Even as it remains one of the most admired – not to mention successful retailers — in the business, one may have to ask if Williams Sonoma is starting to drink the promotional juice a little heavy these days?
While its near perfect balance of online/in-store sales are the envy of virtually every other retailer, not just in the home business, but across the board in general merchandising, a look at the specialty chain’s email marketing makes a rather strong case that it has gotten more aggressive in its promotions and sales recently. And it has the reduced margins to unfortunately prove it. A recent look at its annual gross margins by research company CSIMarket Inc. shows a consistent – and somewhat disturbing – decline in the company’s performance over the past five fiscal years. In fiscal 2014, Sonoma posted gross margins of 38.84 percent. That dropped to 38.32 the following year and in both 2016 and 2017 it declined even further, finally hitting 36.5 percent for the 2018 fiscal year ended January 28, 2018. This came even as the company continued to post impressive top- and bottom-line performance over this five-year period.
Of course, many factors, such as capital expenditures, higher rents and salaries and investments in technology can impact margins, profits on goods sold are certainly a key element in margins.
Whether this trend continues into the current year remains to be seen. Sonoma executives in a recent quarterly call with analysts pointed to an improvement in its margins for the period, specifically citing “higher merchandise margins” and mentioning “streamlined” promotional activities. If those activities were indeed streamlined it might be difficult to tell by a random check of the company’s online email marketing during a recent 30-day period.
You’ve Got Too Much Mail
As a good – if not excessive – customer of several Williams Sonoma brands – besides its namesake kitchen and housewares nameplate it also operates Pottery Barn, West Elm, Williams Sonoma Home, two age-related PB spin-offs and two more small divisions, Rejuvenation and Mark and Graham – I have signed up and receive marketing emails from virtually every brand. Taking September as a random month – one big holiday sale (Labor Day) but not too close to Christmas and not typically an end-of-season closeout period – the number of emails received was rather astonishing. I received 204 individual emails from the assorted Williams Sonoma divisions, an average of 6.8 a day – and that doesn’t include any from PB Kids or Teens or Rejuvenation, for which apparently, I didn’t make the email cut.
Some days there were as many as eight individual emails from the assorted W-S nameplates and it wasn’t unusual to find multiple messages from the same brand on any given days. And while the company’s e-marketing team is to be applauded for the variety and creativity it showed in telling customers the same basic message – stuff is on sale – a certain number of patterns emerged when studying the month’s tally.
- The 20%-off mark is the go-to level for most promotions. While there were a number of sliding scale promotions – discounts based on the level of spending – most went to the 20% default. Very rarely there were 25% and 30% off sales, usually on select merchandise categories while the Outlet division usually went significantly higher…albeit using original price tags that may or may not have ever existed in the first place.
- Private sales were a big deal, but only at Pottery Barn and West Elm. These were usually at the 20% off level and lasted for a few days. Why this terminology was not used for other divisions is unclear.
- Free shipping was used judiciously throughout the month but not for every sale. If this is the holy grail for online shoppers, it’s interesting to note that Sonoma didn’t beat this benefit to death.
- Friends & Family sales, a mainstay these days across the entire retailing spectrum, were only used for West Elm. As the most millennial-minded of any of the company’s brands, perhaps it has research that shows this has a particular relevancy for the socially conscious generation. Or maybe it was just that time of the year.
- The Williams Sonoma kitchen and housewares unit made extensive use of brand-specific sales, often promoting key names such as All Clad, Nespresso and KitchenAid. This makes sense given that housewares are perhaps the only home classification with strong brand names and Sonoma is considered a key outlet for them in the business.
- Williams Sonoma never met a sale it didn’t love so much that it didn’t feel the need to extend it. One-day sales invariably became two-day events…and sometimes three days. Case in point: the company has begun cross marketing all its nameplates under the Key Rewards program. It ran a multi-unit sale that was announced as one day only and eventually stretched to three.
- The Mark and Graham brand – which exists only online and features gift and personal fashion accessory products – basically only used one promotional vehicle for the month: 20% Off Sitewide. And no matter when it was received it was always marked “Last Chance.” As far as could be determined, there was never a “First Chance” mailing.
- When there is a holiday-based sale, Sonoma lays it on even thicker. My inbox showed no fewer than 12 Labor Day related sale emails across several brands…and of course the savings were extended beyond Labor Day.
- Finally, there were a small – very small – number of emails that appeared not to have any sale messaging at all. They focused on the individual retailer’s trend and decorating services. Given that Sonoma has been in the forefront of retailers offering such services to its customers, it strikes one as surprising there weren’t more of these…many more.
It should be noted that all of these findings are based on one person’s emails received in one month. The Sonoma customer in the house next store may have gotten an entirely different set of messages and emails. Williams Sonoma is a highly sophisticated marketing company that has been selling direct to consumers through its catalog for far longer than many of the more recent entries into e-commerce. Its technology in targeted marketing is probably as good as anybody this side of Amazon.
I remember interviewing the late Howard Lester, who as CEO of the company in the 90s and early 2000s was as savvy a tech-based direct marketer as they came. He was the only retail executive I ever met back then who used the word “algorithm” in a sentence – and knew what it meant. Today Williams Sonoma commands enormous respect among competitors and customers alike and it does so many things as well or better than anybody else in the home space. But its promotional activities are something to be watched as it works to restore better margins back into its business.
That promo-a-go-go dance can be very habit-forming.
Warren Shoulberg gets more promotional retail emails than he cares to admit.