POV retailers carve niche with quality mix
March 5, 2001,
NEW YORK -In the wide, wide world of specialty retailing, several retailers strive to differentiate themselves from the other, larger ones by creating a lifestyle brand for their customers.
But in return, they offer sophisticated, classic, high-quality products.
The textiles component of four such retailers-Restoration Hardware, Crate & Barrel, Pottery Barn and Banana Republic Home-is small, but an important part of how they look to furnish the whole house and a growing area for all of them. In addition, their catalogs bring in a strong portion-if not a majority-of their businesses.
"The home area is a very fragmented business," said Barbara Miller, analyst, Goldman Sachs. But "there are a lot of opportunities for companies that execute well."
Shelly Hale, analyst, Banc of America, believes that the home furnishings industry is understored, with a lot of room for opportunity. "Home textiles drive traffic. Furniture is not something you shop for every year, so these other items help."
Though textiles were not a large part of Corte Madera, CA-based Restoration Hardware's mix before, the company is seeing incredible growth in several segments. Julie Shannon joined the company almost a year ago in the new position of merchandise manager, textiles, and she has definite plans for the direction in this area.
"Textiles are a viable part of the business," she said. "They're not just to sell the other parts of it."
Though textiles now account for less than 5 percent of the mix, Shannon sees that ratio swelling in the next few years. Area rugs, for example, are a natural add-on, and she sees that category doubling within two years. Rugs, which complement the furniture lines, will have more updated and selective designs, since there are only so many display arms available. The company will exit the wool sisal business, she said, because "the customer doesn't understand it."
The company uses a domestic mill, but not a major one, for its bedding. "We're concerned with the patterns being right. You have no control overseas," she said. The majority of product overall is both domestic and overseas. And while the company is "not opposed to open line product, it should be exceptional, like a Karastan rug," she said.
She is also concentrating on filling in other textile areas, such as throws and decorative pillows, which changes three times a year. Before, Restoration had throws of $100 and more, and now offers them between $70 and $100. The decorative pillow category will expand as well, in price points and amounts.
Bath textiles are "on fire," Shannon added. Customers have responded well to basic bath goods. A nylon hotel shower curtain from a hotel supplier, for example, is one of the top-selling items for the company. White shower curtains in different fabrics have done well, she said, adding perhaps its because the customer associates white with luxury.
Restoration Hardware, said Banc of America's Hale, has "a great merchandising format, but they tried to grow too fast. A smaller format would work better than a larger one.But there's room for it."
Textiles at Crate & Barrel, Northbrook, IL, are growing because of a new home store format, now in 22 locations nationwide, where furniture and an increased mix of textiles are found. Chairman and founder Gordon Segal told Home Textiles Today that the company will change 40 percent of its product every season in spring and fall. "We're trying to make the stores a seasonal business," he said.
A heavy majority of textiles are imported, he said, because Crate & Barrel wants to offer its customers exclusive looks, and U.S. goods are widely distributed. Segal added that the company has buying offices in most major overseas cities: London; Paris; Barcelona, Spain; Florence, Italy; Frankfurt, Germany; Manila, Philippines; Jakarta, Indonesia; Delhi, India; and Hong Kong. Textiles are manufactured mostly in Finland-primarily because the Marimekko bedding and fabric line is produced there-Mexico, India and Portugal. Revman produces Crate's bedding, made in Mexico.
Crate & Barrel merchandises its different product categories together, displaying folded rugs and pillows of the same pattern with clocks or candles, for example. Housed with its dinnerware, table linens consist mostly of place mats and napkins, with a few select tablecloths. Bedding is mostly top-of-the-bed, and in the stores most bedding inventory is kept off the floor. Decorative pillows and rugs are found throughout the stores.
Crate & Barrel catalogs have also undergone a redesign, and now are divided into two: one highlights furniture and home decorating, the other entertaining and tabletop. Segal sees the catalogs as a way to drive customers into the store.
Among point-of-view retailers, Pottery Barn, San Francisco, probably has the largest component of textiles; and with its plans for its catalogs and stores, that area will only get bigger.
A division of Williams-Sonoma, Pottery Barn has a strong catalog business, and now with its successful Bed and Bath and Pottery Barn Kids catalogs out, the company will grow these components in its retail stores as well.
Pottery Barn and Crate & Barrel are "leading the pack in the specialty area," said Banc of America's Hale.
In a recent conference call, president Gary Friedman said the retailer would "work on expanding and dominating the core businesses we're in. You'll see more aggressive steps to dominate in the window treatment business, floor covering business and a lot of the textiles businesses that are high margin for Pottery Barn, where we can really differentiate and distinguish ourselves in the marketplace."
This fall will see the opening of the "next generation prototype of stores for Pottery Barn"-a 20,000-square-foot store in Palo Alto, CA, which will have "a completely redesigned shopping experience and the addition of the whole bed and bath section that reflects the success of the bed and bath catalog." And though textiles are a small component of the retailer, the company plans to expand its table linens as well.
Pottery Barn does a lot of sourcing overseas, including such countries as Turkey, China, India, and Israel for its bed and bath. A sheet set made in Israel, for example, retails at $129 for a queen set. Top-of-the-bed includes quilts and duvets, and decorative pillows and throws which are mostly solid colors. Area rugs are also a strong category for the company, including Persian, synthetic sisal; real sisal; jute/ coir; chenille; olefin; seagrass; and kilim looks; with additional patterns coordinating with bedding. Window treatments cover the basics, including embossed velvet, silk dupioni, jacquard, sheer, floral burnouts and Belgium linen. Place mats include styles made of cotton, velvet embroidery, linen hemstitch, bamboo and organdy, as well as hotel style table linens.
Both of those retailers present merchandise better, said Brian Postal, analyst, A.G. Edwards. And Pottery Barn has "re-energized consumers' view of rugs. Before it was a square piece of matting, if you will." Both the main Pottery Barn rugs and the Pottery Barn Kids rugs have stepped out in terms of design and made a statement, he added, with displays one doesn't see elsewhere.
Banana Republic Home, the four-year-old division of San Francisco-based Banana Republic, with 45 boutiques either attached to the apparel stores or inside them, offers consumers a carefully edited selection of home merchandise. Not surprisingly, the home merchandise ties in to its apparel, seasonally changing in tandem. Colors found on the apparel side will be found in the home area as well, resulting in non-typical sheet colors such as yellow and in such patterns as windowpane and color blocking.
Most of the merchandise is produced overseas, in such countries as Turkey, Israel and Portugal. Its textile categories include place mats and decorative pillows made of such natural fibers as cotton, linen, paper and raffia, and cotton and acrylic throws. Sheeting is also offered in jerseys, knits and others. But it targets a higher-end customer-a queen set of reversible, 200-count cotton sheets, for example, retails for $195. Two types of towels are offered: a basic one in eight colors retailing for $19 for a 28" by 54" bath towel, and a ribbed jacquard, in fewer colors, for $16 for a 28" by 55" bath. Matching cotton rugs and basic cotton duck shower curtains in a few colors round out the bath.
Banana Republic Home is "a way to build on a brand," said Goldman Sachs' Miller, but "it's not the core business of Banana Republic."
Hale also pointed out that the trend now is place home destination shopping together.
In general, however point-of-view retailers such as these represent an innovative part of the business. Though they may never become a prominent portion of the home textiles industry, they are for many a bellwether of original home product design.