Officials at Restoration Hardware maintain a long-range strategic plan focused on customer engagement and customer loyalty.

During its Sept. 8 second-quarter fiscal results conference call, Restoration Hardware CEO Gary Friedman noted some key statistics:

Net revenue increased 7% on top of a 17% increase last year

Comparable brand revenue declined 3%, compared to a 16% increase last year

Net income of $6.9 million, compared to $29.9 million last year

Friedman explained that the company is “making several strategic investments and changes to our business model in fiscal 2016 that are temporarily depressing financial results in the short term, which we believe will strengthen our brand and position the business for accelerated revenue and earnings growth in 2017 and beyond. These temporal issues include the costs related to the launch of RH Modern; the timing of recognizing membership revenues related to the transition from a promotional to a membership model; efforts to reduce inventories and rationalize our SKU count; and the decision to push our Source Book mailing from the Spring to the Fall.”

What’s more, Friedman said Restoration Hardware plans to unveil “some of the most significant initiatives in the history of our company that we believe will create an inflection point in our business beginning in the fourth quarter of fiscal 2016, and build momentum throughout fiscal 2017. One, we have completely redesigned and rephotographed our entire collection of Source Books. The redesign, led by famed art director Fabien Baron, who designed the RH Modern book, presents the brand in a fresh and compelling new format. Two, based on our successful test of RH Modern in several of our Galleries, we will be introducing RH Modern across our entire retail fleet this Fall. Three, we are making a significant investment in our RH Interior Design business, including doubling the size of our design team versus a year ago, arming our designers with new tools and training, installing Design Ateliers - an interactive space where designers, architects and customers can work to imagine and execute their projects, and launching an innovative multi-channel advertising campaign that will communicate our unique and authentic design philosophy. Four, now armed with data after the inaugural mailing, we are optimizing the second edition of our RH Modern book, making significant changes to the merchandising and presentation, plus adding new collections that we believe will dramatically increase productivity. We plan to mail the second edition of RH Modern sometime in the early Spring of 2017.”

Friedman added: “While the degree and pace of innovation at RH might seem ambitious comparatively, it is the result of years building a culture engineered to be, as Charles Darwin believed, the one most responsive to change. In a world moving exponentially faster, we are building one of the only true sustainable competitive advantages - a culture of imagination and innovation. A culture that is proving itself capable of imagining the future, and an organization that is demonstrating it can build it.”

Stellar Loyalty CMO Narina Sippy shared with Loyalty360 her thoughts on Restoration Hardware’s strategic outlook.

“Although sales have slowed in the past quarter for Restoration Hardware, its company leaders are clearly committed to the longer game, putting the right foundation in place for sustained success which includes their efforts to increase customer loyalty,” Sippy explained. “The brand’s relatively new ‘pay-to-play’ membership program takes a page from the luxury market; it recognizes the importance of Restoration Hardware’s most loyal customers and offers them VIP ‘members-only’ privileges, design services, discounts, and benefits. This approach, combined with other investments the brand is making in its in-store experience, collections and multichannel advertising, will create the emotional bond needed to generate more lasting and profitable customer relationships, which will pay dividends for Restoration Hardware in the future.” 

Doug Sutherland, Loyalty Specialist, Dynamics, offered his thoughts on Restoration Hardware to Loyalty360.

“At a time when it’s easier to homogenize yourself to fend off consumer erosion, Restoration Hardware appears to be doubling down on a mutually beneficial approach that it calls its sustainable competitive advantage by organizing around and enhancing its brand, digital, and bricks-and-mortar venues to adhere to its culture of imagination and innovation,” Sutherland explained. “This could well be a game-changer, ignoring homogenization and appealing instead to its ideal client, and attracting a larger slice of this specific segment.” 

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