Williams-Sonoma, the luxury U.S. emporium that persuaded a nation of foodies to shell out hundreds of dollars for the latest kitchen gadget, has fallen victim to “showrooming.”
Browsers drop by, check out the Shun Hiro $249.95 Santoku knives and $699.95 Nespresso Gran Maestria espresso machines and buy them or similar items for less elsewhere -- treating the stores like showrooms. While the practice typically afflicts chains such as Best Buy Co. that sell commodity products, Williams-Sonoma was long immune because it fielded exclusive merchandise. Now a host of rivals from Web upstarts like Cutlery & More LLC to entrenched players such as Macy’s Inc. and Amazon.com Inc. sell much of the same gear for less as they tussle over what researcher NPD Group Inc. estimates is a $12.3 billion market.
Williams-Sonoma Inc.’s namesake chain has posted comparable sales declines in five of the last seven quarters. Janet Hayes, named brand president in March, is under pressure to turn around the chain, which last year generated about 25 percent of the parent’s $4.04 billion in revenue. Hayes is introducing more proprietary products, including rapid-boiling pots and iPhone-connected cooking thermometers, pricing goods more competitively and adding cooking classes to make Williams-Sonoma a foodie destination once again.
“They have to reinvent themselves,” said Michael Stone, who runs Beanstalk, a New York-based brand licensing agency. “People liked going into Williams-Sonoma and looking at the cool gadgets. That was 10 years ago, that is not today. These are things people can get just as good and cheaper elsewhere.”
Besides Williams-Sonoma, the parent also operates the Pottery Barn, Pottery Barn Kids and West Elm home-goods chains. Analysts estimate net income will increase 7.5 percent this year, compared with last year’s 8.4 percent gain, as revenue growth slows to 7.2 percent from 8.7 percent. The shares dropped 0.5 percent to $53.92 at 9:33 a.m. in New York and through yesterday had declined 12 percent since closing at a 12-month high on Aug. 5.
Williams-Sonoma got its start in the 1950s after a building contractor named Chuck Williams visited Paris and discovered omelet pans and souffle molds of a quality he couldn’t find in the U.S. In 1956, Williams, now 98 and a mentor to current management, opened his first store in Sonoma, California. The late Howard Lester, an Oklahoma entrepreneur, acquired the company in 1978 and took it public in 1983. Today the chain has about 250 stores.
“What they created was aspirational,” said Joan Storms, an analyst with Wedbush Securities Inc. in Los Angeles. “If you got a gift that came from Williams-Sonoma, you were a very special person. If you gave a gift, you felt you were giving quality and cachet.”
Storms rates the shares the equivalent of a hold.
The chain rode the U.S. housing boom and, like much of the retail industry, took a hit after the 2008 financial crisis. Since then, Pottery Barn and West Elm have rebounded on the strength of a housing recovery. In the quarter that ended Aug. 4, sales at Pottery Barn and West Elm grew 9.9 percent and 17 percent respectively; Williams-Sonoma sales fell 0.4 percent.
In recent years, Americans have become more sophisticated about food, and the jockeying for their dollars has intensified. Richard Harvey, Hayes’s predecessor at Williams-Sonoma, has shown up at Restoration Hardware Holdings Inc., where he’s helping develop kitchen and tabletop goods. Bed Bath & Beyond Inc. has added more products and enjoyed success with its 20 percent-off coupons. Closely held Sur La Table Inc. has grown to 100 stores and sells many of the same products. Target Corp., meanwhile, is combining two kitchen e-commerce sites it acquired earlier this year.
“I am not going to buy a $50 gingerbread house at Williams-Sonoma, when I can go buy one for $19 at Target,” said Brian Pitera, a Chicago-based principal at the consulting firm A.T. Kearney.
Hayes is well-suited to the challenge after high-ranking stints at Pottery Barn and its offshoots for six years, says Chief Executive Officer Laura Alber.
The company is trying to beef up the chain’s private-label goods, which already include cookware and stemware, and expand the exclusivity of the products it sells from the key national brands like Le Creuset and Breville, Hayes and Alber said in a joint telephone interview.
Their pipeline includes a $199.95 smart thermometer that sends readings to your iPhone and iPad and helps cooks time the different steps required to compose dinner. Coming are a new Williams-Sonoma-branded pot with a ridged bottom that accelerates boiling, plus extensions of the chain’s Peppermint Bark to celebrate its 15th anniversary, including peppermint-flavored hot chocolate. A Vitamix Pro 750 blender in exclusive candy-apple red debuts in November.
The chain is also trying to compete aggressively on price and promotions without sacrificing quality, they said.
“You will see change and you will see it coming gradually,” Hayes, 46, said, declining to be specific. “But it is going to be meaningful.”
The executives are committed to bricks and mortar.
“Retail is theater and we believe that our stores are a competitive advantage,” Alber said. “We want you to have almost a Pavlovian response when you hear the word Williams-Sonoma and when you walk into the store. You can smell it and you can taste it and you are so excited to learn.”
Williams-Sonoma is dialing up the sensory experience with more tastings, more cooking, more product “demo-ing,” Hayes said. It opened a hands-on cooking school in Chicago in mid-September and is testing further rollouts. Last year, the company acquired the site of the original Sonoma store and is repurposing it as a destination for cooking enthusiasts to learn from visiting chefs.
Pitera says the turnaround efforts are overdue.
“They’ve missed the window almost,” he said. “They are going to have to do it quickly. It’s going to take a pretty savvy management team that can move very aggressively.”