Williams-Sonoma makes big move in home design
Chain integrates brands and offers free consultations
In a turbulent time for retailers, Williams-Sonoma is one of the best-run companies in the sector. It’s one of the few brick-andmortar chains to have effectively integrated its digital operations with physical stores.
Now the San Francisco home furnishings company is trying a bold new kind of integration: It’s tying together store brands like Williams-Sonoma, Pottery Barn, and West Elm with a new home-design service. Instead of operating each brand separately, the company wants consumers to be able to easily buy whatever merchandise they want regardless of what store or website they frequent.
To do this, Williams-Sonoma has created a 500-employee unit called the Design Crew to offer consumers free consultations. Consumers can visit any store where Design Crew employees are posted to advise them on things like fabrics or floor plans, using merchandise across the company’s brand portfolio. These employees can even make followup visits to the home. (Not all of Williams-Sonoma’s 629 stores will have consultants at the start.)
“We think it’s a big game changer,” CEO Laura Alber told me in an exclusive interview.
The initiative is sophisticated because it seeks to solve two of the biggest problems facing traditional brick-and-mortar chains: making physical stores relevant in the age of Amazon and lifting a general malaise in sales and traffic.
Alber didn’t want to specifically talk about Amazon, but there’s no doubt that the online giant in Seattle is weighing on retailers’ minds, including Williams-Sonoma.
Last month, Amazon upended the industry when the company said it would buy Whole Foods Market for $13.7 billion. Having mastered e-commerce, Amazon now seems poised to go after its rivals’ defenses of brick and mortar.
It seems highly plausible that Amazon will eventually move
beyond food and open stores in other categories like apparel, toys and, yes, furniture. The company recently released a home makeover show on YouTube.
“There are a number of ways Amazon can attack competitors,” said Carol Spieckerman, president of the Spieckerman Retail consulting firm. “Now they’ve landed on the physical earth” with Whole Foods.
Design Crew is meant to drive people to Williams-Sonoma Inc. stores by giving them a reason to go: free help from a knowledgeable group of home experts.
“One of our chief competitive advantages is our stores,” Alber said. “The stores are the ultimate convenience. We have real people who know what they are doing. With complex home projects, you want to get it right.”
Retail consultant Brian Kelly said the key to the program is the authenticity of the person giving the advice.
“You need highly trained people to validate the experience,” said Kelly, a former chief marketing officer with Sears. com. “You can’t just hire a 15year-old kid in high school.”
But the more immediate challenge is boosting sales. Consumer spending has not recovered to the levels that preceded the Great Recession of 2007 to 2009. Furniture and home goods are categories especially sensitive to shifts in economic mood.
Last year was not a good one for Williams-Sonoma. Annual revenue grew only 2.2 percent to $5.08 billion, compared with prior years where the company increased revenue by 6 to 8 percent. In 2016, comparable brand sales, a key measure of growth in the retail industry, were essentially flat.
Williams-Sonoma stock, after a great five-year run from 2010 to 2015, has slumped for the past two years.
So a rethink is needed. Just as retailers have traditionally operated e-commerce and physical stores separately, the same silo mentality also prevails for brands and categories. Few retailers have given serious attention to how to persuade consumers to buy products from different departments in a cohesive, thoughtful way.
The home is a good example. To create a living room, you need multiple items that complement each other, both in functionality and aesthetics: lamps, couches, tables, TV stands. If cable companies can offer consumers Internet, phone and cable as an integrated package, Spieckerman pointed out, retailers need to look at the business as a portfolio of merchandise that can also be “bundled in unique ways.”
“Williams-Sonoma has a point of view,” Kelly said. The merchandise “holds together well.”
The strategy makes even more sense when you examine the uneven performance of Williams-Sonoma brands. Last year, comparable-brand sales for Pottery Barn fell 3.5 percent but jumped 12.8 percent for West Elm. Using Design Crew, the company could use the popularity of West Elm to help improve sales for Pottery Barn by encouraging consumers to pair products from the two chains.
“Williams-Sonoma has no doubt done the math,” Spieckerman said.
While offering free design services obviously costs money, Spieckerman said Design Crew could more than pay for itself with increased sales across its brand portfolio. In addition, Williams-Sonoma can also charge for add-on services and drive people to join its Key Rewards loyalty program.
Advice from Design Crew is free but consumers would need to pay for assembly and installation. However, Key Rewards members can get the service at no cost plus 3 percent back in rewards if they buy products from multiple brands.
Given its success in e-commerce and developing proprietary brands, “Williams-Sonoma has got some room to move,” Spieckerman said. “The company has done a good job in their plans to differentiate so they can continue to stay ahead.”