E-commerce sales climbed 2.2% year over year, to $809 million - 51.1% of total revenue - while at the same time retail revenue declined 2.7% to $773 million.
It’s a natural progression for the retailer according to CEO Laura Alber:
We've always had a high percentage of E-commerce sales due to our catalog heritage. This year we reached almost 52% and catalog channel continues to be the highest growth area for us…We were early to understand the importance of e-commerce and we now generate almost 52% of our revenues online and we do so profitably.
That leaves the firm in a good place to build on digital strengths, she adds:
We know how and why our customers shop in every channel across our brands and we will continue to aggressively invest to expand our additional leadership. In 2017, we will continue to invest heavily in digital technology in a fragmented and evolving retail environment where customers are targeted by multiple retailers. We are investing in powerful ways to increase brand level awareness and convert awareness to purchase.
Among the investment priorities is a focus on digital tools, such as next-generation product information pages and 3D product visualization. There will also be an increase in digital marketing and advertising:
Our digital marketing investments in 2016 included a focus on improving the online shopping experience particularly in mobile and increasing online advertising spend across all of our brands. We understand the increasing role that mobile plays in consumer shopping behavior and our investments focused on creating a more friction free experience have resulted in stronger conversion metrics.
On the advertising front, we have increased top of funnel programs designed to reach new audiences and drive brand awareness. With a rich history of inspiring inventory and editorial and catalogs, we are capitalizing on the enhancement across the industry and digital storytelling. We are reaching our customers in new ways in putting video, how-to articles and with other inspiring content vehicles.
Based on the 2016 successes, we are investing more than ever in advertising specifically our e-commerce spend, online advertising initiatives will target top of the funnel vehicles to drive brand awareness and new customers, increased spend for purchases and higher participation in programs like registry in new movers. We will advertise aggressively to meet strategic goals like increasing unaided brand awareness.
We’re also building a digital campaigns across various social media platforms to inspire our existing customers. And importantly, we are increasing advertising investments in cross -brand initiatives like the key loyalty programs to increase shoppers engagement frequency and to drive awareness of our emerging brands and services.
All of this takes places against a highly competitive marketing landscape, notes Chief Digital Officer John Strain:
The marketing environment is competitive. It always has been. And we're fortunate enough to have a heritage of being and direct response retailer with home and disciplines really associate making balance trade-offs between higher I driving conversion programs and strategic brand building top performing investment.
The conversation has moved on from being about catalogs to a “digitally-oriented” discussion about emerging social channels, video, syndicating our content, he adds:
We love this stuff. We have a passion for driving marketing effectiveness and we have the customer analytics team, the customer experience team, customer insights team, they're all part to assess that marketing mix on a multi-touch attribution model. It's really based on identifying opportunities to go broader and deeper where appropriate and also to make appropriate trade-offs.
We’ve partnered with great companies like Google to assess our brand and develop strategies to really expand our brand awareness. So as part of our DNA, we've develop this through decades and its now kind of becomes naturally to pure play startups. So understanding how to do this ii a long-term sustainable profitable way for us [to have] a key advantage.
In this digital mix, Williams and Sonoma’s brands also still have an offline real estate portfolio and this remains an asset, says Alber:
The role of retail stores continues to evolve. As an established multi-channel retailer, we offer shoppers integrated experience across channels, all of which positively contribute their perception of our brands and products. Our retail stores are single best source of new customer acquisitions and are meaningful advantage over digital pure-play composition.
To enhance the customer expense in all of our stores, we're investing in point-of-sale technology and scheduling tools which will provide operational efficiencies and elevated service levels. Given the declining mall traffic and shifting consumer behavior, we continue to evaluate the role our retail stores can and should play.
We believe that our retail store must be a sort of inspiration and value added services that translate not just to in-store sales, but also to establishing brand loyalty and increasing multi-channel purchase behavior. For example, Pottery Barn store remodels in key markets like South Coast Plaza, in Puerto Madero, not only improved in-store sales, but also increase online sales in nearby ZIP Codes.
All told, with more than 50% of sales now online, Alber sees 2017 as a transformative year:
It is our prioritization for the year to invest in E-commerce and digital leadership. We're looking at everything to give the customer experience the best thing possible, so whether it's next generation product page, whether it's 3-D product visualization, whether it’s more investment in mobile, whether it’s better onsite search experience. We’re also looking at Buy Online, Pick Up In Store.
We’re already at the 52% from E-commerce perspective, but we do think the growth is going to continue to grow there, so it's important with our level of profitability. This past was 23.7%. The more we grow that channel, the better returns we get, and so it's going to be very strong focus for us.
A major tipping point on the omni-channel transformation journey for Williams-Sonoma.