By Axiom Consulting Partners

When it comes to creating a distinctive brand, what separates the winners from the losers? Winners in any industry offer an overall value proposition that is distinct, credible, and relevant to target segments. Distinctiveness must be seen by / delivered to target audiences in ways other competitors won’t be able to easily replicate. But how do you define a unique customer experience that is relevant to the audience you care about? Easier said than done.

Take, for example, the world of retail, a dynamic one where many established brands are losing relevance with target consumers and stores are closing at an alarming rate.  In fact, the number of bankruptcies has increased 32% over prior year, with store closings triple that of the prior year.

Retailers that have come to dominate the industry have done so with their approach to customer analytics – which provides deep understanding of the wants, needs, and actions of customers as revealed by the exploration patterns in buying behavior. For example, in Amazon’s case they have applied a sophisticated algorithm to make recommendations based on prior purchases AND provide a line of sight to what was purchased by other customers that fit target consumer profiles. This goes well beyond understanding simple customer preferences and leverages a tool called predictive analytics to identify with a high degree of probability what each customer is likely to need or buy next. While the press is full of articles about Amazon, there are other retailers doing something truly distinctive that is not technology dependent and helping to drive to higher revenues and profits. For example, what is retailer RH (once known as Restoration Hardware) doing that sets it apart from players like Crate and Barrel and Pottery Barn?

In a few words, it is designing a unique customer experience that goes well beyond the usual factors of: Price, Assortment, Fulfillment, Distribution, Platform, and Innovation1. These elements, while important, are simply antes that any retailer needs to demonstrate.  While innovation is called out as a key characteristic, a deeper discussion of how it innovates is best done through example.

RH has spent the last several years transforming its business by overhauling its product portfolio, shifting its catalog business to a format reminiscent of high-end coffee-table books that are ONLY sent to target customers, transforming its business from a promotional to membership-based model, and creating a unique and innovative flagship store experience.  It’s a bit of stretch to call the Chicago flagship store a “store” in the traditional sense as you cannot walk out of the place with a tangible purchase.  Instead, you can experience the product offering and place a custom order at the design studio. These deliberate moves led by CEO Gary Friedman and renowned creative director Milton Glaser are intended to embody RH’s aspiration to be known as a luxury lifestyle brand.

The flagship store, which launched about two years ago in Chicago’s coveted Gold Coast area, is located in the landmark Three Arts Building, and boasts a beautiful sun-drenched atrium accented by a soothing fountain. The atrium is peppered with tables and couches where guests may enjoy a small, yet delicious gourmet menu.  There is also comfortable seating surrounding the atrium allowing patrons to pleasantly pass the time while they wait to enjoy the special dining experience ahead of them. Here they can relax and sip on a coffee, a glass of wine or cocktail, and nibble on a light snack. On a side note, the restaurant doesn’t take reservations – it is first-come, first-served. You’d think the absence of reservations would be a deterrent, but the opposite is true as eager diners line up for brunch, lunch, an afternoon snack, or dinner. Interestingly, RH has become a tourist destination, much like other Chicago icons such as the Art Institute, House of Blues, Architecture Boat Tours, Navy Pier, Sky Deck views from the Willis Tower, and strolls down Chicago’s Magnificent Mile.  As with many of these attractions, it is common to see guests taking photos in the atrium to document their visit and share with friends and family via Twitter, Snap Chat, Facebook, and other popular social platforms.

On the three floors above the dining area are showrooms and design studios designated by theme. The second floor reveals transitional and traditional living, dining, bedroom, and bath sections.  The third floor includes a more modern, contemporary style of living, and the fourth floor, displays offerings for teens / kids. The spaces make envisioning how one could live in these spaces more tangible.  On the fifth floor is access to a patio which displays RH’s outdoor living assortment of couches, firepits, water features, and lighting.  Shoppers can casually float floor-to-floor with glasses of wine, touch and feel fabric choices and enjoy art displayed in a gallery-like setting.  Design staff are on hand with iPads to help shoppers pick out custom fabrics for their projects.  This unique experience propels RH to a luxury, lifestyle brand.

RH leadership astutely realized that it wasn’t going to win by doing more of the same – it needed to transform its business to uniquely convey its offering. With a deep understanding of its target consumer, RH capitalized on the trend of a bifurcating retail landscape – where successful retailers have strategically positioned themselves as either providing shoppers price-based, value propositions (think retailers like Bed Bath Beyond, Target or Walmart), or offering a luxury experience that delights the senses.

2017 now marks the second year of RH’s bold new strategy, a point that Gary Friedman admits is at its “most uncertain stage of its transformation.” Given the big bets placed by the Company, it’s heartening to see financial performance surpass projections. Recent quarterly results revealed strong sales (14% growth versus prior year2), adjusted earnings per share (48% growth2), and a market capitalization of almost $2B3 – all of which are financial indicators that RH will see the payoff from its investment.

A key takeaway from this strategy is that retailers (and anyone in any industry, for that matter) must identify their unique point of difference.  This requires a deep understanding of the target audience and a strong conviction by leadership to “stay the course” even when things are challenging. While there may be hiccups along the way, the innovators that have endured are those that realize change isn’t easy.



1 PwC’s 2016 study, “The new retail ecosystem: from disrupted to disruptor”
2 Quarterly Results from Analyst Call on December 5, 2017
3 Google – Yahoo – MSN Finance on December 15, 2017

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