Ab477case Study of Destination Retailer

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Cabelas: A Case Study in Destination Retailing

Denise T. Ogden, Pennsylvania State University Lehigh ValleyJ.R. Doc Ogden, Kutztown University of Pennsylvania

ABSTRACT

Cabelas is a retailer whose tagline is the Worlds Foremost Outfitter. Accordingto the website it is the world's largest direct marketer, and a leading specialty

retailer, of hunting, fishing, camping and related outdoor merchandise

(cabelas.com). This category killer has built a reputation for selection of

products, service and value. This paper examines the strategy and tactics that

have made Cabelas, a destination retailer and a top tourist attraction.

INTRODUCTION

In todays competitive retail environment, one way to differentiate a retailer is to beunique. Thus a goal for many retail establishments is to become a destination retailer one inwhich consumers will make a significant effort to patronize. This destination retailer could havea physical location, a website or a catalog. This article will examine one of the most successfuldestination retailers, Cabelas.

Cabelas tagline is the Worlds Foremost Outfitter. According to the website it is the

world's largest direct marketer, and a leading specialty retailer, of hunting, fishing, camping andrelated outdoor merchandise (cabelas.com). This category killer has built a reputation forselection of products, service and value. This paper examines the strategy and tactics that havemade Cabelas, a destination retailer and a top tourist attraction.

BACKGROUND

Cabelas was established in 1961 when the founder, Dick Cabela, tried unsuccessfully tosell fishing flies in a local newspaper. He re-worked the wording in the advertisement and ran itin outdoor magazines. Soon the orders began pouring in. Dick and his wife Mary originally ran

the business out of their kitchen. In 1963 catalog operations were started.In 2006, the company grew to a circulation of 135 million catalogs with 86 titles.

Eventually the business required larger facilities as it acquired more products and catalog titles.The current headquarters is in Sidney, Nebraska.

In 1987 the company opened its first retail location in Kearney, Nebraska and in 1988 theonline store was launched. In 2004, the company became publicly traded. Along with the multi-channel offerings, Cabelas has a loyalty program through the Cabelas CLUB Visa Credit card.


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In 2006, 20.3% of their sales were generated through their customers use of the CLUB card(Cabelas 2006 annual report).

Currently there are 26 locations in 19 states with seven stores under construction. One ofthe stores under construction is in Canada and expected to open in Montreal in 2008. Cabelasstores employed 11,700 people in 2006 (Hoovers, 2007) of which 6,300 were full time

employees. The employees are not unionized (Cabelas 2006 annual report).In 2006 the company reported 2.06 billion in total revenue, an increase of 14.6% from theprevious year. Gross profit was about $85.8 million, representing a gross profit margin of41.6%. The retailer has been profitable each year since its opening. The direct business(catalog, Internet) represented 57% of their total revenue.

Stores range in size from 35,000 to 247,000 square feet. They classify any store over15,000 square feet as a large-format destination store. In addition to targeting the tough toreach dad, Cabelas destination retail store appeals to families from a variety of backgrounds.

TOURIST ATTRACTION

One of the reasons that Cabelas is a destination retailer is because it has been successfulin attracting people. Millions of people visit a destination store in a given year. Their large-format stores have become top tourist attractions in their respective states. In some states such asTexas (Cabelas vs. The Alamo, 2006) and Michigan (Smith, 2007), the store is the top touristattraction. In other states such as Kansas and Minnesota, the retail store is one of the top touristattractions (Hoovers 2007). There were 35 million shoppers that visited a Cabelas store in2006. Some people travel as much as 250 miles to visit a store (Nolan, 2007).

The average visitor spends three and one-half to four hours in a store (LeRoy, 2006).Because of the tourist destination status, many state visitors centers are considering locatingvisitor centers near or on the same site as Cabelas stores (Wilson, 2007; Cabelas to Build,2007). The tourism theme is so strong that Hoovers company describes the store as a huntersand fishermans Disneyland.

The presence of Cabelas means that the surrounding economy will grow withrestaurants, hotels, housing and entertainment. Cabelas has turned many underutilized areasinto major tourist spots. Unlike the Wal-Mart experience, many communities have seen retailsales double or triple after Cabelas opened (Schneck, 2003).

STORE DESIGN AND MERCHANDISE MIX

At the front of each store is a bronze statue depicting an animal or other representation ofwild life. Each store has a different statue which invites people to collect pictures of the differentsculptures. Cabelas large-format stores look like lodges. In the middle of each store isConservation Mountain, an artificial mountain which features hundreds of stuffed wildlifeanimals in their natural habitat. Through the store there are additional museum-quality dioramasdepicting wildlife. Stores typically have a giant freshwater aquarium stocked with native fish.Some stores have an indoor archery and/or firing range.


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Each store has a deli that features wild game and local favorites. The gun library featuresrare guns. Recognizing the length of time spent in the store can be tiresome, Cabelas has sofasor other seating placed throughout the store (Parsons-Wraith, 2007).

The category killer carries a wide and deep assortment of products separated into fivegeneral categories: hunting equipment, fishing and marine equipment, camping equipment,

clothing and footwear and gifts and home furnishings. The stores are roomy and designed tomanage the flow of customer traffic. There are many areas where customers can test equipmentbefore the purchase, thus reducing returns and increasing satisfaction. They have also designedthe stores to allow the company to keep remodeling costs low (Cabelas 2006 annual report).

In addition to other products, Cabelas carries company branded merchandise.Representing about 37% of total merchandise revenue in 2006, these products generate highergross profit margins in comparison the other merchandise (Cabelas annual report).

SITE LOCATION

Cabelas has a strong site location strategy and looks for certain criteria when decidingwhether to open a store. According to their website, there must be a minimum of 22 acres ofland, the store must have interstate access and visibility, and an existing or funded Interstateinterchange. In addition, a community development incentive package is required. Thesesubsidies are a part of the companys strategic growth plan and are often in the millions ofdollars (LeRoy, 2006). In recent years the company has received negative press and citizenresistance to the incentive packages required for a Cabelas store to locate in a given community.The company recognizes that an inability to obtain economic development packages could leadto decreased revenues and delays in building future stores. A decrease in the ability to obtainincentives would require changes to their destination retail store strategy (Cabelas 2006 annualreport).

Cabelas management prefers a location with one million people within a 30 mile radiusand to be within 20 miles of a metropolitan area. In addition to stand-alone stores, the companywill consider a location in an existing retail development or an existing store with a minimum of85,000 square feet.

Cabelas often chooses rural, underdeveloped or underutilized sites which provide thepromise of economic growth in a particular area (LeRoy, 2006). Another factor considered is thenumber of Cabelas catalog orders for an area and the number of fishing/hunting license holdersin concentric mileage-based circles around a prospective location (Giddens, 2004).

MARKETING

Cabelas marketing is a key to their success. Over the years they have developed a strongbrand name that is synonymous with quality and service. Their direct marketing via catalogs andthe Internet have allowed them to build a customer database that is leveraged for marketingpurposes. In addition to traditional integrated marketing communications, the company engagesin many community activities, designed around the outdoor theme, to build goodwill.

Instead of just a retail store, Cabelas has been successful in creating a retail experience.According to Gilmore and Pine (2002), to create demand in a competitive environment,


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companies must understand that The experience IS the marketing [italics and emphasis inoriginal]. A retail experience catches peoples attention and money. Creating an experience isnot the same as experiential marketing which is making promotions more experiential.Marketing experiences mean customers create memories through experiences that are created bythe retail atmosphere (Gilmore and Pine, 2002). A retailer can increase a positive affective

experience because consumer emotions are significantly and positively induced byenvironmental stimuli (Donovan and Rossiter, 1982).Cabelas does a remarkable job of creating experiences. By creating destination retail

stores that carry museum-quality exhibits, families have an activity that they can do together,while spending money. Entertainment is important to the shopping experience because it createsa fun atmosphere, which affects store patronage (Talpade and Hayes, 1997; Sit et al, 2003).

Ritzer (1993) defined McDonaldization as the process by which the principles of thefast-food restaurant are coming to dominate more and more sectors of American society as wellas the rest of the world (p. 3). Byman (1999) builds on Ritzers (1993) concept ofMcDonaldization and contends that principles of Disney theme parks are becoming morecommon in society. He calls this the Disneyization of Society.

The four components of Disneyizaiton are theming, dedifferentiation of consumption,merchandising and emotional labor. Depending on the discussion, Disneyization can be seen inboth positive and negative lights. We believe that Disneyization concepts seen in Cabelas is apositive application. Theming refers to building a retail format around a theme.Dedifferentiation of consumption is defined as a general trend whereby the forms ofconsumption associated with different institutional spheres become interlocked with each otherand increasingly difficult to distinguish (p. 33). The Merchandizing component is defined aspromotion of goods in the form of or bearing copyright images and logos, including suchproducts made under license (p. 26). Emotional labor is the act of expressing socially desirableemotions during service transactions (Ashorth and Humphrey, 1993 as cited by Bryman, 1999).

These components can be seen in Cabelas strategy. The outdoor theme has always beenimportant to Cabelas strategy because it serves to define and differentiate its offerings. Thetheme also attracts families and becomes a destination where both adults and children areentertained. The theme also builds consistency in the multi-channel offerings.

Cabelas strategy has elements of the dedifferentiation of consumption component. Thismeans that there is a blurring of different types of consumption. This is the case with Cabelaswhen some consider their destination stores a tourist attraction instead of a retail store. There isa blurring of catalog, retail, tourism, museum and education when you enter a Cabelas retailer.This is the strategy behind a mega-store. A retailer tries to fulfill a variety of needs so that it willattract more people and these people will stay longer and spend more money. Cabelas has beensuccessful in enticing the average Cabelas shopper to spend hours in the store.

In terms of promoting branded merchandise, Cabelas has been successful on severalfronts. First, they have their own branded merchandise which accounted for 37% of allmerchandise sales in 2006. Second they have a loyalty program that brings in additionalrevenue, the Cabelas CLUB Visa card. In addition there are television programs sponsored byCabelas and a Cabelas magazine. The brand is so strong that we would not be surprised ifCabelas started other branded concepts, such as wild game restaurants, not affiliated with anexisting store.

Last, emotional labor is a component of many service sectors and a part of retailing. Thecustomer service experience depends a great deal on how they are treated by retail employees.


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Cabelas is an employee-centric company. Every employee at Cabelas goes through trainingand there are certified degree-granting programs available to all employees. Cabelas hirespeople who are experienced in the outdoors. It is the employees that conduct customer trainingseminars on many areas. It is believed that emotional labor plays a factor for employees atCabelas but it is known if it is detrimental. With high marks for customer service, Cabelas is

doing something right regarding employee training.

CONCLUSION

There are many aspects that have contributed to Cabelas becoming one of the topdestination retailers in the United States. First, the company built its brick and mortar stores onthe reputation of their already established direct marketing operation. Thus the brand name waswell established before the first physical store was built. Second, Cabelas has built partnershipswith the people in the cities in which they are located. The incentive packages have helped thecompany to build an infrastructure that supports the destination store format.

Cabelas ability to create experiences is the third main reasons so many millions ofpeople flock to a store in a given year. The wow factor that one feels while in a storecontributes to the excitement of shopping and to the stores bottom line. Positive word of mouth,customer satisfaction and the product selection contribute to the draw and allure of the store.

In summary, Cabelas is successful in exceeding customers wants and needs whilefulfilling the companys objectives which is the basis for the marketing concept. Many retailerscan learn valuable lessons by studying Cabelas.

REFERENCES

Cableas 2006 Annual Report.

Cabelas corporate website (www.cabelas.com). Accessed January 15, 2008.

Cabelas to build retail store in Rapid City, SD (2007). Business Wire, Mar 22.

Cabelas vs. the Alamo Forth Worth store takes over as the Lone Star States top draw. OutdoorLife, Apr; 213(4), 18.

Donovan, R. J., & Rossiter, J. R. (1982). Store atmosphere: an environmental psychologyapproach. Journal of Retailing, 58(1), 34-57

Giddens, D. (2004). Hunting for business.Dallas Business Journal, 27(52), 33.

Gilmore, J. H. and Pine J. B. (2002). The experience is the marketing. Stategic Horizons LLP,Aurora, OH.


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LeRoy, G. (2006). Not very sporting: Outdoor sporting good retail subsidy scam. MultinationalMonitor, Sep/Oct; 27(5), 15-18.

Nolan, K. (2007). Cabelas sports growth initiative to expand market share.Retailing Today, Jun18; 46(10), p. 7, 72.

Parsons-Wraith, L. (2007). Use mega-store ideas to attract customers. The Shooting Industry,52(3), 20.

Rizter, G. (1193). The McDonaldization of Society. Thousand Oaks, CA: Pine Forge.

Schneck, M. (2003). Cabelas may spur retail boom in Berks. Eastern Pennsylvania BusinessJournal, Feb. 17-23; 14(7).

Sit, J., Merrilees, B., & Birch, D. (2003). Entertainment-seeking shopping centre patrons: themissing segments.International Journal of Retail & Distribution Management, 31(2), 80-94.

Smith, P. W. (2007). Pure Michigan still inspires surprises.Detroit News, May 14, A9.

Talpade, S. and Hayes, J. (1997). Consumer shopping behavior in malls with large scaleentertainment centers.Mid-Atlantic Journal of Business, 33 (2), 153-62.

Wilson, R. (2007). Visitors center eyed near big Cabelas outlet.Journal of Business, 22(13),A5.

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Ab477case Study of Destination Retailer