During summers and winters in the early 1990s, I used to work for Williams-Sonoma (NYSE: WSM). In many ways, it was a dream job. I was paid to talk about cooking, learn about cooking and demonstrate cooking tools. One day, however, it occurred to me that, as much as I loved adopting a slightly condescending air when selling high-priced kitchen items, there really was a problem with the products that I was hawking. That afternoon, I talked an older woman into buying a "Tuscan grape drainer" as a gift for her niece's wedding. As the woman left the store, I realized that I had just convinced her to shell out $49.95 for what was, essentially, an earthenware bowl with holes in it and a couple of grape decals stuck on top. As much as I like cooking, I have to acknowledge that nobody really needs a berry spoon, an asparagus peeler, a corn shucker, or most of the numerous other items that Williams-Sonoma hawks to its customers. The store is, in its own way, comparable to Sharper Image, Wilson's, or any number of the other specialty niche retailers that are finding it so difficult to weather the recession. Recently, in an attempt to lure shoppers into its premium stores, the retailer reduced prices massively, cutting into its profit margin and producing a 42% drop in fiscal first quarter profits.
As some analysts have noted, part of William-Sonoma's problem is that it is supporting an expensive catalog division that isn't really pulling its own weight. Moreover, as shipping prices continue to increase, it is likely that the company will see its catalog sales continue to decline. However, this is only half the issue: while most stores are feeling the recession pinch, it is hitting specialty retailers particularly hard. As Linens N' Things, Sharper Image, Wilson's Leather, and other companies could certainly attest, it's not a good time to specialize. Or, to put it another way, in this economic climate, people are using colanders to drain their grapes.
And who's next on the block? Well, have you taken a peek at the Gap (NYSE: GPS) recently?
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Williams-Sonoma, Inc.
Ah -- I was waiting for news like this. Target -- the trendy and large discount retailer that has stores all over the nation competing just fine with larger Wal-Mart -- has been accused by upscale (and sky-high priced) retailer Williams-Sonoma of copying product designs of everything from Christmas stockings to votive candle holders.
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