Restoration Hardware 2012 Annual Report Download - page 71

Our e-commerce platform provides simplicity and ease of use while allowing customers to experience the
RH lifestyle reflected in our catalogs and throughout our stores. We update our websites on a regular basis to
reflect product availability and special offers. In fiscal 2012, our websites logged over 18.9 million unique visits,
an increase of 32% over fiscal 2011.
We display substantially all of our current product assortment on our websites. The websites also offer a
room-based navigation, which allows the customer to envision and shop items by room or by product, expanding
on the richness of the online experience. For example, customers can search our websites for products by size or
color, browse through our extensive product categories and see detailed information about each item and
collection, such as dimensions, materials and care instructions. Additionally, customers can select color swatches
and view merchandise displayed with different color and fabric options.
Marketing and Advertising
We employ a variety of marketing and advertising vehicles to drive customer traffic across all our channels,
strengthen and reinforce our brand image and acquire new customers. These include targeted catalog circulation,
promotional mailings, email communications, online and print advertisements and public relations activities. We
maintain a database of 14.0 million customers, which includes sales patterns, detailed purchasing information,
demographic data, geographic locations and postal and email addresses. We use this information to tailor our
programs and increase productivity of our marketing and promotion initiatives. We leverage our marketing and
advertising expenses across all our channels as we seek to optimize the efficiency of our investment.
Our stores and our catalogs are the primary branding and advertising vehicles for the RH brand. The highly-
differentiated design aesthetic and shopping environment of our stores drive customer traffic not only to our
stores but also to our direct channels. Our catalogs and targeted emails further reinforce the RH brand image and
drive sales across all of our sales channels. We also engage in a wide range of other marketing, promotional and
public relations activities to promote our brand. These campaigns include media coverage in design, lifestyle,
culture/society and specialty publications, as well as in-store events related to new store openings and product
launches. We also engage print advertising in brand-relevant publications such as Architectural Digest, Vanity
Fair, Elle Décor,House Beautiful,Veranda, Town and Country, DuJour and others, and from time to time have
also engaged in online advertising. We believe that these efforts will drive increased brand awareness, leading to
higher sales in our stores and our direct business over time.
Sourcing
We do not own or operate any manufacturing facilities; instead, we contract with third-party vendors for the
manufacture of our merchandise. Our sourcing strategy focuses on identifying and using vendors that can provide
the quality materials and fine craftsmanship that our customers expect of our brand. To ensure that our high
standards of quality and timely delivery of merchandise are met, we work closely with vendors and
manufacturers. We seek to ensure the consistent quality of our manufacturers’ products by selectively inspecting
pre-production samples, conducting periodic site visits to certain of our vendors’ production facilities and by
selectively inspecting inbound shipments at our distribution facilities. In fiscal 2012, we sourced approximately
75% of our purchase dollar volume from approximately 35 vendors. In fiscal 2012, one vendor accounted for
approximately 11% of our purchase dollar volume. Based on total dollar volume of purchases for fiscal 2012,
approximately 78% of our products were sourced in Asia, the majority of which originated from China, 15%
from the United States and the remainder from other regions.
We have a limited number of long-term merchandise supply contracts but we believe that we generally have
strong relationships with our product vendors. Although we transact business primarily on an order by order
basis, we typically work with many of our vendors over extended periods of time, and many vendors are making
long term capacity investments to serve our increasing demands. Over the last several years, we engaged in a
sourcing initiative to develop closer relationships with our vendors in order to achieve better efficiencies and
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Form 10-K