Everywhere you turn in today's retailing world, people are talking about e-commerce and how it's revolutionized the way goods are sold in this country. In 2003, according to the Department of Commerce, online retail sales in America grew by 26%, totaling $55 billion. However, this figure represents less than 2% of total retail sales. It may be hard to believe, but people still prefer the "in person" experience. A women's clothing company, Coldwater Creek (Nasdaq: CWTR), is an example of this preference.
Coldwater Creek began life 20 years ago as a home-based mail-order catalog business selling casual women's clothing. Based in Sandpoint, Idaho, it originally produced one catalog that had 18 items for sale. Today, it produces two catalogs with 3,000 items. In 1999, the company created its e-commerce platform, which represented 28% of Coldwater Creek's $518 million in total revenues for 2003. Pretty heady stuff for a business located in a town of 7,000.
So, why would a company that is producing a majority of its sales from catalogs and the Internet choose to focus on "bricks-and-mortar" retail? Certainly, its history is not in this area. In fact, when it went public in 1997, it had a retail store in its hometown only. Otherwise, it was exclusively a catalog operation.
What changed? Management made a conscious decision in 2000 that the company needed to be a multichannel retailer to return itself to the hyper-growth it experienced in the late 1980s. Further, this growth would only happen by being closer to its catalog customers, and that meant storefront retail. To that end, in 2001, management wisely hired a retail veteran, Daniel Griesemer, who understood the storefront business model, having cut his teeth at Gap (NYSE: GPS) and Federated Department (NYSE: FD) stores.
Is the proof in the pudding? Recent financials would seem to indicate that management was dead on. At the end of 2000, there were 10 retail stores in operation. Those stores produced $31.8 million in revenue, representing 7% of total sales. The latest year-end report showed 66 retail stores in operation, generating $194.6 million in sales, or more importantly, 37.5% of the total. The multichannel business model is starting to produce positive results, and if the first-quarter report is any indication, more is in store.
Coldwater Creek has done the unconventional by building a catalog operation first and a retail presence second rather than the other way around. It may not have taken the traditional route to developing a great business, but it got there just the same, and ultimately, that's all that really matters.
Are you a Fool Community member? If not, you can sign up for 30 days free.
Fool contributor Will Ashworth lives in the Great White North. He does not own any companies mentioned here.
Terms & Conditions
RSS Headlines
Fool UK