Williams Sonoma, a Multichannel Monster With a Catalog Headache Looming

I like to follow the financial performance of Williams Sonoma. Few businesses provide the consumer with the multichannel opportunities that Williams Sonoma does. The business has core brands (Williams Sonoma, Pottery Barn), brand extensions (Williams Sonoma Home, PBTeen, PBKids, West Elm, the recently disbanded Hold Everything), catalogs, websites, and 573 stores. I'd relish the opportunity to illustrate how their customers interact with brands, sales channels, and advertising channels.

I'd also relish the opportunity to be a fly on the wall in their executive meetings. According to their second quarter earnings release, year-to-date retail net sales grew by 7.9% to $897,281,000. Recent softness in their Pottery Barn brand, representing 190 stores, has management cautious about the holiday season.

Online sales grew from $326,297,000 year-to-date-2005 to $414,780,000 year-to-date-2006.

Catalog sales are very interesting to monitor. Year-to-date net sales of $307,761,000 represent a significant decrease from the $339,295,000 level they were at last year. More important is that pages circulated increased by 4.2%, while catalog sales decreased by nine percent. The company does not tell the reader whether the increase in pages circulated drove enough business online to offset the drop in catalog volume.

Williams Sonoma's telephone sales peaked a few years ago. Like most mature businesses that have a catalog channel, they are experiencing a steady decline in telephone volume. At some point in the future, maybe in the next two years, Williams Sonoma will have to make hard decisions about what their catalogs truly mean to their customers.

Most likely, Williams Sonoma has outstanding quantitative individuals who have run simulations that clearly illustrate whether the catalog channel has a role in the future of their business. At some point, the volume generated over the telephone will be insignificant, compared with the expense incurred mailing the catalogs. Only well-designed simulations will help management make the right decisions about properly calibrating catalog advertising in the future.