Restoration Hardware is looking forward to a year of profitability after spending four years repositioning the brand.
The company opened its first store in 1985 in Eureka, CA and by 2000 had 102 locations. In 1998, it went public and mailed its first catalog.
Vice president for marketing Christine Parish told attendees at the DMA's recent Catalog on the Road Day in Cambridge, MA, that prior to 2001 the company's merchandise mix had a reputation for being whimsical and nostalgic. The offerings leaned toward individual items that didn't really work together, rather than collections.
A big problem was that low-ticket items often were on display next to far more expensive products. For example, a jar of plastic chattering-teeth novelties on a $4,000 cherry table made it hard for consumers to believe the furniture was worth the price.
The product mix also had a reputation for being entertaining, and consumers often would spend 45 minutes or so in the stores. But, Parish lamented, they weren't spending.
The low price-point product mix was edited, and Restoration Hardware set about creating a consistency of product offerings and a “point of view” for every room in the house. If consumers liked the $4,000 cherry dining table, said Parish, they could now find a complementary bedroom set.
Sales and markdowns also were structured to create “events,” both in the stores and the catalog, for items like the newly introduced textile line — bath towels and the like.
As a result of these efforts, the average sale increased 40%, Parish said, noting that the catalog is now seen as Restoration's primary sales vehicle. In 1998, direct-to-consumer sales represented $4 million of the company's business. In 2004, that figure jumped to $130 million
“We measure every catalog-driven sale for ROI,” she noted.
Parish added that the company learned a major lesson: When a 20-year-old product mix is changed and the average price points raised, some customers are lost along the way.
“The average order increases but fewer will be able to shop,” Parish said. “It takes customers a while to get it. New product launches rarely take off out of the gate.”
