Pottery Barn 2009 Annual Report Download - page 37

accuracy programs to reduce inventory shrinkage and improve customer service; regionalizing large-cube
inventory to consolidate furniture shipments, lower shipping costs and enhance the customer experience;
insourcing our Ohio furniture delivery hub to bring company-managed volume to over 40% and reduce damages
and replacements; and aggressively managing inventory flow to reduce distribution square footage by 16%.
In international sourcing, we completed the transition of our Asian furniture network. This initiative has allowed
us to establish local expertise, improve vendor performance and reduce furniture returns, replacements and
damages. Many of the products which are currently driving the turnaround in the Pottery Barn and Pottery Barn
Kids brands were sourced under this new initiative.
In information technology, we completed the rollout of our new e-commerce platform at the end of the third
quarter. This platform enables our merchants to make rapid changes on the sites without IT intervention,
optimizes natural search returns and provides customers with faster download times and easier navigation. We
also implemented new functionality related to customer insights, which is allowing us to generate more relevant
emails and improve catalog productivity. While much opportunity lies ahead of us in both of these areas, these
initiatives are driving increased traffic and incremental sales to the brands.
In real estate, our occupancy cost reduction initiatives were a key focus throughout the year, and we made
significant progress. In 2009, we closed 1,170,000 square feet of distribution space, 83,000 square feet of
corporate office space and 23 retail stores.
Lastly, during fiscal 2009, we established a multi-year franchise agreement with the M.H. Alshaya Company to
launch our portfolio of brands in the Middle East. We opened our first franchised Pottery Barn and Pottery Barn
Kids stores in Dubai in March 2010 and will open two additional stores in Kuwait in the second quarter of fiscal
2010. We believe with this business model, there is a significant opportunity to expand the reach of our brands
outside of North America.
Fiscal 2010
As we look forward to fiscal 2010, we will continue to capitalize on the benefits of our 2009 initiatives that have
not yet been fully realized and focus on the five key initiatives that are driving our momentum today including:
implementing innovative growth strategies to capture market share; delivering superior customer service;
executing our catalog and Internet marketing initiatives; driving supply chain efficiencies; and maximizing
profitability and cash flow.
To capture market share, we plan to continue to introduce and market new products with an emphasis on
innovation, exclusivity and value. We also plan to increase our investment in e-commerce. We believe that one
of our most competitive advantages in this post-recessionary economy is our ability to serve customers in the
channel of their choice, and the Internet is increasingly becoming that channel for both product research and
purchases. We believe that as time passes and the economy improves, there is an opportunity for our brands to
capture market share from those retailers who have closed stores and do not have significant multi-channel
capabilities, have become less relevant or have failed completely in these difficult times.
In the area of customer service, our focus will be on expanding the clienteling services program that we launched
last year in our Pottery Barn stores. In fiscal 2010, we will complete the rollout of this program in West Elm.
To execute our catalog and Internet marketing initiatives, we plan to continue to refine our catalog circulation by
increasing the use of versioning and special mailers, while continuing to shift catalog dollars into e-marketing.
E-commerce is our fastest growing and most profitable channel and we plan to continue to identify new
opportunities to build brand awareness and customer engagement through search, e-mail modeling, affiliate
programs and enhanced functionality.
To drive further supply chain efficiencies, we plan to continue to capitalize on the benefits from the initiatives we
rolled out in fiscal 2009, as well as continue to expand the insourcing of our third-party furniture delivery hubs;
reengineer inbound packaging to reduce the cubic volume of shipments through the supply chain to reduce
packaging, transportation and distribution warehousing costs; and implement the first phase of our east coast
distribution center consolidation that, after moving costs are covered, will result in lower rent, utility and labor costs.
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Form 10-K