How Tool King continues to build out its retail future

By holding down overhead costs while jumping on market opportunities, 3-year-old ToolKing.com is profitable and on course to hit $100 million in two years, says Tool King LLC managing principal Donald Cohen, who will talk about his growth strategy at next month’s Internet Retailer 2005 Conference & Exhibition.

Cohen, whose web site has replaced his former store chain and serves customers in more than 15 countries, likes to compare ToolKing.com to a high-performance race car. “We can turn quickly rather than slowly like a lumbering truck,” he says. “The key to our story is being opportunistic and staying focused on learning.”

Tool King, which once operated nine stores under a former plan to build a nationwide chain, now operates only one store near its Lakewood, CO, headquarters, doing about $5 million a year. ToolKing.com does more than three times as much in sales, and Cohen says sales will mushroom over the next two years as Tool King enters new markets.

“We’re starting to position ourselves as an e-commerce company, not just a tool retailer,” Cohen says. Tool King recently expanded into categories such as lawn mowers and other lawn-care products, and is considering expanding into outdoor furniture, sporting goods and hunting supplies.

To keep costs down, Tool King is expanding cost-saving arrangements such as outsourcing warehouse operations to UPS and expanding its drop-shipping arrangements with suppliers. “Companies like ours are able to leverage the web and be more profitable than those with a lot of built-in overhead,” Cohen says.