RH (the New Restoration Hardware) Is a Great Brand in the Making
A thorough write-up about RH (formerly known as Restoration Hardware) in a recent Businessweek caught my eye. As Susan Berfield documented in the piece, the approach that CEO Gary Friedman is taking with the brand. I couldn’t help but draw parallels to several principles in my new book, What Great Brands Do: The Seven Brand-Building Principles That Separate the Best from the Rest.
- DeMonty Price, the head of the stores, also holds the title of chief values officer. Price’s role is to hold his peers accountable to Friedman’s credos. Among them: “Think until it hurts, until you can see what others can’t see so you can do what others can’t do.”
- A daily values meeting is held at headquarters.
- At yearly leadership conferences people sign a contract that reaffirms their commitment to the company’s values — one of which reads, “I will continuously destroy my own reality to create tomorrow’s future for myself and my teammates.”
- Friedman also created the five “Resto Rules.” “If you want to be a part of our culture, they are not optional,” says Price.
Great brands avoid selling products – The intent is for the RH brand to be about more than selling furniture and fixtures. The company’s stated vision is “to create an endless reflection of hope, inspiration, passion, and love that will ignite the human spirit and change the world.” This sweeping vision manifests itself in a different way of thinking about what business RH is in.
- Friedman explains, “We’re curating people, products, ideas, inspiration.”
Great brands ignore trends – At a time when retailers are considering stronger promotional and looking at smaller store formats, Friedman is re-positioning RH very upscale – e.g., Vintage Birdcage chandeliers for $3,625 and Deconstructed French Victorian chaises for $2,680 – and making its stores bigger (even larger than its already expansive locations). Furthermore, he’s engaging in a new real estate strategy that may lead the way for more collaborations between landowners and tenants.
- “Landlords and developers are actually helping us build these new structures,” he says…“In many cases, we’re building stores that are 8 to 10 times bigger than our existing stores and paying very little more rent.”
Great brands don’t chase customers – By going so high-end, RH will likely turn off the mid-market customers that it had appealed to in years past — and its new “more European, more reclaimed and weathered” aesthetic will likely disappoint those who had grown fond of the brand as a source for “quirky, nostalgic goods. But Friedman has decided to tap into the sensibility of a specific segment by appealing to the values they share.
- “You have to find people who believe what you believe…If they believe in your taste, style, the way you do things, you can create an incredible business.”
So far, it seems RH is on its way to becoming a great brand. Bloomberg estimates RH will soon report fiscal year sales at approx. $1.6 billion, which would mean an increase of almost 32% from the year before, and analysts expect the company to report profitability. Sales have been growing more than 20% per year since 2010 and shares are up 50 percent in the past year.
Based on Berfield’s recap, it seems like Friedman and his team are setting all the right priorities and making all the right moves. But I wanted to know if RH is really delivering the goods. So when I was in Boston recently, I visited its Boylston Street location to check out the brand experience there. Next week I’ll post a Brand Experience Brief to let you know what I thought. Subscribe to my feed so you won’t miss it!