How a kitchen company became successful without a store
Monday, March 19, 2001
Kitchen appliances have been the territory of pitchmen since the days of tinsmiths schlepping their covered wagons of pots and pans on the expanding frontiers of Canada and the United States. Today, the peddlers are gone from the roads, though they continue to appear on television -- just ask any insomniac who can channel-surf from amazing stick-free pots to rotary ovens to miracle cleaning kits.
In the midst of this very competitive market, where, it would seem, power goes to those with big advertising budgets, Toronto's Fred Pritchard has come up with his own collection of upscale kitchen gadgets. The vice-president of Golda's Kitchen Inc. is a certified general accountant who struggles to keep up with an improbable business that is thriving.
The story is a Web site, goldaskitchen.com, and behind it is a 2,000-square-foot warehouse in Mississauga. From high-end Cuisinart blenders to relatively inexpensive spice tins, Pritchard manages a business that, as a sideline, is threatening to overtake his more prosaic day job as a corporate manager.
"We have been very successful. We have so many orders -- volume was up as much as 400 per cent over last year this Christmas -- that we have barely had time to sleep," he explains.
With 3,000 products in inventory and a customer list that covers Canada and much of the United States, Golda's Kitchen has created a niche for itself by carrying things such as specialty graters for extra-hard cheeses that many conventional kitchenware stores don't have. The store even has chocolate forms that vary from lollipops to candelabra.
"There is a limited selection of products in local markets. So we offer what some of our competitors don't have," he explains. "But there is more to it than that. We can afford to have this inventory because we take great care in managing it. We analyze our sales trends, availability of products [and] shipping time from suppliers, and we have strong relationships with suppliers who keep inventory for us."
This is all about running a tight ship and it is what accountants do. But there is a creative side as well to becoming a market presence without a store.
"Advertising was our greatest cost last year and has been the key to our growth," Pritchard says. "That can make or break a dot-com. We do ads in print media, including a national news magazine and a publication about country living. Golda's Kitchen even has a deal with a major miller to sell baking products advertised on its Web site.
"Last year, we spent 40 per cent of sales on ads. A traditional store would not do that." Even so, Pritchard says, the firm expects to be able to retain a profit margin of 10 to 15 per cent of sales in 2001, even though 2000 was a break-even year, he says.
Golda's Kitchen is especially careful about wasting money with on-line banner ads. "The concept is fine, but the price charged tends to be too high. So we have negotiated a new payment basis -- rather than pay a fixed fee, we pay a percentage of sales."
Today, Golda's Kitchen remains a small firm with two full-time and five part-time employees, but in many ways it operates like a large one. In addition to its slick, award-winning Web site, good back-office management and clever merchandise, the firm offers frequent-flier miles through Aeroplan.
This fall, Golda's Kitchen will open a retail store in Mississauga. The store, expected to be 2,000 square feet, will carry about half the on-line inventory. "We will be attracting the same kinds of people who come to our Web site -- those who take cooking seriously and those who like to bake. We are going to continue the emphasis of the Web site on hard-to-find baking items. But we are going to be a Web site with a store rather than a store with a Web site.
"We are not going to put the Web site in the background. We are going to continue to give the same service to a customer in rural Alberta as we do to someone from Toronto."
Golda's Kitchen has made itself more than a generic Web site, with personal touches that give it an identity without excessive cost. For example, all shipments by Canada Post are packed in gift boxes within the outer cardboard. "It makes a nice presentation and shows the customer that we appreciate the business. We like the reward to be special since there is a delay in arrival of merchandise when one orders from the Web. It is nice for the customer to perceive value when the box is opened. And we are certainly in the business of providing value for money."
In a world in which dot-com firms have been failing in large numbers, Golda's Kitchen is thriving. "We are keeping costs down. We don't burn up our capital; in fact, we are now generating capital in the form of earnings."