Revenues rose to $2.5 billion last year for the flagship brand, CB2, Crate &
Kids and Hudson Grace Brands. Now the strategy is to fill the gaps with an
emphasis on providing a whole house feel.
Everyone in the home market knew this day was coming. After furniture and
home furnishings retailers enjoyed a nearly 20% two-year growth spurt from
$120.3 billion in 2019 to $140.6 billion in 2021, things were destined to
change. Retailers held onto their gains in 2022, even boosting them to
$141.3 billion, but now the tide is turning.
Overall, home furnishings retail has only retreated about 3% through June,
but the year-over-year decline will quicken as the months pass. Retail sales
dropped 12% in April, followed by a 5% decline in May and 3.6% drop in June.
Given that June and July are typically weak months for home purchases as
people take to the road, the low single-digit drop so far this year will
surely widen as the third and fourth quarters roll around.
Home retailers must adapt to the change, and the direction Crate & Barrel is
taking provides a valuable case study on how to manage the shift.
Its strategy is to fill in the gaps after the big purchases have been made
with multi-function, practical and flexible home items that serve a
utilitarian need, like cookware and other kitchen tools, area rugs, outdoor
kitchens and storage solutions.
Services are getting special emphasis, too. Its clients can ensure their
existing and new furnishings play well together through expanded
complimentary design services.
And to engage early with young couples as they begin furnishing their first
home—and hopefully to extend the relationship at each subsequent stage of
their life together—the company is leaning into bridal registry services
with special in-store events to personalize their bridal registry
experience.
Common Challenges
Crate & Barrel, owned by the German conglomerate Otto Group, enjoyed a
post-pandemic boom. Year-over-year revenues rose 29% in the 2021/2022
financial year to $2.5 billion, including the flagship brand, CB2, Crate &
Kids and Hudson Grace brands.
Financial 2022/2023 was another banner year, with revenues advancing 28% or
15% when adjusted for exchange rates; this while the Otto Group’s overall
business flatlined at about $18 billion, but declined 2% on an adjusted
currency basis.
Looking ahead, the Otto Group projects a “drop in revenue” for Crate &
Barrel with much riding on the North American market, where it operates 70
of its over 100 stores and which accounts for the lion’s share of the
brand’s sales. And with its share of e-commerce revenue slipping in the most
recent year, dropping from 63% share in 2021/2022 to 60%, its stores will
have to do more to cushion the potential revenue blow.
“We can make the whole house feel cohesive to bring people peace and
tranquility. It’s through mindfulness and thoughtful, intentional
purchasing.”
Stores to the Forefront
While Crate & Barrel president Alicia Waters describes the company as a
digital-first brand, its stores are “designed with purpose” to meet the
customers anywhere along their shopping journey.
“Stores have played and continue to play a critical role in providing that
face-to-face, human touch service,” she said, adding, “Services is how you
win in today’s world.”
Its complimentary home design service puts the customer service side of
design ahead of sales, as other home retailers might. It offers design
services through scheduled in-home, in-store and virtual engagements.
Waters shared that the company is seeing “huge growth” in its design
services with its mindful approach to design, which she described as a “less
is more” philosophy that puts quality before quantity.
“We care a lot about design services, and it’s an area of focus and
investment for us because each person’s view of purpose is individual. So,
design is about understanding what authentically resonates with the client,
where they spend their time and how to build their home out with
high-quality materials to serve people and the planet in a thoughtful,
mindful way,” she continued.
Since everyone wants somewhere to go and things to do post-pandemic,
in-store events also bring in traffic. In particular, it’s found traction
offering scheduled private registry events, where bridal couples are guided
throughout the store after-hours to register gift selections while enjoying
light refreshments.
Private registry attendance has been up over 50% between last October and
January this year. It’s an investment with a long tail for the brand,
establishing trusted relationships with couples that will hopefully pay off
in terms of long-term business relationships.
And as for all retailers, new merchandise gives customers another reason to
come into the store or visit the website.
“Crate & Barrel is leaning into outdoor kitchens with a new collection of
outdoor kitchen cabinets and carts to add to the investment people may have
already made in outdoor furniture.”
Filling In The Gaps
Just like the pandemic placed new demands on the home, this post-pandemic
period is seeing some trends continue to pick up steam and new ones emerge.
“The home has to do more,” Waters maintained. “A lot of it is around
multifunction and versatility because many people are still working from
home. And kids’ spaces must be multifunctional too, serving as bedroom and
study spaces. We are still seeing growth in these areas.”
The kitchen gained new prominence during the pandemic that continues today.
While Crate & Barrel has always been strong in kitchen and dining, it
introduced its first private label cookware collection last year, promising
higher performance stovetop cooking and oven baking. It rounded out the
extensive 200-piece collection, with houseware utensils and cutting boards.
This collection and its other kitchen offerings, including small electric
appliances, continue to show strong growth.
Since cooking is no longer limited to the kitchen, Crate & Barrel is leaning
into outdoor kitchens with a new collection of outdoor kitchen cabinets and
carts to add to the investment people may have already made in outdoor
furniture.
It’s also expanded its outdoor range with a tabletop pizza oven, barbecue
grills and smokers, plus an outdoor refrigerator and beer keg cooler. To
enhance outdoor entertaining, a collection of melamine dishes that mimic the
look of porcelain and shatter-proof acrylic wine glasses with a fine crystal
look are on offer.
Another gap filler is a new collection of area rugs. These provide its
designers with a wider assortment to ground their room designs. And since
many homeowners upgraded flooring over the last two years, area rugs are the
perfect gap-filling necessity.
And it’s added a range of new home organization products by NEAT Method to
help homeowners make better use of their multi-function spaces and store
their accumulated stuff. The NEAT Method is in keeping with Crate & Barrel’s
refined, modern aesthetic.
Whole Home Approach
Just as the company’s mission is to help people design a home with purpose,
it is taking the same purposeful approach to designing its retail fleet.
Last year, it repurposed its Tysons Corner Outlet store to a multi-brand
Crate & Barrel and CB2 store and moved it across the way to the Tysons
Galleria. It also plans to relocate its NYC Soho store to a location in
Flatiron in time for the holidays.
“We are one of the few retailers in the industry that actually serves the
whole home,” Waters shared. “We serve outdoor spaces, the living room, the
bedroom, kitchen and dining room, kids’ rooms. That’s our competitive
advantage.
“We can make the whole house feel cohesive to bring people peace and
tranquility, through mindfulness and thoughtful, intentional purchasing. We
don’t target a customer demographic. We serve all demographics. What unites
them is a purposeful mindset,” she concluded.