RH Modern: When Do You Want the Sofa?

How has online customer behavior influenced the high end home furnishings market?

Affluent customers aged 35 and under don’t want to wait for delivery. The traditional process in high-end and custom home furnishings businesses has been for the customer or their interior designer to place a production order with lead times of up to 25 weeks. The domestic market tends to deliver more quickly, but the European market can easily quote lead times of up to 6 months or more. Today’s younger customers, particularly the more moneyed ones, are not in the habit of waiting to get what they want. In this age of Amazon and Net-A-Porter, the market has increasingly shortened deliveries to meet customer demand. Burberry has recently announced that current season merchandise will be available at the time of the seasonal shows. In other words, stock is being produced at the same time as the samples for the show.

Restoration Hardware’s recent launch of RH Modern has suffered from long lead times for production. RH Modern is a line of luxury furniture, lighting and millwork aimed at a customer for modern or contemporary design. Rumor is that the launch was rushed to market and suppliers were pressured to quote unrealistic production times. While demand has been strong, supply of merchandise has backed up to lead times of up to 9 months. While RH has promoted the line with the same sumptuous printed catalogues as their other product lines, the tangled supply lines have dampened the reception for the line.

To the customer familiar with the design market, lead times are just part of placing an order for a custom product. And for those working with an architect or designer, the lead times are built into the process of design and construction. The system of custom or commissioned design works on the theory that everyone understands the lead times required to get furniture, rugs or lighting made to order in the color and size that works for you produced to a high level of design quality. But this model may not be working now because of changed expectations on the part of the customer.

The new home furnishings customer simply does not perceive the logistical differences in production times between designer apparel and more complex merchandise such as furniture, rugs or decorative items.

This explains why today’s design market includes expensive homes and apartments sold furnished — the buyers and the sellers ascribe to a certain taste level represented by the finished project. Increasingly, these projects are done by well-known architects and designers. And like a name-brand luxury product, the buyer gets the cachet of owning a product of a famous designer as part of the real estate transaction. But it also insulates the buyer from the entire process of design and construction.

How could Restoration Hardware respond?

RH could resolve the issue by presenting product in a gallery setting, with upholstery, millwork, rugs and lighting edited to create a finished design scenario. There is, after all, a defined “look” to the merchandise. Merchandise would be produced in limited quantities but there would be inventory for immediate delivery. This would require some skill in selecting the merchandise assortment for production. But the emphasis would need to shift to selling a total look rather than producing custom items for production. The company could rely heavily on editorial coverage in social media, word of mouth and trade publications to reinforce the desirability and cachet of the product design. The combination of high design and limited availability would energize the design customer.

What are the reasons not to do this? I can think of a couple, the first being the desire for RH to avoid becoming Pottery Barn. The appeal of the broad variety of custom production by RH gives the customer far more choices than Pottery Barn or Crate and Barrel. Plus the RH design esthetic seems skewed in favor of the moneyed customer already familiar with design showrooms and design professionals.

The other reason is financial. Typically there is no credit in the custom market, and orders include at least a 50% deposit or require pre-payment. Finished merchandise is not held or warehoused either, so this avoids the cost of keeping inventory either on the selling floor or in a distribution center. And production of the RH Modern product line, even as an edited assortment, would be costly. But maybe there is a model for a new way to do this which addresses these challenges and more closely fulfills the customer’s expectation. RH undoubtedly has the resources to address this. If not, I can think of one retailing behemoth that might come up with solutions should the home furnishings market be in its cross-hairs. Can anyone say “Amazon”?

Read the original article: “Logistics Woes Crimp Restoration Hardware’s Modern Collection” Wall Street Journal March 28, 2016