Luxury home furnishings retailer marching to its own drummer
From a paid membership model to opening and building large-format stores (“galleries” in RH speak) to mailing out beautifully detailed catalogs, RH (formerly Restoration Hardware) is going against the prevailing retail winds in almost every way possible. And it appears to be paying off.
Net revenues rose 8% to a better-than-expected $592.5 million for the quarter ended October 28, despite an approximate 1% negative impact from Hurricanes Harvey and Irma, the company said. Same-store sales increased 6% compared to a 6% decrease last year. Earnings totaled $1.04, in line with analysts’ estimates
“Our third quarter results are beginning to demonstrate the earnings power of our new membership model, and a dramatically more efficient operating platform,” stated chairman and CEO Gary Friedman.
RH launched a membership model in spring 2016, giving customers special benefits and services for an annual fee. In his statement, Friedman said that with 95% of core RH business now generated from members, the move from a promotional to a membership model has been a success. The company currently has approximately 380,000 active RH members, with membership fee income up 37% year-to-date.
The membership program has resulted in other benefits, according to Friedman, including reductions in return, exchange, and cancel rates.
“We believe that membership has eliminated the frantic buying patterns and associated returns, exchanges, and canceled orders that are the result of a chaotic promotional model,” he stated. “We expect these factors to contribute to improved financial performance through higher conversion of demand into revenue, improved margins and lower costs across our operating platform.”
Friedman said the recent openings of RH locations in Toronto and West Palm, Fla., both of which include integrated hospitality offerings (restaurant, wine vault and coffee bar), have been met with an enthusiastic response.
“Our ability to seamlessly integrate food, wine, art and design, activates all of the senses, drives significant traffic into our galleries, and creates a customer experience that cannot be replicated online,” he said.
Friedman noted it has become clear, “given the continued failures of high growth – no profit, online pure plays, that the complexities and costs of scaling a furniture business will favor those who have control of their brand from concept to customer, build an integrated multi-channel platform with a superior logistics network, and offer the customer a compelling physical and digital experience.”
In many ways, RH is out of step with current retail trends, which is fine with its chief executive.
“We do understand that many of the strategies we are pursuing….are all in direct conflict with conventional wisdom and the plans being pursued by many in our industry,” Friedman said. “We believe when you step back and consider; one, we are building a brand with no peer; two, we are creating a customer experience that cannot be replicated online; and three, we have total control of our brand from concept to customer, you realize what we are building is extremely rare in today’s retail landscape, and we would argue, will also prove to be equally valuable.
Friedman said that RH plans to focus on building a superior operating model that will enable it to compete and win over the long-term.
In two previously announced moves, RH completed the previously closure of the Los Angeles facility in November, and expects to close its distribution center in Dallas by fiscal year end, resulting in savings of approximately $15 million annually.
“Moving forward, servicing our business from two coastal distribution centers will result in improved in-stocks, and significantly faster inventory turns,” Friedman said. “The redesign of our reverse logistics and outlet business is now 90% complete, enabling us to liquidate customer returns in market, while driving cost savings and margin enhancement of $15 million to $20 million annually.”
Beauty retailer goes experiential in new store model
French beauty brand L’Occitane en Provence wants to transport customers to the land of its birth.
The company has completely redesigned its flagship at Yorkdale Shopping Centre, Toronto, to a new model that offers an immersive digital experience and a multi-sensory journey inspired by the land and culture of Provence. Designed by brand creative and experience agency School House, the store boasts a 22-foot- high glass façade that is home to a striking curved video wall, six feet high and eighteen feet wide, which helps draw shoppers into the space.
“Upon entering, guests will feel a sense of wonderment – they will be transported to the lavender fields of Provence, learn about L’Occitane’s expertise in the art of extraction, and visit the land of Corsica, home of the powerful Immortelle flower,” said Paul Blackburn, North American VP of concept design, construction & merchandising, L’Occitane, which operates some 240 stores in North America.
The yellow glass archways at the entry were inspired by Provençal architecture. Key store features include an interactive skincare bistro, a testing experience for fragrances, and large hand-cream column wrapped in communal seating. Provence is brought to life through various design features that channel the elements of earth, fire, air and water.
Earth is cultivated with a flooring of natural stone and a botanical ceiling installation. Water is cultivated with automated rain shower sinks, encouraging test-and-play with products beneath showers from hanging illuminated arched domes. Fire is channeled through a radiating sun installation set within the ceiling plane above and is cultivated into fragrance clouds, creating a unique testing experience for fragrances.
The store complies with L’Occitane’s eco-friendly sensibility. The lighting is 100% LED, and, for the first time in North America, an in-store bottling recycling program in partnership with Terracycle is offered. The stone flooring and countertops are made of recycled natural stone aggregates and contain pre-consumer recycled content. The yellow arches are made from specially-formulated co-polyester resin, incorporating 40% pre-consumer recycled content, compatible with one of the largest post-consumer recycle streams.
The Yorkdale redesign is part L’Occitane’ new “global” retail strategy, which driven by tailoring the customer experience with innovative and personalized services across the globe, while adapting the concepts according to local market specifications.
The retailer has two other stores scheduled to open in December, including a 6,450-sq.-ft. site — its largest location to date — on London’s Regent Street.
It also will unveil a new concept, on the Champs Elysee in Paris. Called 86 Champs, it was created and L’Occitane and French pastry chef, and will Pierre Hermé, the famous French pastry chef, and is described as “a haven for indulgent beauty products and delicious sweet treats.”
Online menswear retailer to open 18 locations in 2018; reduces delivery time
Made-measure menswear retailer Indochino continues to expand its brick-and-mortar footprint.
On Dec. 14, the Canadian retailer will open its 19th location, at Mall of America, Bloomington, Minn. It will be Indochino’s ninth opening this year. Heading into 2018, the company intends to accelerate growth and almost double the number of retail locations, adding up to 18 showrooms throughout the year. The sites will span North America, with potential locations including Atlanta, Austin, Nashville and San Jose, Calif., as well as additional ones in large markets such as New York and Los Angeles.
Indochino’s physical outposts are designed to bring the brand’s online experience to life. Customers are paired with a “style guide” who helps him to put together a one-of-a-kind suit or shirt. The associate helps with fabric selection, and walk shoppers through the multitude of possible combinations of fabrics and personalization options to create suits and shirts that are then made to their precise measurements and shipped directly to their door.
“It’s been an outstanding year as we continued to expand into new markets and grow the business profitably,” said CEO Drew Green. “We’ve set up an on-demand retail model so we’re able to operate with no inventory in our showrooms, leveraging a unique model that minimizing costs and maximizes savings for our customers. We’re introducing consumers around the world to a newer, smarter way to shop where customizable apparel and affordable luxury are the rule and not the exception.”
Indochino also announced it has reduced the time it takes to fulfil an order from four to three weeks due to increased efficiencies across the manufacturing and delivery cycle. The company has been working closely with strategic partner Dayang Group, one of the largest suit manufacturers in the world, which has provided new resources to enhance operations in China including a dedicated production line for the brand. It has also entered into a new partnership with a leading shipping and logistics provider, which has further reduced delivery time.