Restoration Hardware 2012 Annual Report Download - page 63

on product leadership. We built the RH Center of Innovation & Product Leadership, a facility which
supports and streamlines the entire product development process. In addition, we have developed direct
sourcing relationships with our artisan partners. The transformation of our creative process has
dramatically shortened our typical product lead times, reduced our product costs and enhanced our
ability to successfully introduce new categories.
•Refined Our Go-To-Market Strategy—We aligned our organization and the way in which we approach
the consumer to pursue a market-based rather than channel-based sales strategy across our stores and
direct channels. Our strategy is to size our product assortments to the potential of the market and to size
our stores to the potential of the area that each location serves. We believe this approach enables us to
strategically deploy our resources by market to maximize return on invested capital. In order to expose
more customers to a broader product assortment we use our Source Books and websites as virtual
extensions of our stores. In Spring 2011, we introduced our new Source Book large catalog format that
displays a greater percentage of our product assortment, which we believe is continuing to increase
sales across all of our channels because customers respond to the assortments that we emphasize and
feature prominently both in our catalogs and in our stores.
•Reconceptualized Our Stores and Developed Full Line Design Gallery Format—In 2009 and 2010, we
remodeled substantially all of our existing retail stores into our Gallery format that reconceptualizes the
store experience by presenting our products in sophisticated lifestyle settings. We experienced
enhanced productivity and profitability as a result of our Gallery conversions. In 2011, we developed
our Full Line Design Gallery format. This format is architected to offer more compelling unit
economics by increasing the selling square footage devoted to our retail assortment and utilizing non-
traditional selling space such as rooftops and garden courtyards, which carry much lower occupancy
costs than the typical retail space.
•Built a New Supply Chain and Systems Infrastructure—We invested over $60 million from fiscal 2006
to fiscal 2010 in our supply chain and systems infrastructure, including: (i) reconfiguring and adding to
our distribution network; (ii) implementing new point-of-sale, warehouse management, order
management and customer service systems; and (iii) enhancing our direct sourcing capabilities.
•Strengthened Our Management Team—We strengthened our management team by adding Mr. Alberini
to our team as well as other senior leaders in merchandising, product development, finance,
information technology and inventory planning who bring extensive experience in their respective
fields.
We believe these initiatives have contributed to our recent strong performance and increased profitability, and
position us for sustained growth and profitability. The following chart illustrates some of the principal aspects of
the transformation of the old Restoration Hardware to the new RH:
Old Restoration Hardware New RH
Merchandise Strategy Nostalgic, discovery items Category dominance, integrated
lifestyle presentation
Product Development Internally designed and developed
(12 – 18 months lead time)
Externally discovered and curated
(3 – 9 months lead time)
Go-to-Market Strategy Conventional channel-focused
marketing
Fully integrated market-based,
multi-channel strategy
Retail Strategy Multiple small locations in a given
market showcasing narrow and
redundant assortment
Consolidated markets, generally
featuring larger locations
showcasing broader assortment
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Form 10-K