Williams-Sonoma Invests $75M in Fast-Growing, Profitable E-Commerce

E-commerce is already the Most Valuable Player on Williams-Sonoma's team, and the retailer is committing major-league money to keep up its star's winning streak. The multi-channel retailer will invest $75 million in e-commerce and the information technology and supply chain solutions to support it in fiscal 2011, with $25 million earmarked specifically for long-term international e-commerce growth.

In large part because of fast online growth, Williams-Sonoma's direct-to-consumer channel already contributes an impressive 41% to the company's overall revenues, with that figure expected to reach 43% during fiscal 2011, which began January 31, 2011.

"E-commerce is not only our fastest growing but also our most profitable channel and therefore, its growth as a percentage of total company revenues increases overall corporate profitability," said Williams-Sonoma CEO Laura Alber during a recent conference call discussing the company's Q4 and 2010 financial results.

The retailer's capital expenditures for fiscal 2011 will be "in the range of $135 million to $150 million, with over one-third of that in e-commerce and the supply chain that supports it," said Alber. "An additional $25 million is expected to be invested in incremental SG&A [Selling, General and Administrative] expenses to support our longer-term e-commerce international and business  development growth strategies." The $25 million will be predominantly for IT and e-commerce head counts and the infrastructure necessary to support them, she added.

For both Q4 and fiscal 2010, Internet net revenues significantly outpaced same store sales increases at Williams-Sonoma. In the fourth quarter, same store sales grew a respectable 5.2% compared to the same period in 2009, and overall corporate revenues grew 9.7% to $1.195 billion; Internet net revenue increased 27.2%. For the entire year, overall net revenues rose 12.9% to $3.5 billion, fed by Internet net revenue growth of 26.9% and same store sales growth of 9.8%.

Ongoing Online Investments

As these figures suggest, Williams-Sonoma has already made major investments to support e-commerce. During 2010, "we made significant enhancements to our e-commerce platform, particularly in the areas of on-site search, customer engagement, mobile and social media," said Alber. "All of these investments drove increased traffic, higher conversion and a superior on-site experience for our customers. In direct marketing, we implemented new functionality that allowed us to make significant advancements in the relevance of our e-marketing program, and we were able to increase our targeted impressions by 80%."

Looking ahead, the retailer plans to focus on "driving customer acquisition and customer engagement, as well as profitable multi-channel growth," said Alber. Initiatives will include increased e-marketing, the rollout of international shipping in the second half of the year, and "engaging our most loyal customers through in-store events, online community, social media and special programs," she noted.

While e-commerce is the retailer's shining star, Williams-Sonoma is not ignoring its brick-and-mortar channel. Plans to increase market share include "highly targeted multi-channel marketing, including the expansion of our in-store clienteling services, and expansion of our brand into new categories, new markets and new geographies," she said. Alber identified the Middle East as a key growth area for physical stores in the coming year, with plans to expand to other regions in fiscal 2012.

However, Williams-Sonoma's emphasis is definitely on the online world. "The Internet is our fastest growth channel and a key component of our future strategy," said Alber. "We have a long-standing direct-to-customer heritage, a rich house file and an expansive digital asset portfolio that allows us to interact with our customers in ways that our competition cannot. As such we are planning to increase our Internet investments next year to capitalize on the significant opportunity we see ahead. The Internet has changed the way our customers shop, and the online brand experience has to be inspiring and seamless."

For related content see: Williams Sonoma Finds Successful Multi-Channel Recipe
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