RH Climbs a New Mountain

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Gary Friedman is doing some serious mountain climbing and he’s bought himself some new gear to help get to the top. In releasing RH’s cautious third-quarter earnings in mid-December, CEO Gary Friedman announced the acquisitions of two furniture producers and the teaming up with noted interior design and architecture editor Margaret Russell (formerly of Architectural Digest) to head up its nascent media efforts that could include a luxury magazine for the design world.

“New brands and businesses, thoughtfully integrated and amplified on what we believe will be the world’s most innovative and dynamic global design platform, will begin to fundamentally change the landscape of the luxury home furnishings market and the to-the-trade design industry.” Gary Friedman

Taken together, these moves represent new assets Friedman believes RH needs to become the uber-luxury brand he aspires to. “Today’s announcements, plus our previous acquisition of Waterworks, firmly plant four RH flags at the very top of the luxury mountain and clearly state our intention of establishing RH as an arbiter of taste and design,” Friedman told listeners on the company’s analyst call in his own indubitable style which blends equal parts braggadocio and self-deprecating sincerity.

“These brands and businesses, thoughtfully integrated and amplified on what we believe will be the world’s most innovative and dynamic global design platform, will begin to fundamentally change the landscape of the luxury home furnishings market and the to-the-trade design industry.”

Two+ for the Climb

The new pieces of the RH complex, which already includes stores, restaurants, wine bars, jet and yacht interiors are:

  • Dmitriy & Co, a to-the-trade custom upholstery atelier and its Dmitriy founders, Donna and David Feldman, to create RH couture upholstery.
  • Jeup, Inc., a to-the-trade custom bespoke furniture workroom and Joseph Jeup to create RH bespoke furniture.

Russell, former editor-in-chief of Architectural Digest and Elle Decor, will spearhead RH media, “an editorial-content platform that will celebrate the most innovative and influential people and ideas that are shaping the world of architecture and design.”

For RH, these additions follow a vertical retail strategy that goes back to the early days of Sears Roebuck in the first part of the 20th Century. Back then the retailer – the largest in the country at the time – owned many of its suppliers including companies like Whirlpool that made its major appliances, Craftsman (tools), and others that produced paint and other merchandise it sold.

Sears wasn’t the only one to go this route. Marshall Field got into the home textiles business with a subsidiary called Fieldcrest that went on to sell perhaps the most iconic towel brand of all time, Royal Velvet. Controlling – in fact, owning – production meant steady and controllable supplies of goods but also exclusivity, an attribute that even back then was considered important for retailers looking to differentiate their assortments.

RH under Friedman has largely self-branded its merchandise and while it’s had exclusive arrangements with a number of vendors it has not owned them. That changed with its 2016 purchase of Waterworks, a kitchen and bath plumbing fixtures and accessories company that also operated its own stores. Those stores continue but Waterworks now produces merchandise sold through RH as well.

These furniture add-ons give RH additional control over its supply chain, no small thing to have as the past few years have proven. While most of the company’s case goods-type furniture such as living, dining and bedroom products come from overseas – primarily Asia – upholstery products are still largely made domestically due to the customization and individualization requirements of different fabrics, cushion materials and sizes. With these new resources RH should be able to offer more reliable, consistent, and cost-effective sofas, chairs, and other seating. (Dining room chairs are still mostly made in Asia due to the woodworking required for these products.)

Media Matters

RH Media is another matter entirely. Details are still scarce right now as to how that business will be manifested but Russell has led two prominent publications in the interior design field so one has to think print would be a component of the RH strategy. This is a company after all that has produced thousands of pages of print catalogs – “Source Books” as Friedman calls them – that at times have bordered on shelter magazines.

Classic consumer magazine brands have withered away over the past decade and some, such as the once venerable HG, have disappeared completely while the remaining titles are significantly more modest in scope. The B2B publications have also diminished or demised: Interiors, Architecture, Contract, Interior Design, Architect. As a marketing vehicle for RH, rather than as an independent media business, RH’s new media foray will appeal to both consumers and the professional contract/residential designer.

Russell, like Friedman, is a high-profile personality so it will be fascinating to see how they work together. Friedman – recently recognized as a 2022 Retail Radical right here at The Robin Report – is a very hands-on leader who has largely defined the RH that now exists, a far cry from the housewares and gadgets retailer he joined two decades ago, in his own vision.

Still Friedman did drop a hint or two on what RH Media might be. “You think about the investments we’re making, building a media platform and a content editorial platform that will position the brand as an authority in the industry. I’m not speaking about us; I’m speaking about the people who are really shaping the world of architecture and design. We want to become an authority and a voice in that. So, you don’t really do that by talking about yourself.”

Friedman never fails to move the needle when it comes to RH, whether it’s his expansion into hospitality, transportation, housing or across the Atlantic into Europe. Now comes more vertical integration and media. It’s all part of what he calls “the climb up the luxury mountain.” Pass the oxygen!

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