CEO: Blind Rush to E-Commerce Is Foolish

FRAMINGHAM (02/21/2000) - Paul Charron, CEO of Liz Claiborne Inc., has an Internet strategy, but he won't let it jeopardize his core business. He spoke about the company's e-commerce philosophy with Computerworld senior editor Carol Sliwa at a recent National Retail Federation conference.

CW: How do you feel about selling Liz Claiborne-branded clothing over the Internet?

Charron: Channel conflict is a real problem. At present, we don't have any plans to sell over the Internet, but we have a very well-developed Web site that gives us a lot of consumer interaction. My challenge in the case of Liz Claiborne - which is in every department store in the country and in every lifestyle - is not to find more venues for the consumer to purchase Liz Claiborne. My challenge is to get the venues that I have more productive.

There are other brands in our portfolio that are not nearly as ubiquitous as Liz Claiborne. For example, Lucky Brand dungarees, a company we bought last June, is our pioneering brand [for selling via the] Internet. It gives us an opportunity to learn.

I think honestly that some of the most important decisions you can make about the Internet today are the things that you will not do, as opposed to simply the things that you'll do. There's tremendous pressure on people like myself to get to the Internet. I mean, every time you turn around, somebody's [saying] the Internet's going to take over the world. In all honesty, I don't think so.

It's going to be a big thing, and we're capitalizing on the Internet, but there are a lot more ways to use the Internet than simply enabling the consumer with a click of her mouse to purchase the outfit that you're wearing. . . . You can't tell how something's going to fit over the Internet.

CW: Are you ruling out the possibility of selling Claiborne products on the Internet?

Charron: No. You need to be flexible. We're not going to be hoist with the petard of our own principles. . . . Right now we're selling our Liz Claiborne brand on the Internet via Macys.com and Bloomingdales.com. We may sell other brands. Two, we're selling on the Internet via Lucky. Three, we have a number of other Internet approaches that we're simply not prepared to announce at the present time.

The data today [suggests] that for the next five years, the Internet sales in the U.S. are going to be transfer sales [from physical stores to online, with no increase in total sales]. So why do I need that?

We will have an Internet strategy that will be very commercial, beyond the strategies that we're now employing.

But clearly, what we're not going to do is build a massive site, put that on the [profit-and-loss statement]. And we're talking $9 million, $10 million, which for me is 9, 10 cents a share if I do it on the P&L. Now why in the hell would I do that, unless I was going to get an incredible return?

I can lose 9 to 10 cents a share, as I will in 2000, to successfully birth the Kenneth Cole brand, which is a new brand in women's wear that we've licensed that will extend my reach. And that Kenneth Cole brand will be $300 million in three years. Now, I don't think the Liz Claiborne brand, if I was to spend $9 million to $10 million [on an e-commerce site], is going to represent $300 million in incremental sales in three years. So it's really common sense.

Shareholders pay me to make money. They don't pay me to come with ideas that are going to have a return in 2020. I can invest money today that's going to generate a return in 2005. But I better cover it, because I've got to show consistent double-digit earnings growth quarter after quarter, year after year.

If I don't, the stock market will penalize me.

CW: Has the thought of spinning off a dot-com operation ever entered your head?

Charron: No. If it doesn't make sense for me to do with my core brand right now, I've got nothing to spin off.

CW: Do you think companies are in too much of a rush to get to the Internet?

Charron: I think everybody should have a response to the Internet. But an Internet strategy is not necessarily a rush to sell product on every one of your brands over the Internet next Tuesday. I think personally we're using the Internet a lot more effectively in extranets or intranets than we are in terms of selling stuff over the Web.

CW: How are you using Web technology to interact with your retailers?

Charron: We are working very closely with our key retail partners on something called Liz Link, which is an Internet-based order status system.

In addition, we're working with Saks Inc. on something called Liz@Market, which is a virtual showroom.

CW: How important is technology in your dealings with suppliers?

Charron: The ability to use technology is a very, very important capability in choosing suppliers. We've cut the number of suppliers we have in the last five years by 50 percent, despite the fact that we've doubled the number of units we source with the growth of the company.

It was a conscious decision on our part to stop going from country to country in search of an ever-decreasing labor cost. And instead, we work with people to drive more productivity and better communications and better relationships, better anticipation, common management and technology as the great enabler in that regard.