January 15, 2001

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Lands' End Gets Into Software Biz

Direct retailer takes stake in software vendor

By Cheryl Rosen

More on personalization software:

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alk about a unique product for an online retailer: In addition to cashmere sweaters and khaki pants, Lands' End Inc. has added personalization software to its product line.

In a deal inked last week, Lands' End bought nearly 20% of software vendor QuickDog Inc., which now has the right to sell the patented technology behind Lands' End's custom-developed My Personal Shopper system, first unveiled in November. In return, the Dodgeville, Wis., direct retailer gets first dibs on technology upgrades.

QuickDog wasted no time peddling the software, now dubbed QuickDog Personal Shopper, to Landsend.com's biggest E-retail competitors for about $500,000 per license; small businesses can use a hosted service that's priced from $100,000 to $200,000 a year or opt for a model under which they pay a fee for every sale resulting from the software's recommendation.

The personalization software follows other technology innovations that have pushed Lands' End to the lead spot in online retail each of the past three holiday seasons, analysts say.

Just what makes Lands' End's software so unique? Typically, personalization tools offer choices based on a customer's buying history. The Lands' End-QuickDog solution mimics the methodology of human personal shoppers, who get a handle on customer preferences by holding up pairs of items and asking, "Which of these do you like better?" Lands' End asks customers a few quick questions about what they're seeking, their size, color and fabric preference, and body type. The site then shows them several outfits based on the answers. It uses historical purchasing data to provide customers with appropriate ideas each time they return to the site.

Lands' End senior VP Bill Bass got the idea for the system by observing personal shoppers at Nordstrom's help customers find the right items, says QuickDog president and CEO Scott Metcalf. Bass, in turn, hired McKinsey & Co. to help develop the concept, added back-end artificial intelligence from QuickDog, and outsourced the coding to Sapient Corp.

Although no software can duplicate a human personal shopper, Lands' End's has gone a long way toward "cloning the human personal shopper into a digital experience," says Arthur Andersen partner Joe O'Leary. So intriguing is the technology that O'Leary questions whether Lands' End made the right decision in reselling it. "If I were them, I wouldn't sell it to my competitors," he says.

But Lands' End has already learned the hard way just how short a shelf life technology innovations have in the competitive E-retailing sector, says Gomez Advisors analyst Barrett Ladd. Every year, Lands' End deploys a leading technology--virtual models, for example, in 1998 and live customer-service chat in 1999--and each year, its competitors quickly roll out the same thing. Lands' End got consumers interested in live chat last year, and Webline, which supplied the software, made a bundle, Ladd says. Webline has since been acquired by Cisco Systems. "This time," Ladd notes, "Lands' End wants to take part in the revenue stream" by owning a piece of the company marketing the technology."

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