The Coldwater Culture

SANDPOINT – Maryanne Joy fits Coldwater Creek Inc.’s mantra of current, but not trendy. A short, sleek hairdo complements the 52-year-old’s black-framed glasses, and a crocheted sweater softens the austere lines of her tailored slacks. Joy stands out in a crowd of younger Coldwater Creek managers. She oversees the company’s retail store in Rochester, N.Y., and she personifies the company’s target audience — women 45 and older who are frustrated by the midriff-baring fashions in malls, and who yearn for the bygone days of deferential service once provided by department stores.

Coldwater Creek captures both the style and service women of a certain age are looking for, Joy told cohorts last month during an impromptu testimonial to company Chairman Dennis Pence. “It’s his company,” she said. “He’s trusting all of us to carry out that romance he’s created.”

Joy’s testimony was part of Coldwater Creek University. The weeklong seminar, repeated multiple times during the year, helps imprint company culture on legions of new store managers. It’s one of the strategies Coldwater Creek is employing during a period of rapid growth, with an aim of emerging with its identity and brand intact.

The Sandpoint-based clothier will add 60 new retail stores this year, ending 2005 with more than 170 stores. The end goal is a national chain of 450 to 500 stores for Coldwater Creek, which began in 1984 as a small catalog retailer.

As Pence frequently reminds employees, it’s a critical time in company history.

Since women still buy most of their clothing in stores, Coldwater Creek’s new retail outlets represent an opportunity to seize a larger share of the $94 billion U.S. women’s apparel market. But the transition to a national brand is also fraught with potential pitfalls.

The corporate landscape is littered with companies that grew too fast, said Wally Adamchik, a Raleigh, N.C., consultant for retail and restaurant industries, who has worked with Coldwater Creek in the past.

Arby’s stumbled in the 1990s, when it opened hundreds of new stores in poor locations, resulting in weak sales. The push for new stores was so strong that Arby’s executives weren’t selective enough in choosing sites, Adamchik said.

Coldwater Creek has an advantage in selecting new store locations, Adamchik said, because it can track clusters of existing customers through a database of addresses gleaned from catalog and Internet sales. The company has also done a good job of building its infrastructure, so that a clerk in Nashville, Tenn., looking for a size 6 blouse can track one down in the system, and have it shipped from another store, he said.

But there’s another, less tangible requirement for success: Transfer of the brand, Adamchik said. If a company’s built up a certain mystique around its product, it has to make sure that every new store delivers that mystique, he said.

“If I got a certain feeling when I read the catalog, and I got the same feeling from talking to a sales representative on the phone, but when I walked into the store, the feeling was pretty bland, then I don’t have a compelling reason to come back,” he said.

Starbucks and Southwest Airlines are examples of companies that successfully kept their personality through expansions, said Steve Kaplan, a Chicago consultant who works with fast-growing companies. Southwest still has its folksy, no-frills reputation, and Starbucks is still known for gourmet brews in an eclectic setting.

Starbucks, in particular, is “one big, huge process replicated at every location,” Kaplan said. “You get the same experience and the same quality every time.”

Coldwater Creek also aims for duplicate experiences at its stores. Each store comes with a water feature, an effort to provide a calming environment for shoppers, described by Pence as “women with more discretionary income than free time.” Store design and set up follow precise company standards, and Coldwater Creek officials like to say that customer service “is part of our DNA.” But scripting employee and customer interactions is harder.

The company spends several thousand dollars bringing each store manager to Sandpoint for Coldwater Creek University. “It pays off a hundred times over,” said Dan Griesemer, senior vice president for retail.

In a catalog, it’s easy to control how the customer perceives your product, he said, and on the Internet, it’s easy to monitor employees’ communications with clients.

However, “when you’re a retailer, you transfer the responsibility of that customer experience to …a store in Peoria, Ill., or Scottsdale, Ariz.,” Griesemer said. Store managers become the agents of company culture, he said.

September’s session of Coldwater Creek University was the fifth for the company. Groups of 20 to 30 store managers take classes on company history, operations and effective communication. The classes are similar to the “Retail 101” sessions that department stores sometimes put their managers through, with more emphasis on the Coldwater Creek culture, and “why we do things the way we do,” Griesemer said.

Store managers also get access to the architects of the brand they’re selling.

They meet with Pence, to hear him spin the story of how he and his wife, Ann, founded Coldwater Creek. The tale includes how the couple left their executive jobs and their New Jersey lifestyle to move to Sandpoint. How Ann Pence, a former freelance advertising writer for Macy’s, crafted the name “Coldwater Creek” because she thought it sounded tranquil. How the couple and the company were broke within 18 months, and how the Pences pawned possessions to put out a 1995 Christmas catalog, which proved to be Coldwater Creek’s turning point.

The seminar also includes a session with Mel Dick, the company’s chief financial officer. Dick tells store managers that Coldwater Creek had $590 million in sales last year, and has financed the new store openings without taking on debt.

The company’s target audience is women 35 and older, with an emphasis on 45- to 60-year olds with household incomes of $75,000 or higher.

Despite lip service paid to the demographic, “we have a limited peer group,” Dick said. Gap Inc. recently launched a new brand, Forth & Towne, in an effort to attract female shoppers of the baby boomer generation. Chicos, Talbots, Ann Taylor, J. Jill and Christopher & Banks also compete for those customers, Dick said.

But in general, they remain underserved by the malls, which target a younger demographic, he said. As a result, there’s enormous potential for growth, Dick said.

For Griesemer, that’s a teachable moment.

“I have no doubt that we can grow this company into something very big,” he told store managers last month. “What will we have when we get there? What will the condition of the brand be?

Joy, the Coldwater Creek manager from Rochester, thinks the brand will be in good hands if store managers keep the company’s commitment to customer service. Coldwater Creek designers set the fashions, but store employees are the ones who guide weary husbands to deep leather chairs, and take multiple armloads of clothes in and out of the dressing rooms for their wives, Joy said.

Susan Lohse manages a Coldwater Creek in Colorado Springs. Some regulars like the store so much, that they’ll linger for four hours at a time, she said.

Both women left Sandpoint with “diplomas” from the weeklong seminar. But the real graduation rate will probably be revealed later, in the sales performance of the new stores, said Adamchik, the consultant.

“On Christmas, when there are 87 people in the store, do the managers figure out how to deliver the brand?” he asked. “Do they rally around the company’s core values, or do they crack under pressure?”