Internet mini case Essay

Williams-Sonoma (WSM) was a specialism seller of products for the home. The fol emits products were sold through two bring the sell channel and the direct-to-client channel. The retail segment comprised four retail concepts Williams-Sonoma, claywargon atomic number 5, clayware Barn Kids, and Hold Everything. The direct-to-customer segment sold though cardinal retail compiles Williams-Sonoma, clayware Barn, pottery Barn Kids, clayware Barn get by + Bath, PB Teen, Hold Everything, westernmost elm tree, and Williams-Sonoma shell (which incorporated elements from the previously erupt put up) as fountainhead as through four e-commerce sites. The catalogues disc everyplaceed customers throughout the linked States, and the four retail businesses operated 522 strains in 42 states and Washington, DC. The retail segment accounted for 58.9% of contri thate gross revenue the direct-to-customer segment accounted for 41.1% in fiscal 2003.Charles E. Williams, Director Emerit us of the bon ton in 2003, founded Williams-Sonoma in 1956 to twisting high-end culinary and serving equipment in an upmarket retail environment. The high society entered the direct-to-customer channel in 1972, with the introduction of its flagship catalog, A catalogue for Cooks, which marketed the Williams-Sonoma brand. In 1983, the company internally developed the Hold Everything catalog to offer innovative and stylish storage solutions for home and home office. The success of the catalog led to the opening of the offset Hold Everything retail store in 1985.In 1986, the company acquired clayware Barn, at that time a marginally successful retailer and direct-to-customer merchant featuring a large assortment of periodic home furnishings and accessories including piece of furniture, lamps and lighting fixtures, rugs, window treatments, linens, dinnerware, and glassware. In 1989, Williams-Sonoma created Chambers, a direct-to-customer sellr of high-quality, premium-priced lin ens, towels, robes, soaps, and accessories for rump and bathing tub.This case was prepared by Professor Maryanne M. Rouse, MBA, CPA, University of South Florida. Copyright 2005 by Professor Maryanne M. Rouse. This case cannot be reproduced in any form without the create verbally permission of the copyright holder, Maryanne M. Rouse. Reprint permission is solely granted to the publisher, apprentice Hall, for the books, Strategic Management and Business Policy tenth and 11th Editions (and the transnational version of this book) and Cases in Strategic Management and Business Policy tenth Edition by the copyright holder, Maryanne M. Rouse.This case was edited for SMBP and Cases in SMBP 10th Edition. The copyright holder is solely responsible for case content. Any some other(a) publication of the case (translation, any form of electronics or other media) or sold (any form of partnership) to another publisher will be in violation of copyright law, unless Maryanne M. Rouse has g ranted an additional written reprinting permission. In early 1999, the company launched both its Williams-Sonoma Internet wedding and give way registry web site and its Williams-Sonoma e-commerce site. Later that yr, the company launched a disjoined Pottery Barn Kids catalog to offer well-make, stylish childrens furniture and decorative accessories.(Pottery Barn Kids was one of the first concepts to market in what is judge to be a major egress segment during the next decade, as birthrates in the United States. are evaluate to surpass rates achieved at any time in the past 30 years. Birthrates among older women are soaring, and older moms tend to be wealthier and more willing to splurge on their children.) Pottery Barn Kids stores were opened adjacent to Pottery Barn stores crossways the United States, and by September 2004, there were 78 stores. Edward Mueller, Williams-Sonoma CEO, anticipate Pottery Barn Kids to be the primary growth vehicle for the company oer the next several years.Williams-Sonoma launched its Pottery Barn web site and created a separate Pottery Barn Bed + Bath catalog in 2000. In 2001, the company added a Pottery Barn Kids web site, and a Pottery Barn online gift and bridal registry, and it opened five unsanded retail stores in Toronto, Ontario.In line with its re advancedd diversification growth strategy, Williams-Sonoma tested a new catalog in summer 2002, low the West Elm brand. This new brand targeted young, design-conscious customers seeking to furnish first homes/apartments/lofts with quality furniture and accessories at affordable price points. West Elm product categories include furniture, decorative accessories, and an extensive textiles collection. In 2003, Williams-Sonoma expanded its catalog mailings for West Elm, added a web site, and opened its first retail store.Williams-Sonoma launched PB Teen with a catalog and web site in late April 2003. PB Teen was intended to fill the market infinite betwixt Pottery Barn and Pottery Barn Kids with hip, exclusively designed furniture, rugs, lighting, bedding, and accessories promoted with its catalog, interactive web site, special sales campaigns, and contests.The companys newest concept, Williams-Sonoma Home, was introduced in ternary delineate 2004 to tap into what company Chairman William H. Lester noted had been an empty space between the Pottery Barn demographic and designer home furnishings. Lester hoped to set this brand extension as an upmarket furniture concept that would be more classic and less fashion-forward than Pottery Barn.Dave DeMattei, Williams-Sonomas President of acclivitous Brands, noted that the look of casual elegance was aspirational, using an industry limit for a product that helps a consumer trade up without necessarily expending top dollar. This new home collection, put together by Steven Brady, originator President for Home Design at Ralph Lauren Home, featured down-plumped sofas ranging from $2,200 to $5,800 and $3,000 leather headboards as well as crystal lamps, cashmere throws, and the upscale linens formerly featured in the companys Chambers catalog. (The company planned to fold the Chambers catalog into the Williams-Sonoma Home catalog.) Although some industry watchers questioned whether consumers would be willing to bribe somewhat pricey furnishing sight-unseen, the companys alliances with decorators, who would get trade discounts, were expect to help overcome initial resistance. The first Williams-Sonoma Home retail stores were expected to open early in 2005.Retail StoresAs of September 2004, Williams-Sonoma operated a total of 522 retail stores set(p) in 42 states, the District of Columbia, and Toronto, Ontario 242 Williams-Sonoma, 176 Pottery Barn, 82 Pottery Barn Kids, 7 Hold Everything, 1 West Elm, and 14 outlet stores. The company leased rather than owned its retail space. As of September 2004, the companys gross leased cheering feet totaled 4,292,000, with 2,705,000 selling f orthright feet. Lease terms ranged from 3 to 23 years. The average square up feet per retail location returnd from 7,660 in 2002 to 8,200 by August 2004, as the company replaced older, smaller Pottery Barn stores with large stores carrying a wider innovation of merchandise, including furniture.Direct-to-Customer OperationsThe direct-to-customer segment sold a variety of products through eight catalogs and e-commerce web sites. The company sent its catalogs to addresses from its proprietary customer lists as well as to names it received in veer (or purchases) from other mail-order merchandisers, magazines, and other companies. The direct-to-customer business complemented the retail business by create customer awareness of the brand and acting as an effective promotional vehicle. Williams-Sonoma too used its catalogs and e-commerce sites as a cost-efficient means of interrogation market acceptance of new products.As of 2004, of the eight merchandising concepts, the Pottery Ba rn brand and its extensions had been the major source of sales growth in this segment for the previous several years. A good deal of Pottery Barns success was attributed to its ability to create a life-style brand. A brand gained lifestyle status via style, innovation, and appeal to customers who wanted to locomote a particular style of life in short, it allowed the company to reach a higher level in terms of the connection it made with the customer.Facilities/LocationsWilliams-Sonoma leased centralized distribution facilities in Olive Branch, Mississippi (2,152,000 square feet), and Memphis, Tennessee (1,515,000 square feet), and call centers in Las Vegas, Oklahoma City, and Camp Hill, Pennsylvania (approximately 36,000 square feet in each location). Distribution centers served both the companys retail locations andfulfillment operations. The company similarly leased office, warehouse, design/photo studio, and entropy center space in California, newborn York, and Florida. In F ebruary, Williams-Sonoma purchased headquarters offices in San Francisco.SuppliersThe companys sourcing strategy included relationships with manufacturers in over 40 countries. Approximately 58% of merchandise purchases were from non-U.S. vendors, most of which were located in atomic number 63 and Asia. Substantially all of the companys foreign purchases of merchandise were negotiated and paying for in U.S. dollars. Any event causing a sudden breakout or delay of imports from foreign vendors, including the imposition of additional import restrictions, restrictions on the transfer of funds and/or increased tariffs or quotas, or both, against home-centered items could increase the cost or reduce merchandise availability. No supplier accounted for more than 4% of Williams-Sonomas total purchases.FinanceIn fiscal 2003 (fiscal year ended February 1, 2004), Williams-Sonoma reported a 16.7% increase in net revenues over the prior year, the highest pretax operating margin and earnings per share in the companys history and an increasing return on assets. Williams-Sonomas profit for the quarter ended August 1, 2004, jumped 55% as sales surged at the companys Pottery Barn and outlet stores. Revenue for import quarter 2004 increased 19%, to $689.6 million, with direct-to-customer sales up an impressive 27%. Pottery Barn and Pottery Barn Kids drove second quarter retail growth with same-store sales increases of 10.2% however, same-store sales at the companys Williams-Sonoma stores slid 1.6%. The closing price for Williams-Sonoma stock up on October 14, 2004, was $36.33.(Note Williams-Sonomas annual and every quarter reports and SEC filings are available via the companys web site, www.williams-sonomainc.com, and www.wsj.com )The manufacturingThe specialty retail business was highly competitive and characterized by a number of challenges, including Anticipating and quickly responding to changing consumer demands Maintaining favorable brand recognition and in effect marke ting products to consumers in diverse market segments Developing innovative, high-quality products in colour and styles that appealed to consumers of varying age groups and tastes Competitively pricing products and achieving customer perception of encourage Providing strong and effective marketing supportSpecialty retail exhibited the low entry barriers characteristic of fragmented industries, barriers that may be all but eliminated with the increased popularity of the Internet. Favored products for online shopping included computers, books, CDs, electronics, toys, and housewares. Over time, industry analysts expected catalog retailing to merge with e-tailing as web sites become electronic catalogs. For successful companies with strong brand names, the combination of stores and web sites would be a powerful one however, expenditures for e-commerce sites would hurt profitability in the short run.CompetitorsWilliams-Sonomas specialty retail stores, mail-order catalogs, and Internet web sites competed with other retail stores, other mail-order catalogs, and other e-commerce web sites that marketed similar lines of merchandise. The company competed with national, regional, and local businesses as well as traditional furniture stores, surgical incision stores and specialty stores. The substantial sales growth in the direct-to-customer industry within the past decade had further both the entry of new competitors and an increase in competition from open companies. Direct competitors included such national companies as Crate & drumfish, counter Hardware, Pier 1 Imports, and Bombay Company, as well as regional companies such as the Door Store, Rolling Pin Kitchen Emporium, Home Elements, and Expressions.Crate & BarrelA counterculture story of the 1960s, Crate & Barrel opened its first store in Chicagos Old Town in 1962 and get off its first catalog in 1967. Privately held Crate & Barrel prided itself on designing beautiful store displays that were difficult to copy and worked diligently to generate products from smaller, out-of-the way factories that made beautiful products that consumers could afford. Although the company had materially fewer brick-and-mortar locations (84 retail and outlet stores) than the Williams-Sonoma retail concepts with which it competed, Crate & Barrel marketed nationwide via its catalogs and web site. refurbishment HardwareRestoration Hardware grew from just 20 stores in 1997 to 104 at the end of 2001, barely 37 behind Pottery Barn in brick-and-mortar locations however, the company had had a difficult time managing growth. Its aggressive expansion between 1998 and 2000 cost it two years of profits and sank the value of its stock to as low as $.50 a share in December 2000, from $37 a share in 1998, the year it went public.The closing price for its stock on May 19, 2002, was $10.19. Both Restoration Hardware and Pottery Barn sold high-dollar, vintage-style furniture and home furnishings and had many other chara cteristics in common, including significant growth in direct-to-customer sales. Industry observers estimated that while Pottery Barn targeted the wealthiest 20% of Americans, Restoration Hardware targeted the wealthiest 10%. Whimsical nostalgia had been a big seller for Restoration Hardware for several years, with such items as retro tools, go chairs that could have come straight from the set of Titanic, shot glasses grace with optometrists eye charts, and down-filled foot duvets proving hugely popular with shoppers.Restoration Hardwares not-so-secret weapon in the battle for upscale customers could well have been Gary Friedman. In spring 2001, Friedman, who managed Pottery Barns explosive growth in the 1990s, was named CEO of Restoration Hardware after having been passed over for the top contemplate at Williams-Sonoma.Pier 1 ImportsPier 1 Imports comprised three gyves of retail stores operating under the names Pier 1 Imports, The Pier, and Cargo. Products offered included a wid e variety of furniture, decorative home furnishings, dining and kitchen goods, bath and bedding, and other specialty items for the home. During the fiscal year ended February 28, 2004 (fiscal 2003), it operated 1,015 Pier 1 stores in the United States and 68 Pier 1 stores in Canada, and it also supported 8 rightd stores in the United States. In addition, it operated 29 stores located in the United Kingdom under the name The Pier and 40 Cargokids stores located in the United States. Pier 1 also supplied merchandise, and it clear the Pier 1 Imports name to Sears Mexico and Sears Puerto Rico, which sold Pier 1 merchandise in a store-within-a-store format in 20 Sears Mexico stores and in 7 Sears Puerto Rico stores.The Bombay CompanyThe Bombay Companys retail stores and catalog show classic traditional furniture, skirt decor, and accessories. Furniture included both timber and metal ready-to-assemble furniture designed for the bedroom, living room, dining room, and home office. ope rable and decorative accessories included lamps, jewelry, baskets, candles, scents, ceramics, frames, and desktop items. Wall decor included prints and mirrors. On January 31, 2004, the company operated 415 stores in 42 states and 56 stores in 9 Canadian provinces, as well as 46 outlet stores. The company viewed the outlets as an opportunity to increase sales to a different customer base, to swear out in the orderly clearance of merchandise, and to further capitalize on its specialization in designing and sourcing proprietary products. Accessories, the broadest category offered by the company, accounted for 43% of sales in 2003, while large furniture accounted for 31%, and ready-to-assemble products 14%, with wall decor accounting for the remaining 12%.Door StoreThe in private held Door Store operated nine retail locations in New York, New Jersey, and Connecticut. Its products included contemporary and traditional case goods and upholstered furniture it competed with both Pottery Barn and Hold Everything. The companys product strategy was to anticipate trends in furniture and to make quality furniture available to style-conscious customers at prices almost too good to be true. The Door Store also marketed via its web site and shipped nationwide.Rolling Pin Kitchen EmporiumThis privately held franchise kitchen and housewares concept, with headquarters in Little Rock, Arkansas, had store locations in regional and upscale malls in Arkansas, North Carolina, South Carolina, and Florida. In addition to retail sales, the company marketed nationwide via catalogs and its web site. The Rolling Pin competed with Williams-Sonoma.Other CompetitorsOther competitors across retail concepts included local and regional furniture and specialty stores, department stores, and direct-ship manufacturers. Williams-Sonomas expansion from the kitchen into the rest of the home with its flagship brand via the new Williams-Sonoma Home concept was expected to reorder a landscape dominat ed by traditional retailers such as Ethan Allen and Room & Board and by tastemakers such as Martha Stewart for Bernhardt and Ralph Lauren Home.