Williams-Sonoma multi-brands

NEW YORK — Williams-Sonoma will push its multi-brand, multi-channel retail market strategy to the precipice, continuing to test new vehicles and concepts for its highly segmented — and increasingly diverse — customer base.

Those efforts will continue at the core of the company's 30-year-old vision, to "own the home through multi-channel retailing," according to Patrick Connelly, executive vp and chief marketing officer.

Williams-Sonoma operates stores, publishes catalogs and lives virtually on the Web.

"We are fortunate to operate in a very large market that is highly fragmented with no retailer really owning more than a couple of percent of that market," Connelly told an audience at the Bear Stearns Retail, Restaurants & Apparel Conference last week. "So there's a significant opportunity for [retail] brands with a dominant mind share."

Williams-Sonoma's top-line sales have grown at an annual compound growth rate of 17 percent for the past four years. And the firm has introduced two new brands — Pottery Barn Kids and West Elm — as it's begun repositioning its Hold Everything brand.

The strategy, itself, is obvious: attack the three major market segments and dominate the three major channels of distribution. But to maximize those opportunities the company has changed its focus over the past two years, focusing less on channels, and more on its brands — the nameplates that reach its target consumers, he explained.

The firm sharply segments its businesses:

• Williams-Sonoma targets the premium market, along with Chambers and the Hold Everything concepts.
• Pottery Barn and Pottery Barn Kids are directed to the upscale market.
• West Elm, introduced last April, shoots for the remainder of the market below the Pottery Barn target.

Still, the multi-channel aspect of the business is critical. Thirty-five percent of the company's customers are multi-channel shoppers and account for 50 percent of its sales, Connelly said. Bricks-and-mortar retail will account for about 60 percent of the firm's sales in fiscal 2002, with projected revenues of about $1.4 billion, he added. That's on a total base of 478 stores, including 63 that opened during the year.

"More than just retail stores, our locations are really billboards for our brands," Connelly said.

Direct-to-consumer, accounts for the remaining 40 percent of sales — in excess of $930 million — split between its catalogs and the Internet. But the value of the catalogs goes beyond mere merchandising of goods. They allow the company a venue for testing new merchandise and merchandise concepts, categories and classifications, as well as assisting in real estate site selection for stores. They are also valuable in collecting customer data, including highly specific spending patterns. And, of course, they offer a dominant and long-lived advertising presence in customers' homes.

"The power of mailing 280 million catalogs extends far beyond sales and operating contribution," Connelly said.

Moreover, Williams-Sonoma's e-commerce business will grow to about $230 million this year, an increased of 50 percent of 2001. E-commerce now accounts for about 10 percent of total corporate sales.

But the Internet's value, too, is beyond direct sales. It's a powerful prospecting tool. The company has found that about 30 percent of its e-commerce customers are new to the brands — they don't live near stores and haven't received catalogs in the past, according to Connelly.