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Influencers with Andy Serwer: Laura Alber

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In this episode of Influencers, Andy speaks with Williams-Sonoma CEO & President, Laura Alber, as she shares the secrets of her success and how pandemic restrictions helped to boost sales at Williams-Sonoma.

Video Transcript

[MUSIC PLAYING]

ANDY SERWER: A surging housing market and a fast recovering retail sector have created a profit surge for home furnishing retailer Williams-Sonoma and its CEO Laura Alber, who is enjoying yet another stellar year since the start of 2020. A run sparked by the pandemic induced DIY boom. Alber says her business is actually gaining strength as the economy reopens.

LAURA ALBER: The disruption from brick and mortar to online was expedited. And people like us have really benefit from that and will continue to in the future.

ANDY SERWER: In this episode of "Influencers," I'm joined by Laura Alber as we discuss the US consumer, their shift to e-commerce, and how business has changed over her 26 years at Williams-Sonoma.

Hello, everyone and welcome to "Influencers." I'm Andy Serwer. And welcome to our guest Laura Alber, CEO of Williams-Sonoma. Laura, great to see you.

LAURA ALBER: Great to see you too, Andy.

ANDY SERWER: I think everybody knows Williams-Sonoma. But can you in your own words tell us what the mission of the company is?

LAURA ALBER: Oh, gosh, we have always had the goal to improve people's lives at home. And I know that's a big lofty statement. But it's very relevant, especially today, where I'm in home where we have spent so much time. And we want to recognize that people care about their surroundings. And at the same time, they care about their communities.

So this broader mission statement has served us well in thinking about our values and how we can do good as we exceed our numbers at work and how we give back, and our positive influence on our communities and with our associates and on the environment. And so I'm very proud that that has been our mission and continues to be so relevant today.

ANDY SERWER: Tell us more about the business, Laura. How big is it? What are your major sales segments? How much of your sales is in store versus e-commerce, those kinds of things?

LAURA ALBER: Yeah, sure. So last year we are almost $7 billion. We added close to a billion before from the pandemic. And we were 70% e-commerce. And this last quarter, which we announced yesterday, we're 65%.

We are digital first. But we are not digital only. So we have incredible stores, very proud of our stores and the people who work there and the experience that we offer our customers.

We have some of the most loved brands in retail. I think you know a lot of those, from West Elm to Pottery Barn, brands which serves both to the children's business but also Pottery Barn itself, and then Williams-Sonoma, our namesake, which has always been historically had the most stores but is really seeing an incredible surge in e-commerce. And how to teach people to cook and entertain online is a big opportunity for us.

And then, of course, we have our smaller brands. So we have Rejuvenation, which we're very proud of, which is high quality hardware and house parts and lighting. And we have Mark and Graham, which is a personalized gift business, which is very special.

And we also have a pretty sizeable and profitable global business across our brands, across multiple geographies, which really also represents the strategy of being omni and leading with digital and having great beacon stores but really investing in the digital infrastructure. Not to keep just talking, but, while you asked.

In addition to all those things, we have carved out what we think is one of our most sizeable opportunities, which is business to business. So business to business is a huge market and one that no one's really served efficiently. So what we're doing now is really going direct to great clients and hospitality, education, and just designers who do a lot of big projects.

And we are offering them our services, not just to decorate their spaces but also design with them their spaces. And no one else has served these customers from soup to nuts. They've really only done the rugs or they've done the bedding or they've done the furniture. But what we can offer is the whole suite and customize it for them. So it's no wonder that that's been such a huge growth driver for us.

ANDY SERWER: Yeah, that B2B facet, I want to follow up on that because I didn't know anything about that. That's fascinating. And where does that stand right now?

So say a hotel chain might be a prospective client, where you say we'd like to design your spaces, your interiors, or just an office client, something like that. How big is it-- how big is it and how's it going?

LAURA ALBER: Yeah, so it's a really good question. I mean, we keep upping the numbers. We've done 180 million in the quarter, and we keep growing, you know, just tremendous amount over the last year. We said we'd be a billion dollars in five years. At this rate we're going to be $700 million this year.

And so I haven't put a number on it because I don't want to under do it, you know. We've said it could be $2 billion, but if we're going to be $700 million this year, what could it be? I mean, it's a big marketplace, and there's a lot of clients out there who are loving what we do. And these things become like a flywheel in terms of their growth.

ANDY SERWER: Right. And you have that brand equity that people know and recognize. I want to get back to that omnichannel question because that's so critical for businesses like yours. And how do you decide how to deploy assets, deploy capital, deploy your mental bandwidth when it comes to in-store versus online?

LAURA ALBER: Yeah. So it's so amazing. We've had a huge technology transformation in the company. We brought in a new leader and really funded the area, and have been investing in people, first and foremost, and hiring a bunch of extremely talented engineers. But also, in the technology to support our infrastructure supply chain stores, but also all these omniservices in e-commerce.

Now, we have a custom built, internally built e-commerce platform, which makes it really unique, and we do use other people's software on top of it. But we have been showing that the work we're doing with our software out performs so many of other people's software that this continues to be something that we're investing in. And so we have been-- because we've been e-commerce for a long time and previous to that we had the catalog business. When I started 26 years ago, catalog was a big part of the business.

And so we have been investing sequentially in DTC, and so as a result, we started at a higher place. We had more built in the infrastructure versus others. We have been moving from let's say low teens to 25 or so, you know. We're moving from 40 to 70. That's a big advantage because we were ahead to begin with and we're keeping our lead by having that be the focus. It's going to be 85% of our capital spend.

ANDY SERWER: Yeah, I mean, competing with Amazon in particular, and I know you guys have knocked heads with them over the years, it's difficult. But is that the only way for brick and mortar retailer to have had this legacy in investing, or is it sort of too late for a company to get on board right now and become a DTC company?

LAURA ALBER: No. I don't think it's too late, but certainly we have an advantage. The other thing I think really sets us apart and we've talked about these three differentiators, and we just-- you and I-- just talked about the second one, which is digital first but not digital only. But the other big one that I don't want to skate by is developing your own product line.

We're vertically integrated with sourcing and with our own designers, and having that capability to envision a lifestyle trend and bring it to life in products and things that go together, is something that a lot of the online players do not do. You know, they don't-- They're only tech companies, right, and that I think is good for a lot of things, and you have to compete with them on the tech, but the product line.

Isn't it the product that you bring into your house that matters? And I know that decorating your home is not something that's easy. It's dimensional. It's a lot of pieces and parts and everybody's homes are different. And so I believe so strongly that our success has also been because we've spent so much time on our product line and our sourcing structure and our vendor relationships and our sustainability initiatives, and those things matter to the consumer.

ANDY SERWER: I read that you talked about your background and studying at Penn where you're taking marketing maybe or you studied psychology I know. But you do math you said during the day at your job, and you're doing decor and sociology and what people are thinking. Is that really kind of having that holistic sense so important for you to succeed in your job, do you think?

LAURA ALBER: Well, I do think a strong liberal arts education has got a lot of value, still even though I know that there's been so many jobs open in tech. I find that in this job it is a combination of things, right? You've got to be able to be analytical. You've got to be a good leader and hire great talent, and at the same time write and be able to communicate effectively. And all those things are things that I think you both learn academically, but you learn through experience.

ANDY SERWER: And I assume the decor behind you is your products, right?

LAURA ALBER: Yeah. Mostly I think you see a TV, but yes, of course.

ANDY SERWER: There are some other things.

LAURA ALBER: I'm in my office in San Francisco and I feel very fortunate to have this beautiful space behind me.

ANDY SERWER: Talk about the quarter that you guys just announced the other day. It was actually very well received, shall we say, by the Street and look pretty positive or successful, what's working for you guys?

LAURA ALBER: You know, we outperformed on both the top and the bottom line. We had broad based growth, we ran 30 Comp. We had 360 basis points of operating margin expansion. And as I said it was across all of our banners and, you know, our growth initiatives are accelerating, and things are going very well within each brand. And so when you take it all together, that's why we're outperforming. And we have laid out those initiatives into the future, and see a really clear and optimistic view of where we're going.

And so as a result, we raised guidance on the year again. And we raised our longer term outlook, and pushed up our growth initiatives by a year, and increased our op margin. And we're very optimistic. I got to tell you, there's so much opportunity, Andy, because it's such a fractured market. The macro is favorable for home furnishings. And there's a huge disruption from brick and mortar to online.

So before the pandemic, 80% of customers shopped in retail stores for our industry, 80%. Now, even if the pandemic hadn't happened, that would never have held, right, with the way technology is moving. So we knew that there was going to be this huge market share gain opportunity. And that that's why we needed to invest and stay very focused on omni and digital.

And then the pandemic sped it all up and everyone got really much more comfortable shopping online, because they had to, right. So you don't forget that. When that works, and you feel comfortable doing your shopping on your phone, which is a huge area of growth as mobile, you continue to do it. And so the disruption from brick and mortar to online was expedited. And people like us have really benefited from that, and will continue to in the future.

ANDY SERWER: Yeah, I was going to say, I mean, you've been CEO what, for about ten years now. And isn't that right? About ten?

LAURA ALBER: Well, 2010, so. Yeah.

ANDY SERWER: Yeah, 11. And the first five years, the stock went up nicely. Then after that, you kind of had a bumpy ride. And then the pandemic, when the pandemic started, the stock along with the market went down significantly. And then since then, it's been off to the races.

And I guess the concern, and I guess you answered that. But the concern is that, of course, that when the pandemic is over, this run by your company will be curbed. But you don't see that as being the case, because you think people will still be shopping online.

LAURA ALBER: I don't see that to be the case, Andy. And in fact, previous to the pandemic, we were running double digit comps. So that isn't often remembered. But if you actually go back and look at that quarter before, and what we said. And what was so devastating was, pandemic happened, and we didn't know what to expect. And I thought, God, everything's coming together, and now we're going to have this issue with the pandemic. We didn't know that people would continue to shop as much and shop online.

And so you know, at that point, when the uncertainty was as high as it could have been, we really doubled down on what was important to us, and mostly, our values, and saying, how are we going to behave as a company? What's important to us? And that focus has been in addition to everything else that was going on with our growth drivers and differentiators, that focus on values has been a big accelerant of what's going on today.

So yes, I've said many different ways, I'm very optimistic. And we have a lot ahead of us that we can still do. And frankly, our PE is still low.

ANDY SERWER: There are a couple of potential negatives that have come out of the pandemic economy, if you will. And I want to ask you about both of them. The first is inflation. And people talk a lot about inflation right now. It's probably more talk than actual prices being raised in many instances. But you guys have raised some prices this year. And I'm wondering what you're thinking, Laura, about inflation, if you have a take on what the Fed should do, or what you're thinking about pricing for your company at this point.

LAURA ALBER: Our goal is always to give our customer the best value. And value comes a lot of different ways. It comes in design. It comes in price. It comes in quality. It comes into service, and it comes in sustainability. The sustainability aspect has really been something that has increased in importance with consumers. And they're much more focused on knowing where their product is made, and how it's made.

And that's you know, some of the things we've done are not free, you know, in sustainability. They cost more money to have Greenguard certified furniture. It's not a lot more. But it's enough more. And our customers telling us they want those things.

We have also at the same time that we've increased the quality, we've also brought in more opening price points. So the apartment strategy in Pottery Barn is a perfect example of this. Where we went in and said, oftentimes, our furniture is too big, or it's not the right price that someone wants. And we want to make sure that we're accessible.

And so we went in and we looked at it by category, and added some very sharply priced high quality goods. And those are very successful. It's one of our big growth drivers at Pottery Barn. So it's much more complicated than just to say, where are your prices?

Because at the same time, as we've increased quality, and furniture has grown as a percent of total for us, we also have brought in more opening price points. And the growth of West Elm in and of itself is a lower price point. So for the company, we just grew over 50% this quarter really offers beautiful furniture that's sustainable, great design, and very accessible price point.

ANDY SERWER: Are you seeing supply chain issues though, Laura? Are customers able to get the goods from you when they want them?

LAURA ALBER: You know, we've always had different challenges with supply chain. I just remember the port strike. It seems like there's always something. The great news is, our team is really good at handling tough challenges.

That said, of course, we've been affected by delays, you know, the tragic COVID outbreaks that continue in different parts of the world are key places where we do business. And so what we've done is, we've been really transparent as much as we can explaining to the customer, in some cases, padding our deliveries. And when we know that something has happened, and something's going to be delayed, we let our customers know as soon as we know.

And that seems to be the best way to handle it, right. Most people understand that things are slightly delayed. As long as it's reasonable in your caring, I really think customers understand. Of course, it's not our goal. And we continue to look for ways to bring things in faster from overseas, and also domestically.

And we are very lucky that we also have a domestic upholstery operation that is really successful and productive that's here in the United States. And that cuts down our lead time in general, right, because it's here versus overseas. So that's been a really important part of our strategy as well.

ANDY SERWER: You think your numbers would be even better were it not for some of these challenges?

LAURA ALBER: Yeah, who knows. It's always hard to tease out different variables.

ANDY SERWER: Right. Let me ask you about labor shortages. Because that's the other outcome, more tangible perhaps even from the pandemic that has been vexing employers, getting employees. And I wanted to ask you about that. Is that something that you're facing trying to hire people?

LAURA ALBER: You know, I think we've made a lot of good decisions. When the pandemic struck, we did not furlough our store people, or any of our people. And there was many people whose job was always in person. And it was quite concerning what we were going to do.

And I couldn't promise forever, but we promised two weeks. And then we got on a Zoom call, and we promised two more weeks, and two more weeks. And we kept paying everybody. And the respect we showed them converted to innovation and passion back to us in terms of their ability to shift into work that they could do from home.

So for example, our store people started doing design chat at home, virtual design services. And we had people in the office who helped at our care center. And that kind of innovation, that is a big part of the success in keeping our teams together. And of course, you know, you always have people leave. And we're a talent factory.

So a lot of our great people have gone off to run other companies, and do great things. I always see that sort of as a compliment that we've done our job in getting them ready for a bigger job. But at the same time, we were talking yesterday, we feel like, yes, in some cases, there's the big resignation. But for us, it may be the big migration.

Because we're getting great talent right now, Andy. We're really seeing a lot of people who want to come work for us, and across a wide array of disciplines. And we're thrilled to have them. And so we yesterday celebrated all of our new hires. And we have a great internship program. I think some of the best interns in the world worked for us this year, and we're excited about them.

So there's a lot of things we do to keep this talent pipeline full. And I'm actually really proud of our teams across the company for what they're doing to keep everybody together, connected, and inspired.

ANDY SERWER: Laura, you have what, some 28,000 employees. And I'm just curious what you're thinking is about a return to work policy at this point.

LAURA ALBER: You know, it's been-- God, it's been how long has it been since we shut our stores. And we, at the same time, have a lot of things both in the office and the field that need to be done in person. So we've been very careful throughout.

And now, in terms of the office, we are returning people to work safely, and in different groups based on their job. And it's going well. And we're using the office as a tool for collaboration and inspiration. And we're going to continue to move as we learn what's going on in the public, and keeping everybody safe at the same time.

ANDY SERWER: I want to shift gears a little bit, and ask you about you and your background. Where did your interest in fashion and decor come from growing up?

LAURA ALBER: You know, I think who knows what you're going to end up doing when you're younger, right. I mean, you have a lot of interests, and you're focused on school and friends. And when I graduated, I like so many people had no idea what I wanted to do. But I did have a couple of businesses that I started when I was in college making some funny hats and things.

And so when I finally needed to really get a job, which was right after school, I just started applying for jobs, and was very fortunate to get my first job at the Gap, which was a great experience. And they had a training program. I think I might have been one of the first trainees. And I got to start in retail, and I've loved it.

And then after that, you know, I came to Williams-Sonoma in 1995. And I came in the catalog division for Pottery Barn as a senior buyer. And worked for great people, and fell in love with the company, and the industry. The home industry is so rich with architecture, and history, and design. And I love food. I mean, who doesn't. But I'm particularly obsessed with food.

And so it was just a thrill to work in a company that aligned with so many of my interests, and also with an entrepreneurial culture, a culture that really allows you to make a difference. And so that's one that I've really tried to do the same thing for others, and bring out what makes them tick, and give them an opportunity to run big businesses. And it's been an honor.

ANDY SERWER: Yeah, my understanding is you got in a car just drove west after college to get that job, right.

LAURA ALBER: That is true.

ANDY SERWER: And so rising through the ranks at Williams-Sonoma, and to become the CEO 15 years later. I mean, that's unusual. And being a woman, were there challenges that you faced along the way?

LAURA ALBER: You know, I was lucky that as I said, the culture was entrepreneurial. And when I was pregnant with my first child, I wrote a business plan with some other women for Pottery Barn Kids. And we were passionate about it. We got the work done. And we convinced everyone we should at least be able to try to launch a catalog. And that catalog overperformed tremendously.

And as a result, it got everyone's attention, and you know, it was hard to say no to frankly. And so we continued on that front to build what is now close to a billion business, the kids business with teen, and looking at life stages. And it was a thrill, but it was also something that I'm sure got me noticed by Howard Lester who was running the company.

And he then, just like you do when you're helping people develop their careers, he gave me a lot of challenges that were things I might not have done myself. For example, I wanted to run the brands, but instead, he had me do supply chain. And supply chain is a really different thing to do. And it's one that now, I just love supply chain.

But when I was made President of the company in 2006, that was the incremental responsibility I was given with some very, very strong goals to say, here's what you need to do to get the next job. You have to-- I remember he said, you take the return rate down hundreds basis points. That was very, very clear, really good goal. And so those were some of the great things that he put out in front of me, and that I was able to achieve.

And finally, at some point, I think he decided I was ready. And I'm hoping that I've made everyone who made that decision proud.

ANDY SERWER: And you mentioned mentoring people within the company, probably not only you, but of course, the people around you. How important is that for the success of the business?

LAURA ALBER: I mean, isn't it just nothing's more thrilling to be around talented, smart people. And so I think you know, I love spending time with interns and with great new hires. And we have a culture where it's really rewarding to be that leader who does that. And so it's part of our culture.

And I think people-- some people don't-- they don't want a lot of advice. Other people want more. And everybody's different. And so we don't have it so programmed. We have an optional advisee program. And so people can sign up if they want that.

Because sometimes in your life, you're just too busy to do anything, right. You're just like you got to stay head down. Other times, you can go through areas of more growth. And so we keep it optional. And we have a suite of different developmental things that we offer to our teams.

ANDY SERWER: Great. And final question, Laura, what legacy do you hope to leave at Williams-Sonoma and beyond.

LAURA ALBER: You know, I think it goes back to what I said the mission is, is improving people's lives at home in the communities where we work, and doing business in a good way, and being caring and entrepreneurial for your people. In terms of business goals per se, you know, it's for me, the most important thing is running a great enterprise, versus any single metric. And that's what we'll continue to do, and deliver for our customers.

ANDY SERWER: Laura Alber, Williams-Sonoma CEO. Thank you so much for your time.

LAURA ALBER: Thank you.

ANDY SERWER: You've been watching Influencers. I'm Andy Serwer. We'll see you next time.