Cabela's 2004 Annual Report Download - page 21

We have in-house teams that are responsible for the design and development of all private label
merchandise. This allows us to exercise signiÑcant control over the merchandise development process and
the quality of our private label products. The design and development of our products is based on our
understanding of our customers' styles and preferences as well as their price expectations. We have our
own quality assurance department that tests the products after the products have been manufactured by
third party vendors to help ensure that the merchandise meets our speciÑcations.
We intend to continue to design and develop a variety of new private label products to increase our
revenues, enhance our margins, and expand the recognition of the Cabela's brand. In addition, these
private label products are important to our eÅorts to broaden our customer base and communicate our
value position. In certain categories where there is not a dominant national brand, we believe that our
Cabela's private label products have stronger brand recognition than other branded products.
Merchandising and Sourcing. Our merchandising team is comprised of approximately 76 people with
an average of eight years of experience working for us. The members of this team are responsible for
selecting our products and negotiating the costs of our merchandise. We also have a retail merchandising
team that is responsible for the regional and local merchandise needs of each destination retail store. In
addition, our merchants provide product quality assurance for our retail and direct businesses. The
merchandising teams use historical revenue data from our direct and retail businesses, feedback from our
retail store managers and industry trends to determine which products to purchase. Our merchants are
outdoor enthusiasts who use our products in the Ñeld to gain a better understanding of our customers'
needs as well as the functionality and overall performance of the products. We believe that we are well
known to our customers for providing the widest product oÅering to the outdoor recreation market and we
continue to look at category expansion to further serve our customers. We have also expanded our product
oÅering through the acquisition of related businesses.
We have developed strong vendor relationships over the past 43 years. These relationships generally
provide us with greater access to technological innovations and new products. We source our merchandise
from approximately 4,000 suppliers in over 99 countries. In Ñscal 2004, over half of our merchandise was
sourced from locations in foreign countries, with approximately 35.3% of our merchandising being sourced
from China, Taiwan and Japan. During Ñscal 2004, no single vendor represented greater than 10% of total
purchases. In order to exert greater control over product quality, we test products prior to the time the
product is shipped to us.
Inventory Control. Our inventory control team is comprised of approximately 104 people with an
average of seven years of experience working for us. These individuals are responsible for initial inventory
planning and allocation decisions. These decisions are made by assessing historical revenue, performance of
our direct and retail businesses, and anticipated economic outlook. Our inventory control group is equipped
with distribution center and inventory management systems and is able to eÅectively assess revenue trends,
customer demand and current inventory positions and allocate items appropriately. We track revenue at
the SKU level on a daily basis and adjust our reorder and markdown strategies accordingly. We are also
able to utilize our popular Bargain Cave as a means to sell discontinued and returned merchandise. Our
merchandise and inventory control teams work together to make decisions regarding appropriate purchasing
levels and the proper Öow of merchandise. We believe this joint eÅort helps us to maximize the
eÅectiveness of our merchandising team and eÅectively manage our inventory levels.
Marketing
Our marketing strategy focuses on using our multi-channel retail model to build the strength and
recognition of our brand by communicating our wide and distinctive oÅering of quality products to our
customers and potential customers in a cost eÅective manner. Our largest marketing eÅort consists of
distributing over 120 million catalogs annually in order to attract customers to our direct and retail
businesses. We have also established our website to market our products to customers and potential
customers who shop via the Internet. We use both our catalogs and our website to cross-market our
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