Even before the current economic slowdown, outdoor sports apparel marketer Jagged Edge Mountain Gear was finding the going rough. Response to the $3.2 million cataloger/retailer’s spring/summer 2000 catalog was so poor, the company discontinued its spring/summer 2001 edition. By last July, Jagged Edge had taken down its Website and sold its remaining stock to Web liquidator Overstock.com, one of its creditors, to resolve some of its outstanding debt.
As executive vice president Paula Quenemoen says, “We got into trouble, and our viability came into question. It was at that point that we decided to restructure the way we do everything.”
In February 2001, Jagged Edge hired Carson City, NV-based Silvertip Consulting Associates, which works primarily with sports apparel marketers, to help turn around the company. An attorney for Jagged Edge even asked Silvertip president Peter Goehrig to assume the role of acting CEO. Paula Quenemoen and her twin sister, Margaret, president/founder of the company, were now free to focus on creative and marketing.
Goehrig decided that Jagged Edge needed to focus less on its wholesale division and more on its catalog operation and its retail locations in ski destinations such as Telluride, Crested Butte, and Breckenridge. He also closed the warehouse and call center, outsourcing operations to Orem, UT-based Propeller. “The business is seasonal, and there was a lot of money going to rent all year-round,” Goehrig says. The company then relocated from high-rent Telluride, CO, to Moab, UT.
Next, the company went from using multiple manufacturers to only one company, Canada’s Agency Quebec. Jagged Edge formed a strategic partnership with Agency Quebec in which the manufacturer finances the raw materials and production of the apparel in return for a percentage of the catalog sales, allowing Jagged Edge to be better stocked while minimizing its risk.
While the company was implementing these changes, however, its inventory fell to perilously low levels. That’s when Jagged Edge shuttered its Website. The site remained closed for three months, until this past fall.
By October, not only was the Website up and running again, but Jagged Edge had dropped its winter 2001-2002 catalog. The company increased circulation more than 50%, from 475,000 to 725,000, with 90% of the copies going to rented names. To improve productivity of the book, the company dropped its order form envelope and switched its paper stock. It will produce a spring/summer edition this year, but the page count will be reduced by half.
Coinciding with the mailing of the fall/winter book, Jagged Edge was featured on a PBS television special on small businesses. The exposure led to numerous e-mail inquiries, Quenemoen says.
So far, so good
Both Goehrig and Quenemoen are pleased with the results of the restructuring so far. While retaining and leveraging Jagged Edge’s creative vision and brand identity, “we were able to double the conversion rate of prospects,” Goehrig says. “Catalog sales are tracking well since the Oct. 25 drop of the fall/winter catalog.” Also, the average order has increased from $95 to $124.
Quenemoen admits that getting a small business back on track is especially daunting in a recession. “We try to continue to be more resourceful every day,” she says. While the move by many competitors to discount heavily during the holiday season dampened their sales expectations, Jagged Edge countered not by discounting but by continuing to focus on the uniqueness of its brand.
And though Goehrig expects Jagged Edge to break even by the end of the fiscal year, he adds that the battle is not over yet. “The company is still looking for additional capital through investors so that it can see the kind of growth that the restructuring was designed to facilitate and sustain.”