Danier Leather’s smooth road to e-commerce

Kevin Strachan is a cautious guy. It’s Danier Leather’s annual Men’s Night — a schmooze-and-shop fest held each December at the company’s headquarters in Toronto’s west end — and Strachan ducks into a back room to escape the glare of the showroom lights. CEO Jeffrey Wortsman is casually working

the room in a leather blazer. By contrast, Strachan, the fortyish director of e-commerce at Danier Leather, looks a little nervous in his Harry-Rosen-style suit. Occasionally he steals worried looks at the showroom floor, where several hundred of his company’s friends and customers are drinking Glenfiddich whiskey and Stoney Ridge pinot noir. About a dozen models have been hired to lend the evening an atmosphere of glamour.

Everything looks fine, but Strachan, who is this night’s emcee, can’t shake that worried feeling. “”This is a kind of customer appreciation night,”” says Strachan, a boyish executive whose reddish hair and beard go well with his mauve tie. “”We invite some of our best customers. They get a chance to shop for great bargains, and they walk away with a nice memory of having had a chat with one of the girls.”” The girls — of course — are the models, all of whom hover at around six feet in their spiked heels.

Overhead cameras hidden beneath smoke-coloured domes capture all the action, and stream it over Danier Leather’s Web site. Later Strachan gives a little speech and draws names for a variety of prizes, ranging from leather garments and accessories, to Raptor and Maple Leaf tickets. As the night winds down, he begins to loosen up a bit. The evening has been a success, but it is clear Strachan won’t really be able to relax until he locks up.

His cautious approach to public relations is mirrored by his careful approach to e-commerce. St. Paul travelled the road to Damascus one step at a time, and Danier Leather — a manufacturer and retailer of leather garments and accessories with annual revenue of $180 million — is marching toward e-commerce riches, with Strachan leading the way, in exactly the same fashion.

Since 1998 the publicly-listed company has been slowly rolling out its e-business platform and making improvements along the way. There has been no fanfare or hoop-la, just steady progress. It is a strategy that flew in the face of convention when Danier Leather first dipped its toe in the e-commerce ocean, but since the dot-com meltdown it has proven to be an effective approach. While other specialty retailers in this country — including Indigo Books & Music Inc., Roots Canada Ltd. and Forzani Group Ltd., which operates several sports-wear chains including Sport Mart and Sport Experts — have either pulled the plug on their e-commerce initiatives, or at least scaled them back, Danier Leather continues to forge ahead.

“”We would not build a 10,000 sq. ft. store in an unproven area,”” says Strachan. “”We would start with 1,200 sq. ft. and build from there. It’s the same thing with the Web. We’re willing to take risks with the garments we make, but not with technology.””

To minimize its technology risk, Danier Leather decided to outsource its e-commerce platform from day one. When it made its Web debut in 1998, IBM Global Services was right there holding the company’s hand. The main advantage of outsourcing for Danier Leather is that it has never needed to invest big bucks in IT to leverage its brand on the Internet and reach out to a large customer base.

“”We would like more customers like Danier Leather,”” says Mark Langlois, business development manager at Markham, Ont.-based IBM Global Services Canada. “”They’re demanding as heck, but they reward us with loyalty when we deliver.””

A case in point is a special-order capability introduced in fall 2002 that allows Danier Leather’s 89 retail outlets across the country to source a garment for a customer online if it is unavailable in the store. The application — which reduces the cycle for special orders to one week from three, and is connected to the company’s inventory systems — was implemented in about two weeks. “”We have that kind of traction with Danier Leather because we’ve established a relationship,”” says Langlois, noting his client pays a fixed fee each year.

But how much money does Danier Leather make online? And is the online store profitable? “”Our CFO would say it adds value to the business,”” says Strachan. As for sales, danier.com generates about as much money as a brick-and-mortar outlet — $2 or $3 million a year. Not a lot to be sure, but that figure is expected to ramp up substantially in the coming years.

“”Danier Leather is able to use its Web site to extend its reach well beyond traditional stores,”” says Ted Salter, consumer products and retail specialist at the Toronto office of Cap Gemini Ernst & Young. “”Unlike Canadian Tire or Wal-Mart, they are not necessarily a 15-minute drive from your home.””

In the U.S., where Danier Leather has established a modest beach head with two retail outlets, e-commerce will be even more important. Analysts predict the company will have six or seven stores by the end of 2003. That is still barely a drop in the bucket, but Danier Leather expects the Web to make up for its low visibility on the street. Already half of Danier Leather’s online sales come from the U.S., says merchandising analyst David Brodie with Toronto-based Research Captial Corp. “”Danier Leather take a low-risk approach to everything it does,”” adds Brodie. “”The Amazon and Indigo route does not work for everyone.””

In the meantime, Danier Leather is leveraging its investment in e-business for maximum benefit “”A lot of people are using the site for information,”” says retail analyst Marilyn Brophy with Toronto-based Scotia Capital Inc. “”When they have found what they want, they go into the store and buy it.”” The result is that Danier Leather is creating educated consumers who increasingly walk into one of the company’s retail outlets and ask for a product by name. Instead of spending an hour with a sales clerk, these customers typically wrap up their purchase in 15 minutes, giving the staff more time to help less knowledgeable shoppers.

Those who do make purchases online, some from as far away as Brazil, can take advantage of a number of sexy features, including the ability to zoom in on a garment to get an exact picture of the stitching, and to ask questions in a live-chat forum.

Danier Leather is also increasingly using its e-commerce platform to communicate with customers. Direct mail is still the preferred medium for reaching the company’s tier-one shoppers, but the Web is an effective tool for tier-two shoppers. “”If we capture an e-mail address we’re able to start the relationship sooner,”” says Strachan, who estimates it costs his company about five cents to reach a customer using e-mail, versus 60 cents for conventional mail.

What’s next? The next generation of Danier Leather’s e-commerce platform is expected to roll out in time for fall 2003. Langlois at IBM says Danier Leather wants to turn the Web into its main communication hub. “”We’re talking about a higher order of performance.”” What exactly does that mean? Strachan declines to elaborate. After all, he is one cautious guy.

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Jim Love, Chief Content Officer, IT World Canada

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