Internet Retailer Conference + Exhibition (IRCE) 2013 - Coastal.com

Safe Harbor

All statements made during this presentation, other than statements of historical fact, are forward-looking statements. The words “may”, “would”, “could”, “will”, “intend”, “plan”, “anticipate”, “believe”, “estimate”, “expect”, “goal”, “target”, “should,” “likely,” “potential,” “continue,” “project,” “forecast,” “prospects,” and similar expressions typically are used to identify forward-looking statements. Examples of such forward looking statements within this presentation include statements relating to: our perception of the contact lens and eyeglasses industry or market and anticipated trends in those markets in any of the countries in which we do business; our anticipated business operations and implementation of strategies; customer perceptions of and responses to our business and strategy; the effect of the current economic climate on our business and consumer behavior; the results of further investments in our retail brands; opportunities presented by our customer database; the extent to which our business will benefit from consumers seeking lower cost alternatives; our expected results in the eyeglasses business; and our ability to address challenges and opportunities resulting from current economic conditions.

Forward-looking statements are based on the then-current expectations, beliefs, assumptions, estimates and forecasts about our business and the industry and markets in which we operate. Forward-looking statements are not guarantees of future performance and involve risks, uncertainties and assumptions which are difficult to predict. Assumptions underlying our expectations regarding forward-looking statements or information contained in this presentation include, among others: that we will maintain our position in the markets we operate in and expand in a favorable manner; that we will have sufficient capital to continue making investments in advertising and personnel to support our business and new product lines, including our prescription eyeglass business; that we will be able to generate and maintain sufficient cash flows to support our operations; that we will be able to establish and/or maintain necessary relationships with suppliers; and that we will retain key personnel. The foregoing list of assumptions is not exhaustive.

Forward-looking statements or information are only predictions. Our actual future results or performance may be materially different due to a number of factors. These factors include, but are not limited to: changes in the market; potential downturns in economic conditions; consumer credit risk; our ability to implement our business strategies; competition; limited suppliers; inventory risk; disruption in our distribution facilities; mergers and acquisitions; foreign currency exchange rate fluctuations; regulatory requirements; demand for contact lenses and related vision care products; competition and dependence on the internet and other risks detailed in our filings with the Canadian securities regulatory authorities. Reference should be made to the section entitled “Risk Factors” contained in our most recently filed Annual Information Form dated January 28, 2011 as filed on SEDAR, for a detailed description of the risks and uncertainties relating to our business. These risks, as well as others, could cause actual results and events to vary significantly. Accordingly, investors should not place undue reliance on forward-looking statements and information, which are qualified in their entirety by this cautionary statement. These forward-looking statements are made as of the date of this presentation and we expressly disclaim any intent or obligation to update these forward-looking statements, unless we specifically state otherwise and except as required by applicable law.

Our financial statements are prepared in accordance with Canadian GAAP and all figures presented are in Canadian Dollars unless otherwise stated. We also present non-GAAP measures, such as Adjusted EBITDA, the number of orders shipped and the reorder rate, which is defined as the percentage of orders in the quarter shipped to customers that we estimate have ordered from us in the past. You should refer to our securities filings for more information on these non-GAAP measures. Coastal Contacts’ securities filings, including its Annual Information Form, Management Discussion and Analysis and Financial Statements are available on www.sedar.com or at www.coastal.com.

http://www.sedar.com/

http://www.coastal.com/

Contents

• Company Overview

• Our Footprint

• What’s Important

• Facebook Learnings

• Other Learnings

• A “Thank You for Listening”

@macknuttie

Brand Promise

THE BETTER WAY TO BUY EYEWEAR

@macknuttie

Core Values

@macknuttie

Change the View Project

FOR EVERY PAIR OF GLASSES PURCHASED WE GIVE SIGHT, PROTECTION OR HEALTH

SIGHTProviding eyeglasses to restore vision around the

world

PROTECTIONProviding UV protective

sunglasses shields our eyes from harmful UV rays

HEALTHProviding Vitamin A tablets to children can help prevent and

reverse blindness

@macknuttie

CONTACT LENSES EYEGLASSES

TTM Jan 31, 2013 Revenue¹ $152.6 million (CAD) $51.5 million (CAD)

% of Total Revenue 75% 25%

Overview• ~15,000 SKUs• Annuity revenue model

• +2,000 branded & private label frames• Manufactured & delivered 2+ million

pairs to-date

Markets Served U.S., Canada, Europe & Asia-Pacific

Example Brands Offered

Sample Private Labels

% Orders Private Label 5% 70%

Company Overview

NASDAQ: COA

@macknuttie

Continued Growth

Product Mix

FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 TTM @ Jan '13

$31.2

$67.5 $81.0

$102.2 $118.8

$129.8 $132.8 $143.5 $148.2 $152.6

$9.1 $19.1

$39.2 $47.9

$51.5

GlassesContacts

FY10 FY11 FY12 TTM

87%78% 76% 75%

13%22% 24% 25% GL

CL

FY04 – FY12 CAGR: 26%

@macknuttie

Global Customer Database

• Global diversification

• U.S. fastest growing market

• Fuelled by investment in glasses marketing and customer acquisition

As of FY09 As of FY10 As of FY11 As of FY12 As of Jan 13

2,000,000

2,800,000

3,344,000

4,333,000

4,586,000

@macknuttie

Global Footprint

@macknuttie

In The News

• Over 200 million Coastal.com impressions in 2012– Key focus is to target Fashion, Business, Tech & Mass Media outlets with tailored

messaging– Continue to drive coverage of our brand through traditional PR efforts and product

seeding to key influencers

@macknuttie

Customer Focus - NPS

Customer Needs

Value Same products discounted up to 50% for eyeglasses & up to

20% for contact lenses versus typical traditional retailers

Service

Superior customer service Free shipping on virtually all products No hassle 366 day return policy

Selection ~15,000 contact lens SKUs Over 2000 eyeglasses

Quality Top quality branded & private-label selections manufactured

in state-of-the-art facilities

Turnaround Time Typically shipped same day of order

48 hour fulfillment on 93% of eyeglasses

Disruptive Model in Large, Growing & Fragmented Industry

@macknuttie

Strong Value Proposition = High Customer Satisfaction

Strong Value Proposition

Coastal.com NPS Score

at 78%³

1) Free delivery on virtually all products.2) Source: Bain & Company Consumer Survey, 2012. Competitor data as of Oct 2010 and is the most current data publically available.3) Coastal NPS data calculated as a three month trailing average as of Jan 2013.

Simple Online

Ordering

Great Price

Broad Selection

Rapid Turn-

around

Exceptional Customer

Service

Free Delivery¹

No Hassle Returns

@macknuttie

The World is Flat, but It’s Not That Flat

Leader in Social Media

Ranked #3 on Internet retailer Social Media Top 300

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Leader in Social Media

We could talk about “social media”, but that could take a while

@macknuttie

Real Facebook Focus

• US has largest fan base

• In every country, we maintain most fans in competitive set

• We believe our FB fan base is a competitive advantage

1,015,000

500,000

160,400

56,600

@macknuttie

Global Customer Fanbase

• 4X as many FB fans as 2nd place in optical

• First optical fan page in the world to reach 1mm fans

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@macknuttie



• By far, largest online seller of glasses & contact lenses

• Home court advantage

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@macknuttie



• Market is growing very well for us

• Such a huge price discrepancy allows us offer great value

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@macknuttie


• 27% more FB fans than 2nd place in optical

• Driving FB business use cases

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@macknuttie

Direct Customer Feedback

@macknuttie

Key Facebook Learnings

• Nothing close to as targeted for marketers

• Constant changes make it difficult to stay ahead

• As FB releases more ad units, FB users feel

spammed

• Find the balance between engagement posts

and sales posts

• Find something that works and push hard

• Make sure you’re ready for mobile traffic

@macknuttie

Investment in mobile

25% to 40% of all traffic on site is coming from a smartphone or tablet.

• FB often sees up to 60% of traffic on mobile

@macknuttie

Key Learnings by Region

• US - FB

– Customers/Fans will tell you the good and the bad!

– Having a strategic relationship with FB has allowed us to be

in many beta tests

• eCommerce launch partner of FB Offers

– There was early arbitrage leverage, but that is diminishing

– Far and away #1 reason fans like us is for early notification of

sales & discounts

@macknuttie


• US - Other

– 18% online penetration for contacts, but <3% for glasses

– Owned lab

• Fastest delivery

• Rx glasses, progressives, Transisions ®, Rx sunglasses, contacts

– Very price competitive with a lot of noise

– Retargeting is effective, but you need balance

– Email database segmentation is an advantage given our

database size

– Great content is driving engagement and SEO impact

@macknuttie


• Canada - FB

– Our fans tend to LOVE us!

– Fans get vocal if they feel heavy media buying becomes

“spammy”

– Not as engaged as the US

– Very influenced by the US, so it can be difficult to prove our

Canadian-ness

@macknuttie


• Canada - Other

– Real market saturation

• 5th largest online advertiser based on impressions, ahead of Canada’s

largest telecom and bank brands

– Price is less relevant given competitive set

– Legacy advertising deals have been a benefit

– Maximize segmentation of large database of customers

– Private label contacts have been a success

@macknuttie


• Australia - FB

– Not very engaged with businesses on FB in general

– Not comfortable with new ad units FB rolls out (could be that

we tend to be the beta partner)

– Love calling out if we slip up on local vernacular

• Best/Worst example is when a fan called us “F*&%^$@! WANKERS!”

– There still seems to be more supply than demand in FB,

which is good for marketers!

@macknuttie


• Australia - Other

– Media is EXPENSIVE

– Australians want to support local

• Moved regional GM to Sydney

• Distribution Center

• Australians LOVE local influencers

• Possible retail locations

– Seasonal impact can make you look dumb

• Run relevant media and messaging

– Huge price discrepancies allow us to show even greater

value

@macknuttie


• Japan - FB

– While FB is fastest growing social network, it’s penetration is

24.5% (2nd to Mixi at 26.1%)

– Male dominant and use as a business tool (such as LinkedIn)

– Hesitant to post pictures of themselves, but are very open to

pets (and food)

– There was early arbitrage leverage, but that is diminishing

– Less engaging vs other regions we operate in

@macknuttie


• Japan - Other

– Over 60% need corrective eyewear

• Because of that, everyone sells glasses

– Strict rules on where you can advertise

• Yahoo! Has 55% of SEM and doesn’t allow

• No data feeds

– Very price competitive

– Email segmentation seems to be rarely done

– Exchange rate can have a real impact

@macknuttie

How Do You Break Through?

• Low market adoption

– Just over 2% of people buy their glasses online

• High CPA

– Search, display, direct mail, etc

• Noisy marketplace

• How do you break through the clutter?

• BTW, use code FIRSTPAIRFREE

– Be sure to share this

@macknuttie

I’ll Leave You With That

@macknuttie