March 31, 2008

Restoration Hardware Baby & Child Will Try To Out-Crate & Barrel Pottery Barn Kids


Whatever happened to Restoration Hardware's Baby? Patty and the trades reported it last Spring, and DT reader Mark wondered aloud about it a couple of days ago. Now according to Chris, Daddy Types' mall correspondent, Restoration Hardware is indeed planning to launch Restoration Hardware Baby & Child, a catalogue/web/store brand extension that frankly sounds a lot less necessary to me than it does to the the company's CEO:

“This is a severely under-served category in the top shopping centers,” said Gary Friedman, president and CEO. Noting that the top 100 centers “have only one offering – Pottery Barn Kids,” he said Baby & Child will be positioned slightly higher in pricing strategy.
In other words, Crate & Barrel Kids.

At least that was the plan last May. RH Baby & Child was supposed to launch last year, just one of six [six!] brand extensions meant to turn the company around and offset the effects of the rapidly tanking home buy/sell/renovate market. In August, the company announced layoffs and a big reorganization. They're weighing buyout offers from Sears and a private equity firm. The business is hurting, and they're losing money at a rather alarming clip.

And yet they say the first Baby & Child catalogue will still come out, only in Summer '08. And yet Chris reports that the Dallas store people were getting ready to lose some floorspace for the new in-store kids shop, date and size to be determined. [Though we do know the color: chocolate. Chocolate is the new green for kid gear.]

So they're targeting Pottery Barn Kids with a more upscale Crate&Barrelly offering. Meanwhile, C&B's own children's subsidiary, Land of Nod, does almost nothing, just stay alive. Design Within Reach/JAX came and went within eight months. Babystyle's in Chapter 11. And this is somehow the "severly underserved" market that Restoration Hardware--and now GapKids Home, too-- are launching into? I just don't get it.

"Babies. Puppies. Engagement rings?" They have that in exactly the wrong order: Restoration Hardware Baby & Child [ via chris]
Restoration Hardware getting into baby biz: Will launch catalog, Web site [kidstodayonline]


A lot of this is being driven by the suppliers and not so much the stores. With the current slowdown and the dollar's free fall our friends in SE Asia and desperate to do anything and everything to keep the goods coming in and are pushing hard for retailers to try new lines/ideas. Who cares that they failed because its not like they are moving anything right now. Give you an idea how bad it is, Week 10 2006 10,000 import containers moved on the BNSF from pier 400 in LA. Week 10 2008, 850 import containers.

Given that the increased costs caused by the dollar's freefall (and separate big increases in the price of wood, metal and finishing materials) have for the most part not been passed on by the factories, I'm not so sure how much they are trying to push new US business. Their margins are either razor thin or negative right now. A lot of them are trying to build business in Europe.

Walk through a BRU- the prices are the same as they were a couple years ago, despite the fact that the costs to produce those goods and bring them here is much, much higher. Now Restoration Hardware and PBK want to sell you that same BRU crib for 25-50% more money, but I'm not sure many customers are interested in covering those high margins right now (See Babystyle, Jax, et al). This doesn't seem like a good time to launch an aspirational pseudo-luxury brand.

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