The Big Question: How Can Retail Chains Survive the Pandemic?

(Bloomberg Opinion) -- This is one of a series of interviews by Bloomberg Opinion columnists on how to solve today’s most pressing challenges. This conversation has been edited and condensed.

Sarah Halzack:  As the head of Williams-Sonoma Inc., you oversee a company that includes home-goods chains such as Pottery Barn and West Elm. Let’s rewind to mid-March, when the scope and the scale of the pandemic was becoming clear. What was the most urgent change you knew you needed to make? What area of the business needed to be addressed first?

Laura Alber, president and CEO, Williams-Sonoma Inc.: Like everyone, it really caught us off guard. And the most important thing for us is the safety of our people. So we wanted to be thoughtful about what to do, and we spent a lot of time on that. Then of course you go into scenario planning. I lived through the recession in [2008 to 2009] here; I was president of the company. I watched us come out of that stronger than we went into it and gain market share. So I knew we needed to be aggressive and prioritize those things that would make a difference and cut those things that we could wait on. 

We were 56% e-commerce heading into the pandemic. So we were very fortunate that we were able to pivot quickly and capture the shift to digital. A couple years back, we had purchased a company called Outward that does 3-D room planning for us. So we didn’t just have a website, we had tools that we then used to help people who still wanted to buy for their home to envision what it would look like. Previous to Covid, we would go into people’s homes and do room planning with them. We now had to do that all virtually. It was amazing to watch our store associates pivot to doing digital design. We had the tools, and our associates were so innovative about how to use them. So we quickly saw our virtual design-chat pipeline of sales grow exponentially. 

Our mission has been to improve people’s lives at home. And that value colors not just what we sell, but how we sell things and how we source things and the company we are. It was probably a [one] week decision to decide what we were going to do with our store associates, knowing we were probably going to be closed at least a quarter. Those values made it very clear to me what the right decision was, which was to keep the people who have been working more than 12 hours [a week] on the payroll, so that the people who really relied on us didn’t have to file for unemployment and didn’t have to worry. At first, we didn’t know how long we could keep it up. But it soon became clear that this is a key priority for us. 

SH: Since you’ve re-opened stores, what have you learned about shopper behavior? How does that shape your plans and protocols for the busy holiday season?

LA: We require masks in our stores, that’s key. We’re not shy about that, and we provide them if you don’t have one. We haven’t had a lot of lines yet – maybe in the beginning we did at a few stores – but we’ve been able to limit the number of customers and associates consistent with state-specific guidelines. But we’re also allowing people to make appointments. That’s going to become even more important during the holidays. We have signage to encourage social distancing, the directional traffic arrows. We did plexiglass to separate customers at the register. We do daily wellness checks for the associates and we’ve had a really good supply of PPE all along. We’re talking all the time on how to stay safe. The customers really appreciate it; they notice. If they want to shop outside the store and just come and pick the goods up from the back door, we will bring their stuff out. Depending on how you want to shop, we’re ready to serve you in that manner. 

SH: Store traffic remains lower across the industry. But I would imagine when people do come into a physical store, their intention to buy is pretty strong. Is that what you’re seeing? And how does that affect the labor model? Do you need fewer workers in your stores?

LA: Traffic is obviously down. Conversion is up. In the business that we’re in, which is home, it’s a big purchase. [Customers] could be coming in to buy a whole room of product. They want to sit on the sofa. They want to touch the fabric. They can order and get a swatch at home, but our stores have always been a competitive advantage to touch and feel and make better decisions on the large-ticket, large-scale products. They’ll do a lot of cross-shopping online. But you’re absolutely correct: Much more intentional, considered purchasing versus browsing. 

SH: What are you doing differently in terms of merchandising? Certain product categories like outdoor and office furnishings are seeing an explosion in demand, and other categories, not so much. 

LA: What we want to do, back to that mission statement of enhancing people’s lives, is show them how to enjoy their time at home more. So, of course, work from home, study from home, are very relevant. We’ve addressed that category with more product, better shop path, more visibility, more inventory. I think that trend is here to stay. We see that many people will have hybrid work environments. Many companies are saying they’re not even going to come back. So this is a key growth category for us and one that we can really own. 

Outdoors, of course, may be the only way you’re going to see your mother, your relatives, your close friends. You want to be outside, and you want to be comfortable. So people are really spending the money there. There are opportunities that are even bigger, particularly as it gets cold outside. How do we keep people warm? How do we show people how to do turkey on the barbecue? Those are challenges that we’re having as much fun with as we can. 

SH: That’s a good segue to talking about supply chain. I think the situation now is that demand is greater than the inventory you have in certain categories. How are you working to solve that? 

LA: It’s a constant chase and adjustment based on what we’re seeing. We added a lot of inventory back after we had initially cut it because we didn’t know what to expect. It’s a function of our lead times – how quickly they can make it, and make it in a quality way – and then also how high our sales go. We’re not having supply chain issues due to Covid anymore; we did, you can imagine, in the beginning. Certain areas were completely shut down by the government or by people not coming to work. That’s been pretty much remedied. Now it’s just a matter of capacity and speed.

SH: What about marketing? Shoppers who have gone to any of your websites may have noticed fewer promotions. 

LA: The most important thing about our marketing strategy is that we’re relevant. We want to make sure we’re talking to the customer about what’s important to them. That makes us more effective. All the metrics go up when you send an email that you want to read versus one that you don’t. If you’re not going to buy a chandelier, offering you 20% off doesn’t matter. If I’m talking to you about study from home, and I send to people who have kids, “How to set up your kids’ study station,” that’s really relevant to you. So we’re trying to pick things that cross the most people and have the right tone. But then we also use targeted email and targeted advertising based on things you’re interested in. 

SH: Does the acceleration of online shopping affect your assessment of how many brick-and-mortar stores the company needs? Do you need to close more locations than you might’ve thought before the pandemic? 

LA: We were already trimming our fleet. The pandemic has accelerated the trend, but it’s the same trend that we expected. We want to run great stores. We want to be able to take care of them, keep them fresh and new and we want to pay our people very competitively. We don’t want to have so many stores that it’s difficult to manage and stores are cannibalizing each other. We have 50% of our leases up in the next three years. We recognize that traffic could be down for quite some time, so when we run those models and adjust them on the sales side, there are more stores that we’ll close. So this year, we said [before the pandemic] we were going to close 30 and I think we’re closing 50. The strategy is that we’d like to be there. When the economics work, we’ll stay.

SH: You’ve been CEO for 10 years. I imagine this has been one of the hardest and strangest of those years. Can you share how you got to that role?

LA: I didn’t expect to end up here. After college, I got very lucky — I got a great job at the Gap. I was one of their first trainees. At the time, [former Gap Inc. CEO] Mickey Drexler was there. It was a very inspiring time to be there. I took a brief stint with a division of Neiman Marcus, Contempo Casuals. When we decided to move back to San Francisco, it was that time in life where you really reconsider what you want to do. I loved the Williams-Sonoma brands. I love entertaining, food, home, and I just wanted to be part of it. I was drawn to the products and the lifestyle. It was just dreamy for me – and still is – to be involved with such beautiful things and the people that create them.

I started in the direct-to-consumer business, it was called catalog. I became the catalog person who pushed DTC for Pottery Barn and really grew that business. I think when I started it was $100 million. You know how big Pottery Barn is today — it was amazing to watch that happen. Also, during my time, just looking at other opportunities, businesses to start, businesses to buy, it’s been like being an entrepreneur – Pottery Barn Kids, Pottery Barn Teen, the Pottery Barn growth in bed and bath, all the categories outdoor, West Elm. We bought Rejuvenation. That is something that we thought, wow, we know how to grow that, and we have. And then the evolution of Williams-Sonoma, making it really relevant. These have been things that have been really fulfilling to see happen, and behind every one of those things is a very passionate and excellent person who has been driving those businesses. So I see my job as helping them find the great strategies and supporting them to get things done. 

SH: What’s the bottom line? What are the consumer behaviors and trends coming out of this time that you think are going to stick around?

LA: I really believe the cooking more at home trend is here to stay. We’re seeing more and more people, especially millennials, learn how to cook, which is a lifelong skill that’s going to drive our business over the long term. We talked about digital transformation – that’s here to stay. The other big trend is values-based retailing, from sustainability to equity to how you treat your people. I think consumers are more mindful than ever. Lastly, more people are working at home. They’ll be less tied to a specific city. And they’re going to move a lot more. Every time they move, frankly, even if you scale down, it’s good for us, because you need to get different furniture. Those are the hyper-spend moments. Regardless of your lifestyle or size of your home, one of our brands – or even better yet, all of them – can help you build your ideal home. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Sarah Halzack is a Bloomberg Opinion columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.

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