February 15, 2008

Williams Sonoma / Pottery Barn And Multichannel Growth

The DMA is selling a research report suggesting that "Retailers Have Multichannel Skills But Need Help Integrating Channels". The conclusions are based on questions brands answered in a recent survey.

Is there any place we can verify the claims outlined in the report?

Let's look at long-term sales trends from a respected and profitable multi-brand retailer, Williams Sonoma (WSM), owner of the flagship Williams Sonoma brand and the popular Pottery Barn brand.

One can go back to at least 1991 to understand how Williams Sonoma grew sales in the direct-to-consumer (catalog + website) channel and in the retail channel (here are results from the past five fiscal years).

Williams Sonoma introduced the e-commerce channel in 1999. In the table below, annual results are listed, as well as pre-internet and post-internet results:

Williams Sonoma: Comp Store And Direct Channel Growth

Year Direct Growth Retail Comps

2007 (Nine Months) 2.9% 0.5%
2006 4.5% 0.3%
2005 13.6% 4.9%
2004 17.1% 3.5%
2003 20.8% 4.0%
2002 10.2% 2.7%
2001 8.4% 1.7%
2000 33.1% 5.5%
1999 34.2% 6.4%
1998 15.7% 5.0%
1997 11.2% 2.8%
1996 11.9% 4.6%
1995 16.2% 3.4%
1994 55.0% 16.5%
1993 23.9% 13.8%
1992 -0.2% 2.1%
1991 -3.8% 0.5%

Results: 2000 - 2007 13.5% 2.9%

Results: 1991 - 1999 17.1% 6.0%

It isn't a stretch to suggest that Williams Sonoma and Pottery Barn do an above-average job of integrating channels, per the recommendations offered in the DMA research report.

And yet, during this era of multichannel goodness, direct-to-consumer sales are growing slower post-internet than pre-internet. Retail comp store sales are growing slower post-internet than pre-internet.

Some of this is due to scale --- as a business grows, it becomes harder to grow sales as a percentage of prior year sales.

Could some of this be due to a failure of perceived multichannel best practices? Adding an e-commerce channel to an established catalog channel should result in new customers, a new audience, and much improved growth, right?

Instead, we see slower growth rates.

We're also told that catalogs and e-commerce drive comp store sales increases. Pages circulated increased a total of 36% in the past four years, but comp store sales increases are, at best, tepid.

Williams Sonoma is a respected brand with increasing sales and robust profit, profit levels that any company would be proud of. Williams Sonoma exhibits most of the multichannel marketing behaviors and cross-channel integration that we're told we must employ to be successful.

To date, multichannel best practices at Williams Sonoma have not translated to incremental increases in direct-to-consumer sales or retail comps.

Why do you think this is the case? Are the multichannel experts missing something? Is Williams Sonoma an anomaly? Is there a multichannel brand that executes multichannel marketing well, demonstrated via publicly reported sales and profit increases?

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