A Brand on Fire

Double-digit sales growth is fueling West Elm’s expansion into nontraditional business sectors
January 12, 2017Maureen Azzato

JimBrettWestElmJim Brett, President, West Elm
By Maureen Azzato

Jim Brett and his team have relentlessly daunted competitors as they transformed West Elm into a highly profitable lifestyle retail brand targeting the elusive and so-called Millennial minded.

Now they are disrupting the market further, placing a strategic stake in nontraditional ground with plans that include opening boutique West Elm Hotels in unexpected markets.

Joining West Elm as president in 2010 when the small retailer was losing money, Brett has led the company to 27 consecutive quarters of double-digit sales growth. In 2015, the 98-store chain posted $821 million in sales, up 23 percent over prior year. With results like that, West Elm is the darling of parent company Williams-Sonoma Inc.’s portfolio, and the envy of its external home competitors at a time when most brick-and-mortar chains are struggling to achieve low single-digit sales growth in the rapidly changing omnichannel environment.

Another notch in its performance belt that has competitors taking notice is that approximately 50 percent of its revenues are tallied online, similar to that of other Williams-Sonoma Inc. brands, including Pottery Barn, Pottery Barn Kids, PB Teen and Williams-Sonoma.

West Elm’s burgeoning sales and profits are enabling it to expand into entirely new business sectors. In addition to hotels, West Elm last year launched Workspace, a commercial office design division (see “De-Institutionalizing the Workplace,” page 40). While some industry pundits fear West Elm’s new endeavors are fraught with risk and could pull it outside its core retail competency, Brett remains undeterred. He plans to continue to pursue his strategy to design products that impact customers at home, at work and while they are traveling away from home.

“We’ve been dubbed a Millennial brand, but our greatest secret actually is that we resonate with customers of all ages,” Brett said. “Our goal all along was to transcend demographics and really go after a psychographic. The mindset that was prevailing [in 2010] was the beginning of the Millennial movement. Millennials inspired a new way of thinking.”

West Elm has become the go-to home brand for numerous companies that aspire to tap into this Millennial mindset. As a result, large companies such as Marriott and others are interested in partnering with West Elm to help them bring that customer in the door. “We’ve had a number of conversations about collaborating in all types of different spaces and then ultimately decided to pursue hotels first, and to do it ourselves.” (See “Be Our Guest” at right.)

More Than Furniture
When Brett joined West Elm, it was a relatively benign and unknown brand; all the furniture was square and only came in one chocolate-brown finish. “There were no curves. There wasn’t dimension to the finish. There wasn’t any texture. It all felt very machine made, like an Ikea-plus,” he said. “Wood veneer versus paper veneer; still better quality than Ikea, but competing with them, which is not something you can do. So, I wanted to bring a much more handcrafted feel to the brand.”

That objective required thinking about the furniture brand much more broadly. “If you’re only a furniture brand you’re only bringing people in very infrequently. In order to be scalable—a big-volume brand in this space—you have to be both a furniture brand and a gift brand. So, we added a lot of decorative accessories and textiles, and we really focused on handcrafted.” (See “Local-Motion,” page 38.)

One of the first things Brett did was add an assortment of handmade felt ornaments made by a small collective in Nepal, which are still popular today. What started as a $50,000 business for the collective has grown into a multimillion-dollar business. This collective is part of West Elm’s Fair Trade program, something Brett is extremely proud of and passionate about. (See “Fair Trade Focused,” page 36)

His team also streamlined the pricing strategy and changed the way it merchandised the stores, which were previously laid out in a series of apartment vignettes that are currently organized into room vignettes. “People want to shop certain categories together and see all the choices together. There was an opportunity for the store experience to be much more dynamic; much less like a furniture showroom and more like wandering through a home,” Brett said. The remerchandising alone, without changing the product assortment, increased sales 15 percent. Next Brett tackled the pricing strategy, which he said was excessively complicated. Then he changed the company’s catalog creative, and focused on new products and category diversification. The West Elm customer fully embraced all the changes.

In a deep analysis of its customer files, West Elm found it was doing as much business with people under 35 as it was with those over 45. It was also doing as much business with people making $30,000 a year as it was with those making $300,000, and roughly half of its customers live in urban markets and half in suburban areas. However, importantly, the suburbanites are “all of an urban mindset,” he said.

So he put his marketing team to work to define and create customer profiles and began marketing to those segments with specific messages based on their attributes. “It was highly effective,” Brett said. “The important thing wasn’t just that [the analytics] were insightful, but that they were actionable.”

West Elm’s research also indicated the urban Millennial mindset is multifaceted. In addition to being urban-oriented in their thinking, they describe themselves as highly individual and don’t identify or associate themselves with a specific style.

“Our brand mantra is that we want to make it simple for customers to express their own personal style at home, which was a very unique message seven years ago,” Brett said, describing that time as more design and style authoritarian. “We actually aimed to do the opposite.” They aimed to empower customers to be their own home stylists and designers.

Ninety percent of West Elm’s products are currently designed in house, which is a strong point of difference that makes it difficult for competitors to replicate. This spring, the retailer will debut its fresh take on contemporary with the launch of the Scandinavia-inspired New Modern collection. It has “a cleaner, more polished look,” said Johanna Uurasjarvi, creative director, while still being casual and accessible.

Copying Positive Brand Behavior
Inevitably, competing brands began to copy West Elm’s furniture designs, merchandising and marketing. While the company is always working to inspire its customers with new and unique product assortments to stay ahead of the competition, Brett quickly realized the company could have an even broader impact on business practices. If competitors were going to copy West Elm, let them also copy the brand’s values, Brett said. In 2014, West Elm became the first U.S. home retailer to carry Fair Trade certified home furnishings.

“There are a lot of other retail brands now that are in major discussions with Fair Trade about pursuing this model,” he said. “We’ve noticed other people focused on the more soulful elements of products. We think we’ve inspired a bit of a movement and feel good about that.”

West Elm sources products from upwards of 30 countries, some with more challenging infrastructures and economies than others. In addition to working with Fair Trade and other sustainability groups for the past three years, West Elm has also partnered with the nonprofit Nest on its Artisan Advancement Project, which is developing a safety certification program for home workers. “This puts a spotlight onto the women themselves who have been [operating] in the shadows,” Brett said.

West Elm has since formed a Fair Trade steering committee of like-minded retailers, including Eileen Fisher, Patagonia and Target. “That’s why I’m really passionate about Fair Trade. I think it’s a real solution to many of the world’s problems.”

The company was so inspired by its own actions abroad that it decided to do more domestically, which gave birth to West Elm’s local handmade program. The brand aspires to be the focal point in the communities it serves, creating ways for people to connect in real life. “We found that a huge advantage of being a multichannel brand is that our retail stores are the best place where we can connect our associates with their communities, and also help our communities connect with each other and with our [local artists],” Brett said.

That local community connection is also what is driving West Elm’s foray into the hospitality business. The Millennial minded are no longer interested in a chain hotel that guarantees the same room and hotel experience every time they visit. “They want to go somewhere and experience the location. We think that the way we’ve explored local [in our stores] puts us in a unique position to design and build each hotel experience to fully embrace the location and to connect people with other people in the area through different events … that can make our lobbies become the living rooms for the communities we serve.”

 

For images of the Brooklyn, N.Y. flagship store click here

Maureen AzzatoMaureen Azzato | Publisher & Editorial Director
MAzzato@hfnmag.com

 Maureen Azzato is responsible for all editorial and content management, strategic planning, sales and brand marketing for HFN. Azzato is a 25-year media veteran who has been involved in business-to-business publishing, brand development and marketing communications for her entire career.

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