Internet mini case Essay

Williams-Sonoma (WSM) was a military strength seller of harvest-feasts for the office. The high societys products were exchange by means of two channels the sell channel and the direct-to-customer channel. The sell surgical incision comprised 4 sell concepts Williams-Sonoma, clayw atomic flake 18 vitamin B complex, clayware vitamin B Kids, and patronize Everything. The direct-to-customer section exchange though eight sell compiles Williams-Sonoma, pottery type B, clayware group B Kids, pottery boron move back + Bath, PB Teen, Hold Everything, West Elm, and Williams-Sonoma family line (which incorporated elements from the previously discern Chambers) as rise as through four e-commerce posts. The compiles piddleed customers throughout the unite States, and the four sell aires operated 522 stores in 42 states and Washington, DC. The sell segment accounted for 58.9% of bring sales the direct-to-customer segment accounted for 41.1% in monetary 2003.C harles E. Williams, Director Emeritus of the family in 2003, founded Williams-Sonoma in 1956 to aver high- pole culinary and serving equipment in an upscale retail environment. The comp either entered the direct-to-customer channel in 1972, with the mental home of its flagship compile, A Catalog for Cooks, which market placeed the Williams-Sonoma carrymark. In 1983, the comp whatever internally developed the Hold Everything composeue to offer innovative and stylish retention solutions for home and home office. The success of the catalogue led to the opening of the runnerly Hold Everything retail store in 1985.In 1986, the family acquired clayware Barn, at that cadence a delimitationally successful retailer and direct-to-customer merchant featuring a outstanding kind of quotidian home furnishings and accessories including article of furniture, lamps and lighting fixtures, rugs, window treatments, linens, dinnerware, and glassware. In 1989, Williams-Sonoma fixd C hambers, a direct-to-customer trader of high- musical note, premium- damaged linens, towels, robes, soaps, and accessories for rump and bath.This case was prepared by prof Maryanne M. Rouse, MBA, CPA, University of South Florida. Copyright 2005 by prof Maryanne M. Rouse. This case cannot be reproduced in any form without the written permission of the right of first publication toter, Maryanne M. Rouse. Reprint permission is solely granted to the publishing house, Prentice Hall, for the books, Strategic way and business line Policy 10th and 11th readings (and the pla nettary version of this book) and Cases in Strategic Management and Business Policy 10th Edition by the shamright h honest-to-goodness, Maryanne M. Rouse.This case was redact for SMBP and Cases in SMBP 10th Edition. The copyright holder is solely responsible for case content. any other publication of the case (translation, any form of electronics or other media) or sold (any form of partnership) to anothe r publisher will be in irreverence of copyright law, unless Maryanne M. Rouse has granted an supererogatory written reprint permission. In earliest 1999, the ships follow launched both its Williams-Sonoma Internet wedding party and gift registry network come out and its Williams-Sonoma e-commerce site. Later that year, the ac companionship launched a separate pottery Barn Kids catalog to offer puff up- do, stylish childrens furniture and cosmetic accessories.(pottery Barn Kids was one of the first concepts to market in what is evaluate to be a major step-up segment during the neighboring decade, as birthrates in the join States. are expected to surpass rates achieved at any time in the last(prenominal) 30 age. Birthrates among older women are soaring, and older moms tend to be wealthier and more ordain to splurge on their children.) Pottery Barn Kids stores were opened adjacent to Pottery Barn stores across the United States, and by folk 2004, there were 78 stores . Edward Mueller, Williams-Sonoma CEO, expected Pottery Barn Kids to be the primary gain vehicle for the companion everyplace the bordering 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 betrothal registry, and it opened five sunrise(prenominal) retail stores in Toronto, Ontario.In line with its re slowd to diversification process strategy, Williams-Sonoma tested a new catalog in summer 2002, under the West Elm notice. 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, ornamental accessories, and an extensive textiles collection. In 2003, Williams-Sonoma expanded its catalog mailings for West Elm, added a web site, and opened its firs t retail store.Williams-Sonoma launched PB Teen with a catalog and web site in late April 2003. PB Teen was intended to engage the market stead between Pottery Barn and Pottery Barn Kids with hip, that designed furniture, rugs, lighting, bedding, and accessories promoted with its catalog, interactive web site, superfluous sales campaigns, and contests.The companys newest concept, Williams-Sonoma dental plate, was introduced in third make 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 position this brand extension as an upscale furniture concept that would be more clean and less fashion-forward than Pottery Barn.Dave DeMattei, Williams-Sonomas death chair of Emerging Brands, noted that the look of casual elegance was aspirational, using an manufacturing endpoint for a product that helps a consumer cope up without necessarily spending gain dollar. Th is new home collection, put together by Steven Brady, former President for place Design at Ralph Lauren groundwork, featured down-plumped sofas ranging from $2,200 to $5,800 and $3,000 lather headboards as easy as quartz 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 buy somewhat expensive furnishing sight-unseen, the companys alliances with decorators, who would get batch discounts, were expected to help overcome sign 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 located 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 El m, and 14 outlet stores. The company rent rather than owned its retail space. As of September 2004, the companys gross leased full-strength feet total 4,292,000, with 2,705,000 selling square feet. Lease damage ranged from 3 to 23 years. The average square feet per retail location increased from 7,660 in 2002 to 8,200 by August 2004, as the company replaced older, smaller Pottery Barn stores with bigger stores carrying a broadr variety of deal, 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 send its catalogs to addresses from its proprietary customer lists as well as to names it received in exchange (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 in any case used its catalogs and e-commerce sites as a cost-effective means of testing market acceptance of new products.As of 2004, of the eight merchandising concepts, the Pottery Barn 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 zeal brand. A brand gained lifestyle status via style, innovation, and appeal to customers who cherished to lead 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 direct reduces in Las Vegas, Oklahoma City, and Camp Hill, dada (approximately 36,000 square feet in each location). diffusion centers served both the companys retail locations andfulfillment operations. The company also leased office, warehouse, design/photo studio, and data center space in California, New York, and Florida. In February, 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 paid for in U.S. dollars. Any event causing a sudden disruption or defy of importees from foreign vendors, including the imposition of additional import stand-inrictions, 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 inform a 16.7% increase in net revenues over the prior year, the highest pretax operating margin and earnings per dispense in the companys hi boloney and an increasing dispel 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. taxation for second 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 on October 14, 2004, was $36.33.(Note Williams-Sonomas yearly and quarterly reports and SEC filings are visible(prenominal) via the companys web site, www.williams-sonomainc.com, and www.wsj.com )The effortThe military capability retail business was exceedingly competi tive and characterized by a number of challenges, including Anticipating and quickly responding to changing consumer demands Maintaining favorable brand recognition and effectively marketing products to consumers in diverse market segments Developing innovative, high-quality products in colors and styles that appealed to consumers of varying age groups and tastes competitively pricing products and achieving customer perception of measure out Providing strong and effective marketing incarnateSpecialty retail exhibited the low entre barriers characteristic of fragmented industries, barriers that may be all but eliminated with the increased best-selling(predicate)ity of the Internet. fortunate products for online shopping included computers, books, CDs, electronics, toys, and housewares. Over time, industry analysts expected catalog retailing to unite with e-tailing as web sites become electronic catalogs. For successful companies with strong brand names, the conclave of stores a nd web sites would be a sizable 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 standardized lines of merchandise. The company competed with national, regional, and local businesses as well as handed-down furniture stores, discussion section stores and specialty stores. The substantial sales growth in the direct-to-customer industry within the previous(prenominal) decade had encouraged both the entree of new competitors and an increase in competition from established companies. Direct competitors included much(prenominal) national companies as crateful & Barrel, takings computer hardware, sour grass 1 Imports, and Bombay company, as well as regional companies such as the admission 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 mailed its first catalog in 1967. in private held Crate & Barrel prided itself on pattern beautiful store displays that were difficult to copy and worked diligently to find products from smaller, out-of-the way factories that made beautiful products that consumers could afford. Although the company had substantially few brick-and-mortar locations (84 retail and outlet stores) than the Williams-Sonoma retail concepts with which it competed, Crate & Barrel marketed nationally via its catalogs and web site. amends hardware return key 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 elaboration 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 characteristics in common, including significant growth in direct-to-customer sales. Industry observers estimated that tour 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 retroactive tools, steamer chairs that could have come straightaway from the set of Titanic, shot glasses decorated with optometrists eye charts, and down-filled foot duvets proving hugely popular with shoppers.Restoration Hardwares not-so-secret utensil in the battle for upscale customers could well have been Gary Friedman. In spring 2001, Friedman, who managed Pottery Barns explosive gro wth in the 1990s, was named CEO of Restoration Hardware after having been passed over for the top reflect at Williams-Sonoma. bobtail 1 Imports sorrel 1 Imports comprised three chains of retail stores operating under the names sorrel 1 Imports, The Pier, and Cargo. Products offered included a wide variety of furniture, decorative home furnishings, eat 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 back up 8 franchised 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 commissioned 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 emphasized classic traditional furniture, groin decor, and accessories. Furniture included both timberland and metal ready-to-assemble furniture designed for the bedroom, animation room, dining room, and home office. Functional 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 assist in the orderly clearance of merchandise, and to further trespass on its strength in intention 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 read y-to-assemble products 14%, with protect decor accounting for the remaining 12%. doorsill StoreThe privately held Door Store operated nine retail locations in New York, New Jersey, and Connecticut. Its products included modern-day and traditional case goods and upholstered furniture it competed with both Pottery Barn and Hold Everything. The companys product strategy was to scream trends in furniture and to make quality furniture available to style-conscious customers at prices intimately 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 teeny-weeny 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. otherwise Competitors Other 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 dominated by traditional retailers such as Ethan Allen and Room & visiting card and by tastemakers such as Martha Stewart for Bernhardt and Ralph Lauren Home.