Coldwater Creek Surfs Channels

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With catalog circulation down and plans in place to open as many as 500 stores in the next several years, Coldwater Creek is shifting into more of a retail-driven company and less of a cataloger. But that doesn't mean it is walking away from direct marketing.

Coldwater Creek, founded as a catalog company in 1984, will mail about 13 million fewer catalogs this year than last, or about 104 million.

"The catalog universe is shrinking," said David Gunter, director of corporate communications and investor relations. "That's why we're moving away from it."

But the Sandpoint, ID, company will send more mailers intended to drive traffic into its stores. In a test last year, the 12-page brochures went to consumers from Coldwater's in-house database who lived within a 30-minute drive of one of its stores. Based on the success of that program, 3.2 million copies will mail in 2004, a 135 percent increase over last year. Drop dates will be spread seasonally through the year.

The move toward retail is producing strong results. Coldwater's net income for the three months ended May 1 rose 185 percent to $5.5 million from $1.9 million.

"Our strategic shift from catalogs to a retail store model resulted in higher sales and increased net income during the first quarter," chairman/CEO Dennis Pence said in a statement. "Our retail store performance increased our ability to leverage store occupancy costs, which, coupled with improved merchandise margins, delivered the higher net income." The company's stock price rose 17.82 percent from April 27 to June 1.

Using the database of names collected by the company over the years as a catalog marketer is a key element in its retail strategy.

"We have this database of millions and millions of customer names across the country and a lot of brand awareness where we're mailing," Gunter said.

Coldwater isn't abandoning its heritage.

"We will always have a catalog presence, as it remains a strong revenue vehicle and our most efficient advertising tool," he said.

The retail mailers differ from catalogs in that they aim to drive store traffic by providing a sneak peak at merchandise that's just coming into the stores. The cover of a recent edition offered a free watch with a $100 in-store purchase.

"These mailings serve a dual purpose: Alerting existing customers to the availability of a store near them while also acting as a prospecting tool for customers who might not have purchased from us in awhile," Gunter said.

And if some catalog customers become retail customers as a result of the mailers?

"If we prospect a customer who comes from a catalog list and she becomes a retail customer, that's fine," he said.

Gunter called the program a success so far: "We can compare store traffic in the markets where we mailed these and see that they do have an impact." The sales effects of a mailer are similar to a catalog's, he said, though the shelf life is shorter since people often save catalogs. After a retail mailer is sent, targeted stores experience a sales increase for a few weeks, with the bulk in the front end of that period.

"If [recipients are] interested, they will make the trip sooner rather than later," he said.

Coldwater tracks traffic with a camera at the front entrance of its stores. Also, the mailers are coded so if a customer brings one in and makes a purchase, this can be recorded.


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