Coldwater Creek

Posted on by Chief Marketer Staff

Is there such a place as Coldwater Creek? The image conjures up some far-off place in the mountains, with cool streams and tall pines, a spot we would all like to visit.

Actually, it exists only in our minds, says Dennis P. Pence, president and CEO of the catalog company bearing that name. But the image must be pretty vivid to consumers, for sales skyrocketed to $246.7 million last year, thanks to expert merchandising in the four catalogs mailed by the firm (none of which is called Coldwater Creek).

Now the Idaho firm is pursuing an all-out growth agenda. It has expanded its new private label line, launched a bed and bath catalog, and entered the Japanese market.

Will that North American essence survive the transition to Japan? The company introduced its popular Spirit of the West catalog there last year, translating the catalog into Japanese, converting dollars into yen, and hiring six Japanese-speaking service representatives to handle the calls.

Pence notes that Japanese customers don’t have a high propensity for discretionary spending, but he remains cautiously optimistic. “We’re seeing a very difficult sales time in Japan due to the high yen translation to the dollar and the recession,” he says.

Pence adds that many U.S. catalogers are struggling with small, fatigued files, and welcomes the opportunity to capture a broader audience overseas. He is considering a launch in Germany next year where, he says, the market features “fairly high-end” strong mail order buyers with a high propensity to buy via catalog.

Back on U.S. soil, Bed & Bath, still in its infancy, has shown “strong success” and aggressive plans are in place to grow the book.

The catalog offers the opportunity to “help leverage the overhead during off push times” as spring and late summer are popular purchasing seasons for bedding and bath supplies, Pence notes.

Pence adds that the “home arena” is a good fit for the Coldwater Creek customer, often referred to as “she.”

“She” turns out to be a 35-to-50-year-old professional working woman with a career and a family. She lives in a major U.S. metropolitan area and has more discretionary income than free time. “We think that we know her and know her problems very well. We’re interested in staying with her and offering her additional goods and services.”

And, some of those goods arrive wearing the Coldwater Creek private clothing label, a line Pence plans to expand over the next several years.

Cutting and snipping is under way to develop consistent sizes with plans to recruit designers.

The company, co-founded in 1984 by Pence and his wife Ann, has seen 13 consecutive years of revenue growth and began trading on the stock market in January 1997 with an initial public offering of 2.5 million shares of stock. The stock opened at $15.88 and at press time was hovering around $23.

By 1992, the company reported net sales of $18.7 million. Today, Coldwater offers over 1,200 items (the majority made in North America) in four catalogs: Northcountry, Spirit of the West, Milepost Four and Bed & Bath.

The customer mailing list has hit 5.4 million and last year, the company mailed 112.4 million catalogs. The catalogs, all created and designed in-house, have helped make the company the largest employer in north Idaho.

Pence credits the company’s success with good back-of-the-house operations and systems, and a keen understanding of the customer.

A customer who, Pence says, has less brand loyalty and lots of opportunity to shop elsewhere. “We try not to get side-tracked. We try not to pay too much attention to the competition. We really try to focus on what the customer wants.”

The company boasts abandonment rates of less than 1% and orders are consistently shipped within 24 hours of receipt. During Christmas 1997, customer service representatives fielded as many as 35,000 calls per day at an average answer speed of 4.4 seconds. “You’re only as good as your last transaction,” Pence says.

The couple started the company from their $350-per-month two-bedroom apartment in Sandpoint, ID (a destination the two journeyed to after abandoning the New York City rat race).

A closet doubled as a store room for merchandise and a long telephone extension allowed the phone to be dragged into the bedroom at night so the Pences’ could live up to their promise of 24-hour service.

One catalog featured 18 items and with the help of the first big seller, a belt buckle with a northwest coast Native American art design, the fledgling company did $17,000 in sales its first year.

Coldwater Creek also operates retail stores in Sandpoint and Jackson Hole, WY. Retail activity currently accounts for 3% of sales.

The company is headquartered on a 20-acre lake-side campus with a 160,000-square-foot distribution center, customer service center and employee training facility. Next year, plans call for a 650,000-square-foot distribution center and customer service center to open in Parkersburg, WV.

The east coast base of customers has grown to represent about 70% of business. Perhaps this reflects a harried urbanite desire to miss that morning train and dip a toe into a cool mountain stream-like the imaginary Coldwater Creek.

At this point we’re mailing the same amount of times but we’re upping circulation a bit because response to the updated design and product changes that we’ve made in the catalog are very encouraging. I use mostly house files because those are people who have already purchased a “Bear Gram” or have expressed interest and it makes more sense, it’s cheaper to mail to them. But we use some rented lists particularly for Christmas and for Valentine’s Day.”

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