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RETAIL—Catalog House Finally Meets Customers Face to Face

Imagine that you’re getting ready to open your very first retail store in Los Angeles and you already have 300,000 customers. It may sound like wishful thinking, but not for Coldwater Creek. The Sandpoint, Idaho-based company only has 10 stores throughout the country, but it has amassed a hardy following of at-home shoppers through its 17-year-old catalog business. Thanks to the database of loyal customers Coldwater Creek has collected, company officials can strategically place stores in areas where they know their shoppers live. That way, instead of fighting entrenched retailers for recognition, Coldwater Creek can bring with it its own core of shoppers. “It’s a real advantage,” said David Gunter, the company’s spokesman. “It allows a cataloger to take that brand to the customer who has only experienced it in the abstract, and it allows us to do a little data mining.” In June, Coldwater Creek, a retailer that caters to women aged 35 to 55 with apparel and accessories, gifts and home furnishings, will open its 11th store at Sherman Oaks Fashion Square, the first of several it expects to open in the L.A. area. The new address lies within an hour’s drive of about 300,000 customers who not only are familiar with the Coldwater Creek catalog, but buy from it frequently. “Fashion Square popped off the screen with a great hurrah as the place to look at a store for us,” Gunter said. With sales of more than $325 million through its catalog division and newer Internet business, Coldwater Creek is one of the larger and more successful companies of its kind. But like all retailers, it struggles to keep customers loyal in a fiercely competitive environment. Multi-channel selling, the new buzz word that has emerged to describe the move to market through the Internet, catalogs and stores, is a way to accomplish that. “For those who can pull it off, (multi-channel marketing) makes a lot of sense,” said Richard Giss, partner in the consumer business practice of Deloitte & Touche LLP. “Multi-channel (retailers) have more points of contact with you, they are more in front of you and more in your mind. They have more potential ways to market to you and they make it much easier for you to buy in the way that you want to buy.” Indeed, Coldwater Creek joins a growing list of catalogers moving into the brick-and-mortar channel of distribution, from Sur La Table and Williams-Sonoma Inc., to a newer expansion by apparel cataloger J. Jill, which has opened about 28 stores since 1999 including locations in Westfield’s Shoppingtown Topanga in Canoga Park and Glendale Galleria. In coming months, J. Jill too is slated to open at Sherman Oaks Fashion Square. Each Coldwater Creek store, complete with a waterfall beckoning customers inside, costs about $1 million to launch, with about $350,000 of that going to stock the shelves. It is an expensive proposition, especially for a company that already enjoys more than 2 million customers through its catalog operation. But catalog stores bring several built-in advantages to a brick-and-mortar operation. Using data from their catalog operation, they can tell not only where their customers live, they can also determine with greater certainty what items are most likely to sell well. “When it comes to fashion, consumers can be quite finicky, so from that standpoint you want to have enough information so that you’re not jumping on a wish and a prayer,” said Patrick J. O’Hare, market analyst with Briefing.com. In theory at least, catalog retailers can also better service customers who visit the store. If the store runs out of a size or a color, they can use their catalog distribution system to get the item to the customer the next day. “If they do it right, they can ship it tomorrow,” Giss said. “All of a sudden, what was a missed sale is a made sale.” And the stores can enhance the catalog and Internet operations. “When we have a store in a particular area, we notice we have an increase in web and catalog sales as well,” said Gunter. “What’s happening is these customers are coming into the store to validate the sizing and quality of the merchandise.” Customers who like the merchandise Coldwater Creek carries may be reluctant to buy it sight unseen. But once they visit the store and try on the apparel, they may also feel more confident about placing orders through the catalog and the Internet. “Our best customers are now shopping with us through more than one channel,” said Gunter. “If she’s sitting home on Sunday, she wants to review the catalog. If she needs something quickly, she wants to get it online. We’ve taken that one step further and said when she gets a chance she much prefers to shop in a brick-and-mortar retail setting.” Coldwater Creek officials point out that, despite the inroads made by e-commerce, some 80 percent of apparel sales continue to be made in traditional store settings. Despite the company’s success, it plays in a relatively small arena. With only a handful of stores so far (the company also operates outlet stores, something many catalog retailers do to manage excess inventory), Gunter pointed out that less than 10 percent of the company’s sales come from its retail operations, or just over $12 million for the most recent fiscal year ended March 3, 2001. Eventually, Coldwater Creek officials hope to open some 80 stores. “If we were to look three years down the line, we’d love to see an environment where the web, catalog and retail stores each represented a third of the business,” Gunter said.

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