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. Then they buy those or similar items for less elsewhere, treating the stores like showrooms.
Although the practice typically afflicts chains such as Best Buy that sell commodity products, Williams-Sonoma was long immune because it fielded exclusive merchandise. Now a host of rivals from Web upstarts like Cutlery and More LLC to entrenched players such as Macy’s and Amazon.com sell much of the same gear for less as they tussle over a market worth about $12.3 billion.
Williams-Sonoma’s namesake chain has posted comparable sales declines in five of the past 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 brand licensing agency in New York. 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.
Williams-Sonoma got its start 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. He opened his first store in Sonoma, Calif., in 1956. Oklahoma entrepreneur Howard Lester acquired the company in 1978 and took it public in 1983. Today the chain has about 250 stores. Williams, now 98, is a mentor to current management.
What they created was aspirational, said Joan Storms, an analyst with Wedbush Securities 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.
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, where he’s helping develop kitchen and tabletop goods. Bed Bath & Beyond has added more products and enjoyed success with its 20 percent-off coupons. Closely held Sur La Table has grown to 100 stores and sells many of the same products. Target is combining two kitchen e-commerce sites it acquired.
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 principal at the consulting firm A.T. Kearney.