Less is more at One Step Ahead

Catalog/online store thrives with lean product mix

By Lisa Casinger -- Kids Today, 8/1/2007 12:00:00 AM

They say necessity is the mother of invention and in the juvenile industry that phrase could not be truer. An overwhelming majority of retailers got into the business when they had children because it was at that point they realized there were no viable shopping options in their area.

The product mix for One Step Ahead and Leaps and Bounds includes apparel, bath and health, feeding, safety, travel and gear and toys.

Karen Scott, founder and president of One Step Ahead/Leaps and Bounds, also got into the business when she had her two boys — but for a little different reason.

"When I had my first son, Steve, I was a marketing executive at Kraft working 70 hours a week," Scott said. "When I came back to work after my second son Mike was born three years later, I was promoted to mergers and acquisitions and I was no longer in love with what I was doing in the corporate world."

As many parents do with their second child, Scott started hauling out all the products and gear she'd saved from the first child and she realized she had a problem.

"The car seat I had caused me a muscle spasm getting my child out of it," she said. "The swing I had was a wind up and every time I wound it up the baby would wake up and the list goes on and on."

Scott realized the products she'd bought for the first child were not usable and in fact most of them were bad purchases.

"I think I'm a pretty intelligent person and I'd bought a lot of bad product," she said. "A light bulb went off and I thought I can't be the only parent who's been through this — bought products that didn't really meet my needs."

From there Scott formulated her business concept and did a screening with about 200 local new parents asking them questions about their purchasing experiences and about products that didn't meet their needs. She got an 80% response rate, unheard of for most surveys.

She left Kraft and started moving ahead with her idea in 1988. She sent a test mailing of 125,000 catalogs filled with infant and toddler products to expectant parents and grandparents. She worked out of the library in her home.

Six months later her husband Ian, who has an IT background, joined her in the business. They brought customer service and shipping operations in-house and moved into a 5,000-square-foot facility. Today the multi-faceted company is #18 on Kids Today's list of the Top 20 kids home furnishings retailers; it is the only catalog/Internet retailer on the list and one of the few independently-owned retailers. Average transactions are $60–70.

Scott launched her retail business through direct mail rather than a brick-and-mortar store because she said it gave her more leverage and made it easier to grow the business as the need arose. Expanding didn't mean finding the perfect location or buying a store — it meant buying more mailing lists and increasing the customer base to which she mailed.

One Step Ahead moved six times from its beginning as a home-based business to its current location in Lake Bluff, Ill. in an 180,000-square-foot space that includes a warehouse and shipping department, office spaces and customer service area.

The circulation for the catalogs varies between 2 million and 5 million. One Step Ahead is mailed 13 times a year and Leaps and Bounds is mailed nine times. One Step Ahead mailings are comprised of five new books and supplements that include new products or repaginations.

One Step Ahead is geared toward children ages 0 to 3, while Leaps and Bounds reaches the 3-year-old and older market.

The retailer's 180,000-square-foot location in Lake Bluff, Ill., houses the shipping department and warehouse, offices and customer service area.

Ten years after starting the catalogs, they took their business to the Internet. Ian and Karen's skill sets compliment each other and were ideal for direct marketing. His responsibilities include heading up the operations side of the business, sales and service and Karen's include marketing and business development.

One Step Ahead's customers are typically upper-middle income, college-educated moms who work at least part time.

The thing that makes One Step Ahead truly unique stems from Scott's initial idea to cull product for her customers. Every product that appears in the catalogs and on the Web sites has been through a prescreening process.

"We ask for all the testing manufacturers do on their products," she said. "Then we do an internal merchandise test and then products go through a parent panel."

The screening process starts with the buyers who select products for the core categories. One Step Ahead, geared toward 0–3-year-olds, offers baby clothing, bath and health, feeding, nursery, safety, travel and gear, toys and seasonal merchandise. Leaps and Bounds, geared toward 3-year-olds and up, offers health and growth, safety, travel, at home, indoor toys, outdoor toys and seasonal products.

The next step is to get the products in front of consumers either via a focus group or in-home trials. .

"A lot of Internet businesses that have surfaced in the last 5–6 years think more is better," Scott said. "We think less is more as long as you've done your homework. We offer the best the market has. We do comparative shopping, we prescreen product and one of the new features on our site is customer-generated numerical product ratings with commentaries."

If a product starts to receive a lot of negative feedback, it gets reevaluated and the information is passed along to the vendor. If the vendor can correct the problem, Scott keeps it in her lineup. If not, it gets dropped.

The top-selling product categories are safety, travel and apparel. Scott offers some furniture on the sites and in the catalogs as long as it can be shipped via UPS. About 60% of the Web sales are driven by the catalogs and 75% of the overall business is generated by the Internet. The Web sites contain more than two and a half times the product available in the catalogs. The strongest products are featured in the catalogs and the selection is representative of the core product categories.

Scott uses e-mail promotions to keep in touch with shoppers and drive them to the site. She says they tend to perform better if they're sent earlier in the week and most have a promotion tied in. They've tested e-mails with more content rather than promotions and they've not done as well. Typically e-mail is sent every two or three weeks and more frequently during the holidays.

Scott describes her competitors as anyone with a Web site, but her main ones are Target and Babies "R" Us. Her consumer surveys have shown that about 86% of shoppers admit to making purchase decisions based on price, so she does try to price match, but aside from that she also offers private label product and a 100% unlimited product warranty.

"Someone once said that your competitor is a click away," Scott said. "That is the truest statement made in the last decade. The real challenge is to make your site sticky; content is one way to do it as is addressing the information and product needs of your customer base."

Private label products represent about 25% of sales for the company. Scott works with vendors in the industry on many of her private label offerings but she also is always on the lookout for products they can improve or develop exclusively.

Late shipments are Scott's main problem with vendors, an issue that has made her put out an addendum to her vendor handbook.

"Vendors agree to hold inventory to our projections and then they don't," she said. "We can fully appreciate their problems, particularly when we cherry pick. It requires a lot of negotiation and we have a very astute purchasing group, but every season there's one or two vendors that kill us. If a vendor does that more than once then they're out."

Scott also is challenged by vendors selling direct to consumers on the Web. If the vendor maintains parity pricing it's not a problem, but if they undercut her prices, she stops selling the product.

Ongoing challenges include increased delivery and shipping costs.

"I think it [delivery and shipping] will impact everyone who does business on the Internet," Scott said. "Some industries can price up to accommodate that but our industry is absorbing all of these extra costs and no one seems to be willing to move on product. It takes one brave soul to do it. We are the market leader, outside of Babies 'R' Us, for our industry and I think people might be looking to us to make the first move."

Scott notes that she has made some mistakes, including a failed credit book operation, but she has high hopes for a recent idea. During a business trip Scott had the chance to "examine the business at arms length" and she realized they'd walked away from the core part of the business — prenatal. When the big boxes got into specialized gear and One Step Ahead's sales dropped in that category, the product showed up less and less in the catalogs. One Step Ahead originally was targeted at 0–3 years but Scott realized the catalog product offering now was appealing to parents of 6-month-olds and older and the 0-6 month category was lost. She's now in the process of rectifying that situation.

"I told our buyers not to worry about the margins but to pull together the best baby gear a parent could have," she said. "If we lose it in the margins we'll get it back in the core because we'll reach the customers earlier on."

So she'll be launching a new catalog, one with more content and tips on parenting and a solid collection of the best of what's available.