I remember walking into a Restoration Hardware three or four years ago late in December as the holiday crunch was on. The rumours had swirled forever that they were never very productive retailers and they were struggling. Quite frankly I never understood it. The stores were well merchandised, well branded and well kept. The colour stories were always appealing and I always felt like walking in and browsing. But did I ever buy anything? Ahhh, there’s the rub.
Although, that one December evening, the place was packed and they surprised me with a terrific assortment of classic games in beautiful wooden boxes. They were already pre-wrapped and I couldn’t resist. What’s more, they were being promoted. The place was a madhouse and people were lined up buying multiple units of those games such as Clue, Scrabble, Battleship and the like. I bought a Monopoly game that the family still plays to this day (even today as a matter of fact). I often thought that it was a very good business for them to be in when it is gift season, those well made, higher end versions of classic games.
So, what has been the problem? Yes, their particular space is crowded with Pottery Barn, Crate and Barrel and everyone and their brother opening a furniture offshoot of their concept (think Eddie Bauer). But it goes beyond that. The merchandise mix when they first opened was highly eclectic; assortments of accessories, doorknobs, nostalgic radios, some furniture, lamps etc. I was never really sure what they were selling or what they stood for. Lately, they started to really merchandise with colour stories, more furniture and a snazzy website. But I still wonder, what is their bread and butter category? What do they pay the rent with day in and day out? What is the denim or yoga pant of their business with which they can build a steady, repeatable clientele? I don’t see it as yet.
Under new private equity ownership, partnering with the current CEO, maybe they will start to head down the path of basic commodities that will sell each and every day, in every market. Their real estate is of high calibre and their brand name has been built over years of being in the game. However, if they don’t find additional products that resonate on a daily basis, like those games do at certain times of the year, then I fear for this Restoration Period.