How Spiegel Recovered
What's more, Spiegel Brands reduced its fixed overhead on an annualized basis by $36 million, achieved by restructuring the call center function, centralizing its IT platform and consolidating warehouse functions between July and November 2004. "November was when we became completely free of any infrastructure left by Otto," she says, referring to the Otto family, the former majority owner, which also owns the majority of German direct marketing giant Otto Versand.
Among other cost reductions, Spiegel and Newport News began fulfilling orders out of the same call center, which was moved from Virginia to Nova Scotia. Additionally, Spiegel Brands' marketing department reduced advertising spending by $21.9 million by optimizing circulation strategies for both businesses.
Despite the negative experience with its previous credit business, one of the early actions Madonna took was to strike a 10-year agreement with Alliance Data Systems Corp., a provider of transaction, credit and marketing services, to provide co-brand credit card programs for both catalogs, helping give Spiegel, in particular, a new start in the customer credit business.
"We went from a 56 percent credit penetration to 4 percent overnight," Madonna points out about the closing of the credit card business at the time. "That was the main event … that really impacted our sales in 2003."
As for the catalog's overhaul, Madonna and her team effectively have updated the Spiegel catalog business from a department store in print to a resource of what today's busy women want. "Today, it's much more about ideas, advice, inspiration and concepts," she says. "We have experts in different fields who give customers advice. And we have a new style point of view, which is relevant to today's customer. It's very fabric-driven."
Most notably, this past January, Spiegel rekindled an old relationship with designer Norma Kamali for an exclusive, 17-item fashion line called Norma Kamali Timeless. Spiegel previously had carried a Norma Kamali line during the 1980s; now Madonna says Kamali is in sync again with today's Spiegel customer. "We sourced the line, produced it, and our customers love it."
