Williams Sonoma/ Hbr

1. What are four to five ways that specialty retailers differ from discounters (a la Wal-Mart)?

Inventory turns: According to the data provided in the Williams-Sonoma Inc. case study (1990) average specialty store turns were just under 2x. If you look at the data from the Wal-Mart Article discount stores have turns many times that, actually turns around the neighborhood of 8x.

Margins: Discounters such as Wal-Mart go for the high volume low margin approach. Sine their whole approach revolves around offering low prices, this goes hand in hand with low margins.

Customer Service: Specialty stores focus on offering customer service. Selling their high prices and high margin offerings requires a high level of customer assistance and service from its sales force. Customers feel like they deserve and are paying for knowledge and service when they shop at stores such as Williams-Sonoma.

Atmosphere/Experience: When someone walks into a specialty store they are being sold on a concept. A specialty retailer selling higher end goods would not prevail if their physical stores had the atmosphere of a Wal-Mart for example. Wal-Marts concept is large selection at low prices. So like-wise, Wal-Mart's clientele would probably question the low prices concept if they walked into a store with displays and fixtures similar to Williams-Sonoma's. Also Williams-Sonoma is selling style, or a lifestyle. Discount retailers however, are not; they are selling the concept of wide selection at low prices.

2. What is the primary force impacting the company (Porter)?

I believe that Williams-Sonoma's primary force of competition is jockeying for position. Williams-Sonoma is constantly at odds with the competition. The company has to keep careful watch of its competition and continually fight for market share.

Department Stores: According to the case study, department stores maintained substantial purchasing power over wholesalers and manufacturers. These chains also made strides to improve operating performance and have also lowered their margins in order to drive sales. This poses a threat to Williams-Sonoma.

Specialty Stores: These competing retailers pose a number of threats to Williams-Sonoma. According to the case study these stores have expanded more rapidly than Williams-Sonoma has. This has forced the company to compete or even lose out on prime real estate locations at malls and other shopping venues. Also by increasing the share of imported and unbranded merchandise, they were able to improve margins faster than Williams-Sonoma. Also, due to their rapid expansion, these competitors gained more square footage than Williams-Sonoma. This increases the competition's market share.

Crate & Barrel: This competitor was formed with the idea that people who have taste but no money still want to buy house wares that are attractive but are not too expensive. Williams-Sonoma sells style at relatively high prices. Crate & Barrel also sells style but they are offering their goods at lower prices than Williams-Sonoma. Crate & Barrel poses a large threat to Williams-Sonoma's share of the wallet. (Williams-Sonoma, Inc. 1990, pgs 10 & 11).

3. What is their primary value discipline (Treacy)?

I believe that Williams-Sonoma's primary value discipline is Customer Intimacy. Williams-Sonoma from the very beginning was selling a concept/style or an experience rather, to its customers. The company's early catalogs would include recipes and kichen tips . This action produced intimacy as well as a strategy that would inspire customers to retain the catalogs longer since the catalogs were also providing resources. Williams-Sonoma's sales force also offer a higher level of customer service to its customers. The sales force are trained to be extremely knowledgeable in the company's products as well as being knowledgeable in the products use.

4. What are the issues facing the company? Focus on the top five. Rank them in order of importance. Provide evidence from the case on why you believe each is an issue.

1. Competition: Crate & Barrel, a competitor who is eating away at the company's market share, is a very serious issue to the company. There are only a given amount of people

2. Economy Strength: Given the fact the Williams-Sonoma primarily focuses on higher end product offerings that one could argue are not necessary, the company has to focus on customers who earn higher incomes. Since the company focuses on a higher end market, Williams-Sonoma and other high end specialty retailers would be the first companies to be in financial trouble if the economy were to turn bad. In a bad economy it goes with out saying that all businesses would take a hit, but high end specialty retailers would face the problem quicker and to a higher degree.

3. Controlling Supplier Costs: Williams-Sonoma has failed to increase their share of imported and unbranded merchandise as quickly as the competition. This has given the competition the ability to improve margins faster than Williams-Sonoma. The company also sells a lot of niche items in many different categories that have to be sourced from many different manufacturers and distributors located in many different countries. Since the sourcing is so spread out this eats away at the company's leverage with suppliers.

4. Real Estate: The case study mentions that stores such as The Bombay Company and Lechter's have expanded at a quicker rate than Williams-Sonoma has. This has forced competition for space at top-tier shopping centers and retail districts. All this rapid expansion of the competition has also given the competition a higher degree of presence and more square footage than Williams-Sonoma. There are only a given number of top-tier shopping centers and retail districts that would be a fit for Williams-Sonoma stores. It is not like they could pull off putting a location in lesser areas.

5. Distribution Costs/ I.T. Costs: Since Williams-Sonoma is primarily a catalog business/online catalog business they inherently have face very high I.T. costs and distribution costs. Granted the article does not address sales via the internet, I would venture to say that a business such as Williams-Sonoma which initially focused on catalog mail-order