was then. “Management realized the web could be a huge growth driver going forward,” Thome says. As a result, during the last two years it has invested in technology and people. Thome was brought in as the company’s first e-commerce vice president a year ago and told by top management it was looking to double the Internet business, about 10% of revenue in 2005, within a year. So the first thing Thome did was to restructure his entire department.

The e-commerce function had been supervised by a director of e-commerce who had oversight for a merchandising group and a design group. Thome determined that structure couldn’t support the accelerated channel growth the company was seeking. “There was diffused accountability and responsibility. We needed to have very clear lines of accountability so we could be very efficient, because frankly, we’re doing three times more now than we were last year,” he says.

Thome is responsible for day-to-day operations as well as future strategy of the company’s online business, which includes both Jewelry Television and the recently acquired Shop At Home. He grew the online team of 20 to about 30. He divided it into six functional areas: e-marketing, e-merchandising, web and design services, project management, product management, and business intelligence (a combination of web and database analytics). The director of e-commerce now has responsibility in the first three areas; a second director reports to Thome with responsibility for the rest.

The web site’s first priority is to supplement Jewelry Television’s TV broadcast, which runs 24/7 and is streamed on jtv.com. But beyond that, the web site affords the opportunity to appeal to different shoppers in different ways than the broadcast does. That utility and the channel’s sales growth have gained the attention of senior management. Thome says the team is recognized as instrumental in the growth of the company and included in high-level decisions.

“When we talk about business expansion, acquisitions that would complement the online channel, and using the Internet to enter markets we’re not in,” he says, “we are defining and driving that strategy and getting the funding to move forward.”

 
 

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