Behind The Wrought Iron Curtain: Restoration Hardware's CEO Says True Competition Is Professional Designers

Who is Restoration Hardwares competition? CEO Gary Friedman dismissively referenced Pottery Barn, Crate & Barrel, Ethan Allen and Room & Board as competitors in the sense that they also sell better furniture and home furnishings. But in the 2nd Quarter 2014 earnings call earlier today, Friedman said the real opportunity for the retailer is hidden behind an iron curtain.

The CEO announced real upside for Restoration Hardware is the highly fragmented segment known as to-the-trade design centers, which are accessed nearly exclusively by interior design professionals or individuals with a resale license. Friedman explained that designers routinely receive industry discounts of 20-40%, but consumers need to hire interior designers to access design-center merchandise so any potential discounts may be lost to them. Friedman believes this target market is Restoration Hardwares big opportunity for future growth in both volume and margin. The retailers vision is to house disparate categories of a design district under one roof, giving access and pricing transparency to all consumers.

Perhaps articulation of this vision gives context to the 11-pound mega catalog Restoration Hardware mailed last June, receiving tremendous publicity, much of it not positive. Despite criticism, Friedman still considers the catalog a success, though one likely to be optimized in the future. Interestingly, Friedman himself admitted that his very own Restoration Hardware 12-book compendium remains on a counter in his kitchen, and that he hasnt had a chance to go through it all yet. Its easy to believe that Friedmans experience is consistent with many Restoration Hardware consumersthough they may be less likely than the companys CEO to keep the books on hand for future browsing.

Like the bold move of an epic hardcopy catalog in an increasingly digital world, Restoration Hardware sees their growth coming from aggressive expansion in retail space. Friedman asserts that when online/catalog items receive in-store presence, sales lift from 50 to 150%. It makes sense that merchandise perfectly displayed and lit in gorgeous environs are elevated from products to a lifestyle, likely increasing the desirability of attaining that lifestyle and increasing sales of those items.

When asked what specific line within the Restoration Hardware portfolio that Friedman was most excited for future growth, there was a Benjamin Braddock moment. However, Friedman sees the future not as plastics, but as leatherdistressed leather.

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Behind The Wrought Iron Curtain: Restoration Hardware's CEO Says True Competition Is Professional Designers