Pottery Barn 2014 Annual Report Download - page 26

Many of these factors are beyond our control. For example, for the purpose of identifying suitable store locations,
we rely, in part, on demographic surveys regarding the location of consumers in our target market segments.
While we believe that the surveys and other relevant information are helpful indicators of suitable store locations,
we recognize that these information sources cannot predict future consumer preferences and buying trends with
complete accuracy. In addition, changes in demographics, in the types of merchandise that we sell and in the
pricing of our products, may reduce the number of suitable store locations. Further, time frames for lease
negotiations and store development vary from location to location and can be subject to unforeseen delays or
unexpected cancellations. We may not be able to open new stores or, if opened, operate those stores profitably.
Construction and other delays in store openings could have a negative impact on our business and operating
results. Additionally, we may not be able to renegotiate the terms of our current leases or close our
underperforming stores, either of which could negatively impact our operating results.
Our sales may be negatively impacted by increasing competition from companies with brands or products similar
to ours.
The specialty e-commerce and retail businesses are highly competitive. We compete with other retailers that
market lines of merchandise similar to ours. We compete with national, regional and local businesses that utilize
a similar retail store strategy, as well as traditional furniture stores, department stores and specialty stores. The
substantial sales growth in the e-commerce industry within the last decade has encouraged the entry of many new
competitors, new business models, and an increase in competition from established companies. In addition, the
decline in the global economic environment has led to increased competition from discount retailers selling
similar products at reduced prices. The competitive challenges facing us include:
• anticipating and quickly responding to changing consumer demands or preferences better than our
competitors;
• maintaining favorable brand recognition and achieving customer perception of value;
• effectively marketing and competitively pricing our products to consumers in several diverse market
segments;
• effectively managing and controlling our costs;
• effectively managing increasingly competitive promotional activity;
• developing new innovative shopping experiences, like mobile and tablet applications that effectively
engage today’s digital customers;
• developing innovative, high-quality products in colors and styles that appeal to consumers of varying
age groups, tastes and regions, and in ways that favorably distinguish us from our competitors; and
• effectively managing our supply chain and distribution strategies in order to provide our products to our
consumers on a timely basis and minimize returns, replacements and damaged products.
In light of the many competitive challenges facing us, we may not be able to compete successfully. Increased
competition could reduce our sales and harm our operating results and business.
Our business and operating results may be harmed if we are unable to timely and effectively deliver merchandise
to our stores and customers.
We continue to insource furniture delivery hubs in certain geographies and continue with the regionalization of
our retail fulfillment capabilities. If we are unable to effectively manage our inventory levels and responsiveness
of our supply chain, including predicting the appropriate levels and type of inventory to stock within each of our
distribution centers, our business and operating results may be harmed. Further, we cannot control all of the
various factors that might affect our e-commerce fulfillment rates and timely and effective merchandise delivery
to our stores. We rely upon third party carriers for our merchandise shipments and reliable data regarding the
timing of those shipments, including shipments to our customers and to and from our stores. In addition, we are
heavily dependent upon two carriers for the delivery of our merchandise to our customers. Accordingly, we are
subject to risks, including labor disputes (such as the disruptions at the west coast ports in early 2015), union
organizing activity, inclement weather, natural disasters, the closure of such carriers’ offices or a reduction in
operational hours due to an economic slowdown, possible acts of terrorism affecting such carriers’ ability to
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