A LIFESTYLE COMPANY

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CENTRAL OPERATIONS infrastructure OPERATING STRATEGY Gaiam utilizes a highly leveragable centralized business model. Business unit heads are responsible for sales and marketing, and utilize Gaiam’s infrastructure, technology, systems, accounting, distribution, creative services, purchasing, merchandising and sourcing. FACILITIES & EQUIPMENT A key component in Gaiam’s overall strategy is to deliver quality, natural merchandise to our customers efficiently and quickly. Our commitment to this goal was realized in 2000 when we expanded our fulfillment center to a 208,100 square foot state-of-the-art facility located near Cincinnati, Ohio. The central location allows for easy access to major shipping companies’ hubs and enables us to deliver products across the continental United States in a timely and cost-effective manner. The investment in fully integrated, comprehensive management information systems helps to leverage operational efficiencies by supporting all major business functions, including customer database management, order processing and fulfillment, customer service, inventory management, merchandising and financial reporting. 14
EXCEPTIONAL CUSTOMER SERVICE Building long-term relationships based on loyalty and trust with our customers remains at the forefront of our business. We want our customers to be completely satisfied with every purchase they make. That's why we provide an unconditional return guarantee, well-trained product specialists who have specific knowledge of our products and on-hand inventory to support more than 90% of our in-stock orders. PRODUCT DEVELOPMENT Gaiam currently offers more than 2,000 proprietary products, distinguishing us from many of our competitors. These items include our Gaiam Organix brand of organic cotton clothing and our complete library of award-winning videos, DVDs and audio CDs. Our proprietary products grew from 24% of our business in 1999 to 37% of our business in 2000. We leverage our product development costs across all our distribution channels. STRICT DEVELOPMENT STANDARDS We set stringent standards for each of the products we select to ensure only the highest quality materials are used that pose the least amount of impact on the environment. As we expand our supply chain to include overseas suppliers in Europe and South America, these strict and thorough testing procedures also apply. “68% of consumers prefer natural products.”–American Demographics, 1999 15
Page 1 and 2: ® A LIFESTYLE COMPANY
Page 3: GAIAM was created as a multi-channe
Page 6 and 7: LETTER TO THE SHAREHOLDERS We recog
Page 8 and 9: LOHAS INDUSTRY l ifestyle o f h eal
Page 10 and 11: DISTRIBUTION CHANNELS media
Page 12 and 13: DISTRIBUTION CHANNELS retailers and
Page 14 and 15: DISTRIBUTION CHANNELS catalogs and
Page 18 and 19: NEW ADDITIONS expansion
Page 20 and 21: PEOPLE corporate culture and commun
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Page 24 and 25: ITEM 1. BUSINESS GAIAM Gaiam is a m
Page 26 and 27: OUR COMPETITIVE STRENGTHS We believ
Page 28 and 29: • Offer Quality, Convenience and
Page 30 and 31: SEASONALITY See the Quarterly and S
Page 32 and 33: ITEM 5. MARKET FOR REGISTRANT’S C
Page 34 and 35: ITEM 7. MANAGEMENT’S DISCUSSION A
Page 36 and 37: QUARTERLY AND SEASONAL FLUCTUATIONS
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Page 40 and 41: GAIAM, INC. CONSOLIDATED STATEMENTS
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Page 44 and 45: Goodwill, Net Goodwill, net represe
Page 46 and 47: On June 30, 2000, Gaiam, Inc. and W
Page 48 and 49: 7. INCOME TAXES The provision for i
Page 50 and 51: A summary of stock options outstand
Page 52 and 53: ITEM 10. DIRECTORS AND EXECUTIVE OF
Page 54 and 55: “In our every deliberation we mus
Page 56: “Never doubt that a small group o

A LIFESTYLE COMPANY

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