Restoration Hardware (RH). Nobody invites you to enter the luxury home decoration retail segment.
Incorporation on its own merits
No invitations are received to enter the Luxury segment. Restoration Hardware (RH) has achieved that difficult “Upgrade” journey through a clear strategy and firm execution in the last 8 years.
With the opening of its 6-storey flagship-store with 9,000 sqm. in NYC (Meatpacking District) at the end of 2018, a successful transformation phase culminates to become a chain with 86 Luxury Decoration stores (USA), sales of 2,690 million USD, productivity in store above € 10,000 / sqm. and what is even stranger today, profitably.
We are very used to seeing Flagships generating heavy losses. This is not the case for RH.
In its first year open, this store in NYC has generated sales of over USD 100 million and a positive contribution of USD 30 million.
Mission accomplished!
Gary Friedman, CEO of the chain, summed up in a certain way the situation of Retail and the trajectory undertaken by Restoration Hardware with determination.
“We believe that in the most recent period growth without profitability has been unfairly rewarded and valuations have been based, erroneously, on the belief that an online business is more profitable than a retail with physical stores”
“It is becoming increasingly clear that brands born online desperately need integration with stores to survive, as they are facing very high variable costs and difficult to bear in the medium term”
“Traditional networks, in some cases fueled by fears that millennials may not perceive them as fashionable, have invested to grow their digital business in an unnatural way. Without obtaining higher total sales, the results are a lower business margin and somewhat abandoned physical stores ”
“At RH, we have chosen to take a different path. Elevate the RH brand by building architecturally inspiring spaces that blur the boundaries between residential and retail, interior and exterior, home and hospitality with seamlessly integrated restaurants and services. ”
“Our brand is more valuable in creating a customer experience that cannot be replicated online”
“This dominant physical presence combined with an omnichannel and direct platform that already generates more than a billion dollars online will continue to allow the RH brand to stand out in the fragmented luxury segment of home retail”
2/3/2020 RH Reports Record Third Quarter Fiscal 2019 Results | Restoration Hardware
Main characteristics of the HR business
- Reasonable, non-exorbitant sales growth, with profitability on the rise and supported by operational improvements and sourcing such as reducing the stock by 20%, increasing sales by 7%
- Atypical customer program (400,000 members) with an annual fee of 100 Usd with great advantages and which already accounts for 95% of its sales
- Its physical stores are gaining participation, contrary to the general trend, supported by an integration of its new online restaurant activity with its customers.
- Harmony carefully applied to make its shops exquisitely renovated and recovering unique buildings that were once Museums, Post Offices …
- The direct channel made up of ecommerce, telephone, catalogs and professionals accounts for 44% of total sales. Their catalogs, called Source Books, constitute one of the best experiences in how to transform and enhance the strength of printed material and digital effectiveness.
Hard Restoration development
Future development is still based on inspiration through its stores. Two new segments such as Home / Ski and Home / Beach emerge in an incipient way, but with a permanent character.
In addition, the medium-term expansion to the European market (6 new stores) is decided.
RH’s commitment is to continue navigating with skill between two waters, increasingly difficult to separate:
• Retail vs Residential
• Home vs Hospitality
• Indoors vs Outdoors
Who said that Luxury is always traditional and conservative?
More Info: carlos.dominguez@mheconsumer.com
