Restoration Hardware is looking forward to a year of profitability after a four-year transition period of repositioning the brand.
The company opened its first store in 1985 in Eureka, CA and by 2000 had 102 stores. In 1998, it went public and mailed its first catalog.
Prior to 2001, Christine Parish, vice president, marketing, told attendees at the DMA’s Catalog on the Road Day in Cambridge, MA that the company’s merchandise mix had a reputation for being whimsical and nostalgic. The product range focused more on individual items that didn’t really sync together, rather than collections.
A big problem was that low-ticket items were often on display next to vastly higher ticket offerings. For example, a jar of plastic chattering teeth novelty items 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 would often spend 45 minutes or so in the stores. But, Parish lamented, they weren’t spending.
The store and catalog’s 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 were also structured, to create “events” at retail and in the catalog for items like the newly introduced textiles such as bath towels.
As a result of these efforts, the average sale increased 40%, she 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 a major lesson learned by the company was the fact that when you change a 20 year old product mix and increase your average price points, you’ll lose some customers along the way.
“The average order increases but fewer will be able to shop,” she said. “It takes customers a while to ‘get it. New product launches rarely take off out of the gate.”
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