I'm Still Losing Business to RH
Dear Stephen,
I'm a third-generation owner of a to-the-trade residential furniture manufacturer. We make luxury furniture, upholstery and accessories here in the US, manufactured the old-fashioned way. Think Holly Hunt, but still a family business. We sell mostly through our own showrooms across the country and where we don't, we have high-end multi-line decorator showrooms that sell our product.
The leading decorators and interior designers who have clients in markets like Palm Beach, Manhattan, the Hamptons, Palm Springs and Beverly Hills have been specifying our product for years for their clients. Our furniture has been featured in Architectural Digest and NBC's Open House. We're a very high-end and established brand.
Increasingly, however, I am told by decorator clients (as well as friendly competitors) that we're all losing sales to RH. Restoration Hardware. I keep thinking to myself only a sucker pays top dollar for RH quality! Yet somehow, we continue to lose business to them.
The decorators tell us they are equally frustrated, as well. One interior designer told me a new client of hers walked into the RH West Palm showroom and just pointed to whatever she wanted. Apparently, to make matters worse, she'd already gone through the catalogue before they even went to the showroom. This designer is a brand in and of herself with many custom furniture designs; she said this scenario is getting all too common—especially with the younger richer clients…
This very famous decorator said she had no choice but to make her customer happy—it's crazy to think customers are paying the designer's markup in addition to the already steep RH retail prices! These clients don't realize how insulting it is to the designers. To add insult to injury, the client took this designer to lunch at the RH restaurant up on the roof (completely furnished in RH, of course).
Our company is a member of DLN (Design Luxury Network)—a group of luxury brands. The other owners in the group tell me they're competing with RH constantly. The products, from what I can tell, are mostly made outside of the US. It is a different quality, a different design, with no legacy or heritage and yet the customers keep coming back for more! To me, RH is crap!
Are you hearing about this, too? What's the RH phenomenon all about? It's hurting my business.
Signed,
Real Luxury
-----------------------------------
Dear RL,
Most of our recruiting clients are the luxury brands affected by RH. They share your sentiment.
Here's the thing—the reason so many luxury brands are upset about RH, and designers too, is because they don't feel like RH is a true luxury brand. At best, most luxury brand owners consider RH a premium brand. I recommend everyone read Jean-Noël Kapferer & Vincent Bastien's The Luxury Strategy (Kogan Page). My luxury clients tell me that RH products are inspired by the designs of many of the luxury brands they are competing with. Interpret that as you wish. I'm agnostic.
Finance bros love RH because they've traded it and own the stock themselves. Being investors, it's natural for them to buy the product.
To many, most true luxury brands are manufactured at the company's headquarters, in a company's own factory and are not outsourced to mass production facilities. Once again, that is up for debate. I'm just repeating what I've heard from my clients.
To go back to your point on DLN, RH owns Waterworks and markets it in their stores. They have started adding Waterworks at RH, a shop-in-a-shop concept—so far just in the Newport Beach and Palm Desert locations, as far as I know. I think the former owner of Waterworks was one of the founders of DLN, so that is kind of ironic.
As we all know by now, RH is a global powerhouse and a marketing phenom. Like you said, it's not what my clients consider luxury, but it markets itself as such and the customer pays a luxury price for it. Between the catalogue, the hotels, the restaurants, the yachts, the buzz—it all just works! Additionally, with an RH membership program, they discount the retail price to end-users, quoting a similar price as they give to registered interior designers. Burning luxury brands and designers, too. All while bringing in more revenue. Say what you will about RH, but founder Gary Friedman is a retail visionary and the consumer seems to agree.
Here's my remedy for you:
Luxury brands must up their game and keep designing something fresh all the time. It's great when product or designs can't be easily copied but it has more to do with new product being innovative, fresh, forward-thinking, exclusive… you get the idea.
The second thing is, these luxury brands have smaller factories and can easily customize products, which is something designers and customers love. A big company like RH has more difficulty doing that. Here's a tip—companies like RH hate the word "custom" so luxury brands should embrace that. You don't need to have a restaurant in your showroom to compete with RH. You are not IKEA.
Finally, here's what RH has going for it: they have everything the customer wants under one roof. Customers want access, not obstacles, when it comes to furnishing their homes. Seemingly, however, these very wealthy clients don't care where the product is being manufactured. They care about what it looks like and how it works. The best example I can leave you with is your iPhone—where do you think your iPhone is manufactured? Most likely the same country some of the RH furniture is coming from!
Signed,
Stephen