Identifying Williams-Sonoma's X Factor

Home furnishings and housewares retailer Williams-Sonoma is enjoying profitable growth in a competitive marketplace. What's its secret? Pat Connolly, chief strategy and business development officer for the San Francisco-based company, provided some insight into that question for the audience at NEMOA's directXchange Fall Conference in Groton, Conn. yesterday. Specifically, Connolly outlined six beliefs that Williams-Sonoma holds as integral to its success.

1. Product: Williams-Sonoma creates, designs and manufactures about 85 percent of the products it sells, Connolly said. The company has created a global supply chain, importing merchandise from around the world, particularly Asia. In addition, Williams-Sonoma has three manufacturing facilities in the United States — one each in North Carolina, Texas and California. We have control over our product, said Connolly. This has helped Williams-Sonoma to build its most valuable asset, its brand.

2. Lifestyle merchandising: The best to way sell home products is to show them in peoples’ homes, Connolly said. Williams-Sonoma goes to great lengths to make that possible. It scouts out and rents homes in markets as far away as Mexico and Canada, then transforms those homes — e.g., paints walls, replaces furniture — into the perfect canvases for its catalog photo shoots. "It's like making movies," said Connolly. While Williams-Sonoma does have the ability to use CGI technology that can digitally put products into photos/rooms, it doesn't plan on abandoning its on-site photo shoots. It's who we are as a brand, Connolly said.

3. Multichannel retail: Today's consumers engage brands and make purchases in more than one channel. For Williams-Sonoma, that includes its 600-plus retail stores, e-commerce site and catalogs. Successful retailers going forward will need to perfect more than one channel, Connolly said. Williams-Sonoma's history as a catalog brand is the foundation for its success. We believe our catalog heritage is the primary driver of results, Connolly said. Williams-Sonoma will mail a quarter-billion catalogs this year. Nothing conveys our brand better than our catalog, Connolly said.

4. E-commerce excellence. While the catalog is the foundation of Williams-Sonoma, digital is its future. Yet the two remain linked. Our catalog heritage gives us a head start in the critical skills that are necessary to succeed online, Connolly noted. Those skills include the following:

• Marketing effectiveness (aka attribution): Williams-Sonoma developed attribution technology in-house to measure the value of its various marketing channels (e.g., email, catalog, pay per click, etc.). Specifically, what's generating incremental sales? Email is the most incrementally effective marketing channel we use, said Connolly. Furthermore, knowing the incremental value of each marketing channel, including print, enables Williams-Sonoma to manage catalog circulation intelligently.
• Personalization: Our goal is to know who you are when you come to our site, said Connolly. Williams-Sonoma currently recognizes about 70 percent of its total site visitors; remarkable considering that 50 percent of the retailer's daily site visitors have never been to the site before. Once Williams-Sonoma knows who you are, it's able to serve up relevant content, products and offers to you — all in about 40 milliseconds.
• Execute against the basics: Williams-Sonoma has brought its SEM program in-house, developing a keyword database from the words consumers use to search for its products. In addition, it's upgraded its on-site search tool, implementing a predictive analytic solution that suggests results while the visitor is typing into the search box. Thirty percent of Williams-Sonoma's online revenues come from visitors who use site search, Connolly said.
• A/B testing: Williams-Sonoma is using real-time A/B tests to improve its marketing efforts. Tests include creative (e.g., the color of a "Buy" button), content (e.g., email subject lines), offers/pricing (e.g., including shipping costs in the price vs. separating out shipping costs from the product's price), among others.
• Social media: Our brands want to be part of a conversation with customers via social media, Connolly said. Nobody wants to talk with someone who only wants to talk about him or herself, he added. Williams-Sonoma's social media editors, who have complete autonomy to post what they see fit, seek to create an ongoing dialog with the brand's fans and followers.
• Mobile: Twenty-five percent to 30 percent of Williams-Sonoma's total orders come from mobile devices (primarily tablets), Connolly said. Fifty percent of the company's emails are opened on mobile devices, he added.

5. Social responsibility: When people today buy a product, they want to know where it's made, who made it, did they receive a fair wage, do they have suitable working conditions, among other things, Connolly said. Transparency is key. Williams-Sonoma's West Elm brand is built around social consciousness and community. It utilizes a worldwide network of artisan makers and suppliers, committing to paying $35 million directly to artisans who use handcrafted techniques. West Elm has signed partnerships with artisan groups in poor countries like Haiti, India, the Philippines and Nicaragua. In addition to providing job opportunities in poorer countries, West Elm is promoting jobs for women in those locations.

6. Future: I believe Williams-Sonoma's best days lie ahead of it, said Connolly. He cited a veteran executive team that's invested in the company's future as a strong building block. The top 17 executives at Williams-Sonoma have been together at the company for, on average, 14 years.