Restoration Hardware 2012 Annual Report Download - page 60

Expand Our Offering and Increase Our Market Share. We participate in the domestic housewares and home
furnishings market, that based on our research we believe represented $143 billion in sales in 2010. Our annual
net revenues currently represent less than 1% of this market, and we believe we have a significant opportunity to
increase our market share as more customers are exposed to our growing merchandise assortment and as
introductions of new products and services inspire current and new customers to add to their collections. We
believe our dominant assortments and continued expansion of product categories enable us to change the highly
fragmented luxury home furnishings landscape and grow our market share. We apply our unique design aesthetic
and superior product development capabilities to bring a fresh and differentiated perspective to existing and new
product categories, new services and new businesses:
•Increase Product Categories and Assortments. Over the past few years we have successfully expanded
our offering across our categories. We have continued this strong level of innovation with a number of
initiatives, including in: (i) indoor and outdoor furniture, where we continued to broaden our
assortments in upholstery, dining and occasional, as well as introduced new finishes in our living,
dining and bedroom collections; (ii) rugs, where we continued to significantly enhance our collection
developed by Ben Soleimani of Mansour Rug, a 4th generation family-owned rug business known for
its innovative designs; (iii) lighting, where we significantly expanded our assortment; and (iv) baby and
child products, where we continued to expand our assortments in furniture, textiles and décor. We also
introduced our collection of smaller living space furnishings, and custom window shades and blinds.
We are continuing to introduce select new product categories where we can offer a dominant
merchandise assortment consistent with our brand positioning in other product categories. We recently
launched two new collections through distinct Source Books: Tableware, our collection of dinnerware,
flatware and table linens, and Objects of Curiosity, our collection of unique decorative accessories and
objects for the home.
We have a successful record of new category introductions, including Outdoor in Spring 2006, Baby &
Child in Spring 2008, Outdoor & Garden in Spring 2010 and Small Spaces in Spring 2012.
Historically, once a category is tested and proven in our direct business, we selectively roll out an
edited collection of the products in our stores. We believe this approach allows us to efficiently launch
categories in a disciplined, expeditious and cost-effective manner. For example, our Garden collection
took seven months from concept to introduction, with minimal additional resources required to launch.
•Expand Services. We plan to provide our customers with a growing range of services designed to
enhance the customer experience and optimize sales. We have introduced interior design services,
providing our customers with complimentary in-store and in-home design consultations. As of
February 2, 2013, we had 39 interior designers in 25 locations, and plan to expand this program. Based
on the results achieved to date, we believe that our interior design team will contribute to increased
sales as they assist, inspire and influence customers in the manner in which they envision their homes.
In addition, an expanded portion of our product offering can be customized to meet individual
preferences, including different choices of materials, fabrics and finishes. We are also enhancing our
existing registry services and believe that a significant opportunity exists to expand and improve our
bridal and gift registry businesses with the expansion of our Baby & Child offering and our
introduction of Tableware and Objects of Curiosity.
•Enter New Businesses. We believe we have the ability to leverage our defining strengths of taste, style
and innovation across multiple businesses, which can enhance brand awareness, reinforce our lifestyle
positioning and enrich the customer experience. We plan to explore and test from time to time new
business opportunities complementary to our core business which can capitalize on our unique
development model. For example, in 2013 we plan to launch our Contemporary Art business, with our
first freestanding art gallery in the Chelsea Arts District in New York, as well as an e-commerce
platform. We believe we can scale new businesses rapidly, leveraging our fully integrated multi-
channel infrastructure and providing a powerful platform for continued long-term growth.
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