Pottery Barn 2011 Annual Report Download - page 40

the world. We also continued to aggressively explore profitable opportunities for retail expansion in other regions
of the world, as the existing 13 franchised stores in the Middle East continue to introduce new customers to our
brands.
In our supply chain, we continued to see ongoing customer service and cost reduction benefits from our Asian
sourcing, distribution, transportation and packaging initiatives. We also completed the transition of our North
Carolina upholstered furniture operations to our new state-of-the-art facility as demand for our high quality,
exclusive upholstered products continues to grow.
In business development, we acquired Rejuvenation, which is headquartered in Portland, Oregon. Rejuvenation is
a leading manufacturer and multi-channel retailer of custom configured and authentic made-to-order lighting, in
addition to high-end door and cabinet hardware.
Fiscal 2012
As we look forward to fiscal 2012, we continue to be focused on the customer so that we can continue to deliver
increased revenue and profitability, while simultaneously investing in our future. Our key initiatives for 2012 are:
to continue to grow sales in each of our existing brands through innovative product introductions and compelling
marketing; to invest in the competitive strengths of our multi-channel business; to invest in our supply chain to
ensure that we have the highest service levels in the industry; to leverage our customer insights to fill white space
by developing new businesses within and outside of our current framework of brands; to answer the worldwide
demand for our products by expanding the global presence of our brands; and to invest in the technologies that
underlie all of these strategies in order to make it easy for our customers to decorate, entertain and cook at home.
E-commerce is our fastest growing and most profitable channel, and a key component of our future strategy.
Unlike most other retailers, we already have a large percentage of our business online. In 2011,
direct-to-customer net revenues grew to 43.9% of total company net revenues and e-commerce net revenues grew
from 34.1% to 37.9% of total company net revenues. We believe our direct-to-customer percentage will grow to
more than 50% over the next three years as we become less reliant on retail store expansion to drive increased
profitability and long-term growth. To enhance and improve our e-commerce performance in 2012, we are
focused on back-end technology investments and leveraging multi-channel customer data to enhance the online
shopping experience and to make it easier to shop for custom configurations and personalized items.
In supply chain, we are focused on further improving customer service and enhancing profitability. In global
sourcing and manufacturing, we will continue to build quality into every phase of the design and manufacturing
process, and we are committed to further reducing returns and replacements due to damage and defects. Our new
sourcing offices in China, Vietnam and Singapore are critical to achieving these goals. Fiscal 2012 will be the
first full year we will operate our consolidated east coast distribution operations, as well as our new,
state-of-the-art upholstered furniture manufacturing facility in North Carolina. Additionally, we will begin
investing in the redesign, consolidation and modernization of our conveyable direct-to-customer distribution
operations in Memphis, Tennessee. We are also committed to engineering value into our products while reducing
waste. We believe that we can partially offset rising raw material and labor costs through improved packaging,
design engineering and optimized transportation. This is an important tenet of our commitment to economic,
social and environmental sustainability.
New business development is another key component of our growth strategy. In 2012, we will continue to
identify innovative and exclusive businesses to develop internally or acquire that we believe can expand our
reach and drive sustained profitable growth. Rejuvenation is an example of our acquisition strategy. It represents
a significant opportunity to leverage our multi-channel and supply chain capabilities with the exclusive, high-
quality lighting and house parts that Rejuvenation manufactures. Cultivate.com, announced in early 2012, is an
example of an internally developed web-based business that offers inspiration, design help, and resources for
homeowners and design professionals.
The largest new opportunity that we see in our future is in global expansion. In 2012, we will expand our global
e-commerce shipping capabilities by increasing the number of countries we ship to from 75 to 99 and will
continue to expand our franchise presence in the Middle East, growing from 13 franchised stores to a total of 18
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