Pottery Barn 2013 Annual Report Download - page 19

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The retail business complements the direct-to-customer business by building brand awareness and attracting new
customers to our brands. Our retail stores serve as billboards for our brands, which we believe inspires our
customers to shop online and through our catalogs.
Detailed financial information about the retail segment is found in Note L to our Consolidated Financial
Statements.
SUPPLIERS
We purchase our merchandise from numerous foreign and domestic manufacturers and importers, the largest of
which accounted for approximately 5% of our purchases during fiscal 2013. Approximately 64% of our
merchandise purchases in fiscal 2013 were foreign-sourced from vendors in 50 countries, predominantly in Asia
and Europe, of which approximately 98% were negotiated and paid for in U.S. dollars.
COMPETITION AND SEASONALITY
The specialty retail business is highly competitive. Our specialty retail stores, e-commerce websites and direct-
mail catalogs compete with other retail stores, including large department stores, discount retailers, other
specialty retailers offering home-centered assortments, other e-commerce websites and other direct-mail
catalogs. The substantial sales growth in the direct-to-customer industry within the last decade, particularly in
e-commerce, has encouraged the entry of many new competitors and an increase in competition from established
companies. In addition, we face increased competition from discount retailers who, in the past, may not have
competed with us or to this degree. We compete on the basis of our brand authority, the quality of our
merchandise, service to our customers, our proprietary customer list, our e-commerce websites and our
marketing capabilities, as well as the location and appearance of our stores. We believe that we compare
favorably with many of our current competitors with respect to some or all of these factors.
Our business is subject to substantial seasonal variations in demand. Historically, a significant portion of our
revenues and net earnings have been realized during the period from October through January, and levels of net
revenues and net earnings have typically been lower during the period from February through September. We
believe this is the general pattern associated with the retail industry. In anticipation of our holiday selling season,
we hire a substantial number of additional temporary employees in our retail stores, customer care centers and
distribution centers, and incur significant fixed catalog production and mailing costs.
TRADEMARKS, COPYRIGHTS, PATENTS AND DOMAIN NAMES
We own and/or have applied to register over 80 separate trademarks and service marks. We own and/or have
applied to register our key brand names as trademarks in the U.S., Canada and approximately 90 additional
jurisdictions. Exclusive rights to the trademarks and service marks are held by Williams-Sonoma, Inc. and are
used by our subsidiaries under license. These marks include our core brand names as well as brand names for
selected products and services. The core brand names in particular, including “Williams-Sonoma,” the Williams-
Sonoma Grande Cuisine logo, “Pottery Barn,” “pottery barn kids,” “PBteen,” “west elm,” “Williams-Sonoma
Home,” “Rejuvenation” and “Mark and Graham” are of material importance to us. Trademarks are generally
valid as long as they are in use and/or their registrations are properly maintained, and they have not been found to
have become generic. Trademark registrations can generally be renewed indefinitely so long as the marks are in
use. We own numerous copyrights and trade dress rights for our products, product packaging, catalogs, books,
house publications, website designs and store designs, among other things, which are also used by our
subsidiaries under license. We hold patents on certain product functions and product designs. Patents are
generally valid for 14 to 20 years as long as their registrations are properly maintained. In addition, we have
registered and maintain numerous Internet domain names, including “williams-sonoma.com,” “potterybarn.com,”
“potterybarnkids.com,” “pbteen.com,” “westelm.com,” “wshome.com,” “williams-sonomainc.com,”
“rejuvenation.com” and “markandgraham.com.” Collectively, the trademarks, copyrights, trade dress rights and
domain names that we hold are of material importance to us.
5
Form 10-K