Restoration Hardware is learning the hard way that in today's retail climate, consumers are gaining ever more influence along with rising expectations for getting what they want, when they want it, as the Wall Street Journal reports:
Customers looking to buy a concrete dining table or a leather stool from upscale home-furnishings retailer Restoration Hardware’s newest collection are going to have to be patient.
The high-end retailer has struggled to stock and ship much of a new line of modern furniture launched last fall and targeted at millennials and city dwellers. Delivery of a $4,795 espresso-colored desk may not be scheduled until October. A $1,260 brass pendant lamp could ship by next week, but a nickel version isn’t expected to ship until June.
Executives at Restoration Hardware Holdings Inc. initially said they were conservative with how much inventory they purchased for [the] RH Modern launch and later blamed delays at key suppliers for shortages. One person familiar with the matter said the company rushed to bring the concept to market and gave suppliers deadlines that were too tight.
The problems have hurt sales and soured investors, who have pushed Restoration Hardware’s shares down more than 50% this year.
Anthony Chukumba, a senior research analyst at BB&T Capital Markets, said his team tested purchases of 50 non-customized items from RH Modern this month. Of the 50, 29 were out of stock, with an average of 63 days before customers would be contacted about delivery.
RH Modern was initially supposed to launch with a 300-page catalog, but that number swelled to more than 500 in the end, according to the Journal.
The Furniture Waiting Game Is Under Attack
Anyone who has ordered custom furniture knows it can take several weeks and even a few months for an order to be delivered, given the lead times at factories and depending on the season.
But if accurate, the BB&T Capital Markets analysis is truly damning for Restoration Hardware. The company is up against some stiff competition from the likes of Wayfair, an online furniture seller who says it usually ships orders within two days, the Journal notes.
On balance, there are a few lessons to draw from Restoration's woes, says Constellation Research VP and principal analyst Guy-Frederic Courtin.
"There's the whole reality that your supply chain has to keep pace with the market, and it's not as easy as one could imagine, especially with retail products that have long lead times, which furniture definitely does," he says.
As consumers, we're simply becoming much less tolerant of waiting, he adds: "If I can get my pizza in half an hour, why not my couch? Consumers are driving expectations to places they can't be. But don't tell that to a consumer. We're all petulant children, we want what we want, when we want it."
For retailers like Restoration and others, "it's really upon them to do a better job managing customer expectations," Courtin adds.
It's also time to do a thorough analysis of key systems. Courtin recounts the time he himself ordered a couch and was initially promised delivery within four weeks, a timeline that soon became three months, and then back down to one month. The seller had such severe disconnects between its various inventory systems that the delivery company had a better view into it than the company itself.
Restoration could apply predictive analytics to truly understand what their suppliers' capacity will be over time, Courtin says. They should also look to improve communication overall with suppliers in order to gain insight into factors such as raw material levels and competitive bids from other buyers' for a supplier's capacity.
Industries such as consumer electronics, automotive and aerospace are doing a much better job of understanding their suppliers' vulnerabilities and ability to adapt to conditions with raw material substituion, "but retailers are just starting to learn that process," Courtin says.
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