Williams Sonoma benefits from a Vaccine Economy design to life as e-commerce accounts for two-thirds of total sales

Last week, the two leaders in home improvement retail, Home Depot and Lowe’s, gave evidence that the COVID boom in home improvement enthusiasm isn’t abating in the vaccine economy. Yesterday, Williams Sonoma added further confirmation that interest in home ownership is not waning just because the pandemic lockdown house arrest is over.

In fact, the home design retailer has had its most profitable first quarter despite the current instability and uncertainty in the wider economy. CEO Laura Alber argues:

The current economic environment is challenging, but the housing market remains strong. Hybrid work means people will continue to spend more time at home, and the rising costs of gas and travel have historically pushed people to stay at home to cook and entertain. We believe these three trends will lead to continued momentum in furnishing and enhancing the home.

As a company, we are prepared to come through economic uncertainties. We are a multi-channel portfolio of brands with a management team that has expertise and experience in managing historic times of economic challenges.

The vaccine economy has brought a new impetus to “raise sticks” and move or remodel existing homes, explains Alber:

On my desk today was a report from Google with what I think is pretty fresh data. Nearly 40% of Americans are considering moving in 2022, and most are hoping to make a purchase. The desire for more space is the number one reason Americans move. Others have specific functions in mind. Those features include an outdoor space and a large kitchen that’s also pet-friendly, which really aligns with what we’re doing across all of our brands, with the laid-back lifestyle that we showcase… people working from home, people learning how to cook, they care more about their houses, they have invested and now they are moving, they want to move.

Ecommerce

Understanding the industry sector in which Williams Sonoma operates is critical to success, she adds:

We operate in a large and fragmented industry that derives more than half of its revenue from smaller brick-and-mortar retailers that lack sophisticated e-commerce capabilities. We are one of the strongest players in the market and believe we have an opportunity to capture more of this $830 billion aggregate addressable market. Our FY21 revenue of $8.2 billion represented only about 1% of the opportunity, and we continue to demonstrate our ability to incrementally gain market share.

The shift of the entire retail sector to buying online as a result of the COVID crisis is a significant development, Alber says, with e-commerce now accounting for just under two-thirds (65%) of total sales, although the growth rate has inevitably slowed from the highs of the pandemic is slowing down:

This trend is further amplified by the arrival of the millennial generation in the household formation phase. In an industry occupied by companies lagging behind in developing their digital experiences and skills, and Pureplays inexperienced in running businesses, we believe that as a digital-first, we don’t digital-only companies are well positioned.

This digital transformation push is underway, she adds, with efforts currently focused on two main areas – improving the conversion funnel throughout the customer journey and providing enhanced product recommendation capabilities alongside an enhanced furniture shopping experience:

The benefits of our in-house design capabilities go well beyond physical product design. We’ve also been able to develop our own supply chain efficiencies and proprietary technology that have enabled our company to be resilient.

The global supply chain crisis is bound to have some implications, she concedes:

We continue to experience delays, challenges and additional costs on our network. We continue to navigate challenging starts and stops due to COVID-related pressures and shortages of raw materials and labor. Nonetheless, we are focused on meeting our customers’ expectations and we are pleased that our customer satisfaction scores remain high and we are beginning to see some improvement in our brands’ stock levels.

There are reasons to be optimistic, she concludes:

We’re opening a new distribution center in Arizona and will have more automation there. That should bring us some efficiency, [such as] a possible reduction in shipping costs in general and a reduction in the cost of accommodating the customer. We’re still late [are] Unfortunately late in some cases, with the slowdown in Vietnam, so [we’ve been] It’s embarrassing to have to tell a customer once, twice or even three times that their delivery is delayed due to all the issues we’ve had in some of these countries due to COVID. So that just starts with the list of things I have in mind when you ask me about future efficiency.

My recording

Reason for celebration for a retailer that has made a strong omni-channel turnaround.