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Williams-Sonoma, Inc.

Williams-Sonoma, Inc.

3250 Van Ness Avenue
San Francisco, California 94109
U.S.A.
Telephone: (415) 421-7900
Fax: (415) 616-8359
Web site: http://www.williams-sonomainc.com

Public Company
Incorporated:
1956
Employees: 22,000
Sales: $1.8 billion (2001)
Stock Exchanges: New York
Ticker Symbol: WSM
NAIC: 45411 Electronic Shopping and Mail-Order Houses; 442299 All Other Home Furnishings Stores

Williams-Sonoma, Inc., has become virtually synonymous with home furnishings through its mail-order catalogs and retail stores. In slightly more than 40 years, Williams-Sonoma has grown to a $1.8 billion company, making it a leading U.S. retailer in specialty home furnishings. Retail store sales, through more than 380 stores in the companys four chainsWilliams-Sonoma, Pottery Barn, Pottery Barn Kids, and Hold Everythingaccounted for 57.2 percent of annual sales in fiscal 2001. Catalog sales, through the Williams-Sonoma, Pottery Barn, Pottery Barn Kids, Pottery Barn Bed + Bath, Chambers, and Hold Everything catalogs, which ship more than 233 million catalogs each year, accounted for approximately 42.8 percent of sales. In collaboration with Time-Life Books, Williams-Sonoma also publishes the Williams-Sonoma Kitchen Library Series. Published since 1992, the cookbooks in the series feature a single subject, simple recipes, and lavish photographs, and are a best-selling series in the United States.

Each of Williams-Sonomas divisions is focused on a specialty market. The flagship Williams-Sonoma catalog features a range of more than 300 professional, often exotic, products for the kitchen. The more than 200 Williams-Sonoma retail stores, the largest of the companys retail store chains, feature an expanded 3,000-item line of kitchenware, including cookware, cookbooks, cutlery, dinnerware, and custom-built French stoves. Pottery Barn, the next-largest division, with 136 stores in its retail chain, sells a near-complete line of carpets, lighting, window treatments, furniture, and other home furnishings through its catalogs and retail stores. The company also operates eight Pottery Barn Kids stores and 26 Hold Everything outlets, which offer a unique line of storage and organization products for the home. Williams-Sonomas home furnishings offerings are rounded out by mail-order catalogs Chambers, which offers high-end bed linens and bath products, and Pottery Barn Bed + Bath, offering moderately priced items. The company also operates three e-commerce web sites and gift registries. Founder Charles E. (Chuck) Williams, chairman until 1986, continues to guide the companys merchandise selection as vice-chairman.

Starting in 1956 with a Passion for Cooking

After serving as an Air Force aircraft mechanic in North Africa and India during World War II, Charles Williams moved to Sonoma, California, where he worked as a self-taught carpenter. A passionate cook, Williams made a trip to Paris in the early 1950s aboard the famed Ile de France cruise ship. While in Paris, he discovered a range of cookware and accessories unknown to the rather bland American kitchen of the period. In 1956, tired of his carpentry career, Williams bought and began to renovate a building in Sonoma that included a failed hardware store. Williams proceeded to dispose of the stores traditional hardware supplies and to stock it instead with the professional quality cooking equipment he had discovered overseas.

The store caught on quickly, becoming popular with many professional and serious cooks. Encouraged by friends such as Julia Child and James Beardwho would be instrumental in sparking an interest in fine cooking in the United StatesWilliams moved his store to San Francisco, renaming it Williams-Sonoma in honor of its original location. Throughout the next decade, Williamss store prospered, attracting customers from around the country. Williams continued making trips to Europe, discovering new products to bring back to his store.

By the late 1960s, the nature of houseware sales in the United States had changed. Interest in international cuisine was on the rise, generating interest in professional quality cooking equipment. Led by Macys, department stores were making their kitchenware departments increasingly fashionable. Williams was not impressed by these new departments. It wasnt that much, he told the San Francisco Business Times. Serious cooks continued to flock to the Williams-Sonoma store, and by the early 1970s, Williams, exhausted from shouldering the burden not only of stocking and operating the store, but also from running the business end, began to look for help. One frequent customer and close friend was Edward Marcus of the Nieman-Marcus retail chain. Marcus suggested that Williams either sell his company or expand it himself. Williams decided to expand, and in 1972, Marcus and Williams formed a corporation, Williams-Sonoma, Inc.

Williams continued to handle the purchasing and merchandising, while Marcus brought in a team of executives to guide the companys business end. A second store was opened in Beverly Hills by 1973. In that year, the company brought out its first mail-order catalog. As Williams told Gentry, the catalog was a learning experience. We found that we could sell items by catalog that wouldnt sell in the stores. We could tell a story that couldnt be explained in the store, especially where the item and its use werent intuitively obvious. Unlike in the stores, where customers merely saw the products on the shelf, the catalog, called A Catalog for Cooks, featured photographs of the products in use. The first mailing of the catalog went to 5,000 people. Sales took off, and the catalogs mailing list quickly went nationwide.

The corporation added stores too. By 1977, the Williams-Sonoma chain had grown to five stores. The following year Marcus, who held one-third of the company, died, and a change in management led the company into trouble. With $4.9 million in sales, the company carried a debt of $700,000 and posted a net loss of $173,000. [The new management] proceeded to run it the wrong way, Williams told the San Francisco Business Times. In a years time, the company was in financial difficulty. I decided to sell. If it was going to have these kinds of financial problems, I didnt want it. Id never had those kinds of problems before. Id never borrowed money. For years, I never had credit because I paid cash.

New Ownership for the 1980s

In 1978, Williams sold the company for $100,000 to W. Howard Lester, a former IBM salesman and founder of several computer services firms, and his partner, James McMahan. With the sale came the requirement that Williams remain in charge of selecting merchandise and running the catalog.

Williams-Sonoma turned around quickly under Lester. Within five years, the retail chain grew to 19 stores. Catalog mailings reached 30 million customers by 1983, and catalog sales accounted for more than 75 percent of the companys $35 million in annual revenues. In 1982, the companys catalog sales expanded when it acquired the Gardeners Eden catalog, then posting $100,000 in annual sales. To finance further expansion, Lester took the company public in 1983, with an initial public offering (IPO) of one million shares at $23 per share. Lester retained about 22 percent of the company; Williams, who continued to lead the companys catalog, held about 1.9 percent of the companys stock.

With the money raised in its IPO, the company established a new distribution and warehouse facility in Memphis, Tennessee. Over the next three years, the retail chain grew to 31 stores in 14 states, and the company opened a second retail chain, Hold Everything, which would grow to five stores. The company also sought to expand its catalog business, introducing a catalog featuring table settings and a second catalog featuring more exotic cookware, both of which did poorly. Coupled with the catalog losses, the move to Memphis cut heavily into the companys profits, which were down to $445,000 in 1983 from a net of $1.5 million in 1982. By 1984, with sales reaching nearly $52 million, earnings had sunk to a mere $38,000.

This setback proved short-lived. By 1985, sales climbed to $68 million, earning the company a net of $2.4 million. The company continued to expand, adding 14 Williams-Sonoma stores by the end of the following year. Expansion went beyond Williams-Sonoma. In 1986, the company acquired the struggling Pottery Barn, a chain of 27 retail home furnishings stores, from The Gap for $6 million. Pottery Barn also was added to the companys growing line of catalogs, which by then included Hold Everything and Gardeners Eden. Meanwhile, the retail end was contributing a growing percentage of the companys sales, up to 36 percent by that year. By the end of the 1986 fiscal year, the companys sales climbed past $100 million.

The company continued to grow aggressively, raising the number of Williams-Sonoma stores to 64 in 1988. A joint venture with Tokyo Department Store brought the first Williams-Sonoma storeand the Catalog for Cooks to Japan. The companys sales surged to $136.8 million, and net earnings of $3.4 million, by year-end 1987. To guide this burgeoning empire, Lester brought in former Pillsbury Co. president Kent Larson as Williams-Sonoma president. Under Larson, the company formed a joint venture with Ralph Lauren to open a chain of Polo/Ralph Lauren Home Collection stores. A fifth catalog was added to the Williams-Sonoma ranks in early 1989. This catalog, called Chambers, featured bed and both products. By then, retail sales accounted for 53 percent of Williams-Sonomas sales.

Company Perspectives:

All brands aspire to make a profound difference in the cultural landscape, though only a few ever succeed in doing so. The family of brands under Williams-Sonoma, Inc. can certainly be counted among them. At any given moment, millions of people are enjoying a home made better by our products. Though each one of our brands brings innovative, quality products to our customers, the whole is greater than the sum of its parts. Together, these brands fulfill the Companys overall goal of furnishing every corner of our customers homes.

Between 1986 and 1989, the company added an average of 12 stores per year, bringing the total number of Williams-Sonoma, Pottery Barn, and Hold Everything retail units to 102 in the United States, with another unit in Japan. Not all of Williams-Sonomas ventures were successful, however. After one year, the company and Ralph Lauren agreed to dissolve their joint venture partnership. An attempt to establish a Gardeners Eden retail chain also failed, in part because of the inherently seasonal nature of that market. Nevertheless, the companys revenues, led by its growing Williams-Sonoma retail chain, continued to make steady gains, rising from $174 million in 1988 to $287 million in 1990.

Williams-Sonomas rapid expansion, and the economys turn into the recession of the early 1990s, badly hurt earnings. The companys $11.2 million net profit in 1990 fell to $1.6 million and $1.8 million in the next two years, while revenues increased slowly, to $312 million in 1991 and $344 million in 1992.

Recovering After the 1990s Recession

Williams-Sonomas troubles proved short-lived, however. Management was restructured, the company introduced new merchandising strategies and catalog designs, and catalog production was brought in-house. The company also slowed expansion of its retail chains, focusing instead on improving store design and on increasing store square footage. In 1992, the company joined with Time-Life Books to create the first in a series of Williams-Sonoma Kitchen Library cookbooks. Sold initially only through Williams-Sonoma retail stores, the first four books offered simple recipes, clear instructions, and tips on cooking techniques for pasta, pies and tarts, grilling, and hors doeuvres. The books sold well, adding to Williams-Sonomas image as a resource for the serious and even not-so-serious cook.

By year-end 1993, the company had posted a strong turnaround. Revenues rose to $410 million, and earnings again climbed past $11 million. A chief architect of the turnaround was Executive Vice-President Gary Friedman. Friedman introduced major changes throughout the companys retail operations. The Catalog for Cooks was redesigned from digest to full size, which, as Lester explained to the San Francisco Chronicle, gives you a lot more punch. You can show bigger recipes and more dramatic photographs on major ideas. The new design spurred an increase of 40 percent on the catalogs sales. Next came a reorganization of the Williams-Sonoma store chain, including grouping in-store promotions around monthly themesso that, for example, if the theme for the month was pasta, the largest share of in-store displays featured pasta-related merchandise. Within several months, the reorganization helped boost per-store sales by more than 20 percent. For the Pottery Barn division, which had lost more than $5 million in 1992, Friedman introduced even more dramatic changes, including replacing more than 80 percent of the retail stores merchandise, while increasing square footage in new and future stores. The newly designed Pottery Barn reflected Friedmans own frustration when trying to furnish his home, as he told the Austin American-Statesman. It was a confusing proposition, Friedman said. I needed a place where I could find everything I needed. To the Dallas Morning News, Friedman added: I wanted a store that would sell me window treatments, lamps, sofas and chairs. The Pottery Barn redesign proved immediately successful and helped spark the divisions growth from combined store and catalog sales of $103 million in 1992 to $165 million in 1993.

With total catalog sales rising to $200 million, Williams-Sonoma rolled out new formats for its Williams-Sonoma flagship chain and its Pottery Barn chain. The expanded Williams-Sonoma stores featured professional demonstration kitchens, larger cookbook libraries, tasting bars, and a food hall featuring high-quality foods and the companys own line of private-label foods. The new format for Pottery Barn stores included an average 10,000 square feetabout triple the size of older Pottery Barn storesfeaturing a design studio, lighting gallery, and interior finishings shop. The company also started construction on a 300,000-square-foot addition to its 750,000-square-foot Memphis distribution and warehouse facility. The company also entered an agreement with Time-Warner and Spiegel to introduce a 24-hour television shopping network.

With the implementation of these changes, Williams-Sonoma was once again on the fast track. Sales in 1994 reached $528.5 million, for net earnings of $19.6 million. The following year, with the number of Williams-Sonoma, Hold Everything, and Pottery Barn stores topping 200, revenues jumped again, to $644.7 million. That year, the James Beard Foundation awarded Williams with a Lifetime Achievement Award.

Key Dates:

1956:
Charles Williams opens a store in Sonoma, California.
1972:
Williams-Sonoma, Inc. is formed as a corporation.
1973:
A second store is opened in Beverly Hills, California; the company launches its first mail-order catalog.
1978:
The company is sold to W. Howard Lester and James McMahan.
1982:
The Gardeners Eden catalog is acquired.
1983:
Williams-Sonoma goes public.
1985:
The firm establishes a second retail chain, Hold Everything.
1986:
The Pottery Barn chain of stores is purchased from The Gap.
1989:
Chambers, a new catalog, is mailed to customers.
1992:
The company joins with Time-Life Books to create a series of Williams-Sonoma Kitchen Library cookbooks.
1994:
The Williams-Sonoma and Pottery Barn stores undergo a series of changes, including a new store format.
1998:
The company is listed on the NYSE.
1999:
Williams-Sonomas e-commerce site is launched.
2000:
Pottery Barn begins selling merchandise online; first Pottery Barn Kids store is established; Williams-Sonoma TASTE magazine begins circulation.

E-Commerce and Brand Strengthening: Late 1990s and Beyond

Progress continued into the latter half of the 1990s. In 1998, the firm listed on the New York Stock Exchange and sales reached $1.1 billion. Management began to focus on a multichannel marketing strategy that included its stores and catalogs, as well as a new channel, the Internet. As such, the company began an extensive program aimed at capturing additional sales via the web. CEO Lester commented in a 1999 HFN The Weekly Newspaper for the Home Furnishing Network article, This is an area of real development for us. We havent been talking about it that much, but were really focused in that direction.

Sure enough, the firm launched the Williams-Sonoma online bridal registry in June 1999, allowing customers to shop online for registry items. Later that same year, the Williams-Sonoma e-commerce web site also became operational. The Gardeners Eden catalog was sold in 1999, as part of the firms new strategy, which focused on its remaining brands and Internet business. The Williams-Sonoma catalog also was revamped to include more information on products as well as special features and tips related to the products. By the end of the decade, more than 311 stores were in operation across the United States.

Williams-Sonoma entered the new millennium determined to remain a leader in the specialty retail and home furnishings market. It upgraded the Williams-Sonoma web site and launched an e-commerce site for Pottery Barn. Focusing on expanding that brand, it began sending customers the Pottery Barn Bed + Bath catalog, which featured moderately priced bed and bath items. The company also opened eight Pottery Barn Kids stores after successfully introducing its catalog in the previous year.

The Williams-Sonoma TASTE magazine also came to market in 2000, adding yet another publication to the companys arsenal. The new lifestyle magazine focused on food, drink, travel, and entertaining. Plans also were set in motion to develop a new concept entitled Elm Street. The new brand was scheduled to sell lower-end kitchen and housewares items and was designed to complement the Williams-Sonoma and Pottery Barn brandsit was expected to launch in March 2002.

Despite the companys aggressive growth approach and its record revenues of $1.85 billion, a 13.5 percent drop in net income was posted in fiscal 2001. Higher costs related to its catalog and Internet business along with a slowing economy were named as culprits in the decline. In April 2001, Dale Hilpert was named Williams-Sonomas new CEO. Management looked to his expertise in company infrastructure and growth to aid in the firms expansion plans.

While the retail sector continued to experience a decline in 2001, Williams-Sonoma pledged to continue posting revenue gains. Its strategic efforts included a focus on its brands, customer satisfaction, channel synergy, vertical integration, and operating efficiency. The company, which emerged successful from the earnings decline in the early 1990s, appeared well positioned to tackle yet another downward trend in the retail industry.

Principal Divisions

Williams-Sonoma; Hold Everything; Pottery Barn; Pottery Barn Kids; Pottery Barn Bed + Bath; Chambers.

Principal Competitors

Bed Bath & Beyond Inc.; Euromarket Designs Inc.; Pier 1 Imports Inc.

Further Reading

Barnett, Frank, and Sharon Barnett, Williams-Sonomas Multi-Channel Marketing Leads to Niche Dominance, Direct Marketing, March 1999, p. 41.

Breyer, R. Michelle, Pottery Barn Bringing New Format to City, Austin American-Statesman, August 19, 1995, p. Dl.

Fisher, Lawrence M., A Store for the Gourmet Cook, New York Times, July 30, 1986, p. Dl.

Garry, Michael, Upscale Image Reaps $35 Mil for Williams-Sonoma, Merchandising, September 1984, p. 17.

Halkias, Maria, Mending Cracks at Pottery Barn, Dallas Morning News, July 6, 1995, p. ID.

Jenkins, Caroline, and Susan Posnock, Magazine Taste Test, Folio: The Magazine for Magazine Management, January 2001, p. 61.

Joss, John, The Kitchen Gods Life, Gentry, January/February 1994, p. 61.

Kehoe, Ann-Margaret, Team Spirit: Unity of Vision Gives Power Retailer Its Edge, HFN The Weekly Newspaper for the Home Furnishing Network, April 28, 1997, p. 1 (3).

Marler, Serena, Williams-Sonoma Eyes Web for Growth, HFN The Weekly Newspaper for the Home Furnishing Network, June 7, 1999, p. 5.

Meeks, Fleming, Williams-Sonoma, Forbes, February 18, 1991, p. 60.

Nicksin, Carole, Lester Taps Hilpert as CEO of Williams-Sonoma, HFN The Weekly Newspaper for the Home Furnishing Network, February 19, 2001, p. 1.

Pascale, Moira, W-S Cooks Up New Look, Catalog Age, October 1999, p. 7.

Saeks, Diane Dorrans, Williams-Sonoma Net Off Despite Launches in 2000, HFN The Weekly Newspaper for the Home Furnishing Network, May 28, 2001, p. 41.

Shaw, Jan, Williams Learned to Delegate, But He Hasnt Given Up Working, San Francisco Business Times, December 19, 1988, p. 12.

, Williams-Sonoma Cooks Up Growth, San Francisco Business Times, November 28, 1988, p. 1.

Springer, Bobbi, Cooking on Four Burners, San Francisco Business Magazine, July 1989, p. 44.

Vincenti, Lisa, Williams-Sonoma to Broaden Reach of Home Furnishings, HFN The Weekly Newspaper for the Home Furnishing Network, October 25, 1999, p. 4.

Williams-Sonoma Sets Catalog Redeployment, HFN The Weekly Newspaper for the Home Furnishing Network, January 19, 1998, p. 4.

Yawn, David, Williams Sonoma Expanding Distribution, Memphis Business Journal, April 29, 1996, p. 1.

M.L. Cohen

update: Christina M. Stansell

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Williams-Sonoma, Inc.

Williams-Sonoma, Inc.

100 North Point Street
San Francisco, California 94133
U.S.A.
(415) 421-7900
Fax: (415) 983-9887

Public Company
Incorporated:
1956
Employees: 6,900
Sales: $644.7 million (1995)
Stock Exchanges: NASDAQ
SICs: 5961 Mail Order Houses; 5719 Miscellaneous Homefurnishings Stores

Williams-Sonoma, Inc., has become virtually synonymous with home furnishings through its mail-order catalogs and retail stores. In less than forty years, Williams-Sonoma has grown to a $664 million company, making it the U.S. leader in retail specialty home furnishings. Retail store sales, through more than 200 stores in the companys three chainsWilliams-Sonoma, Pottery Barn, and Hold Everythingaccount for 58 percent of annual sales. Catalog salesthrough the Williams-Sonoma, Pottery Barn, Gardeners Eden, Chambers, and Hold Everything catalogs, which ship more than 125 million catalogs each yearaccount for approximately 41 percent of sales. In collaboration with Time-Life, Williams-Sonoma also publishes the Williams-Sonoma Kitchen Library Series. Each of the 24 (and counting) cookbooks in the series features a single subject, simple recipes, and lavish photographs. More than five million copies of the cookbooks have been sold, primarily through the companys retail stores, since the inception of the series in 1992. Advertising is performed almost exclusively by the companys catalogs.

Each of Williams-Sonomas divisions is focused on a specialty market. The flagship Williams-Sonoma catalog feature a range of 300 professional, often exotic products for the kitchen. The more than 120 Williams-Sonoma retail stores, the largest of the companys retail store chains, feature an expanded 3,000-item line of kitchenware, including cookware, cookbooks, cutlery, dinnerware, and custom-built French stoves. Pottery Barn, the next-largest division, with 57 stores in its retail chain, sells a near-complete line of carpets, lighting, window treatments, furniture, and other home furnishings through its catalogs and retail stores. Hold Everything, with 35 retail stores in 1995 and its own mail-order catalog, offers a unique line of storage and organization products for the home. Williams-Sonomas home furnishings offerings are rounded out by mail-order catalogs Chambers, which offers bed and bath products, and Gardeners Eden, which specializes in gardening equipment and accessories. The company has been led by chairman and CEO W. Howard Lester since 1978. Founder Charles E. (Chuck) Williams, chairman until 1986, continues to guide the companys merchandise selection as vice-chairman.

Start with a Passion for Cooking

After serving as an Air Force aircraft mechanic in North Africa and India during World War II, Charles Williams moved to Sonoma, California, where he worked as a self-taught carpenter. A passionate cook, Williams made a trip to Paris in the early 1950s aboard the famed He de France cruise ship. While in Paris, he discovered a range of cookware and accessories unknown to the rather bland American kitchen of the period. In 1956, tired of his carpentry career, Williams bought and began to renovate a building in Sonoma that included a failed hardware store. Williams proceeded to dispose of the stores traditional hardware supplies and to stock it instead with the professional quality cooking equipment he had discovered overseas.

The store caught on quickly, becoming popular with many professional and serious cooks. Encouraged by friends such as Julia Child and James Beardwho would be instrumental in sparking an interest in fine cooking in the United StatesWilliams moved his store to San Francisco, renaming it Williams-Sonoma in honor of its original location. Throughout the next decade, Williamss store prospered, attracting customers from around the country. Williams continued making trips to Europe, discovering new products to bring back to his store.

By the late 1960s, the nature of houseware sales in the United States had changed. Interest in international cuisine was on the rise, generating interest in professional quality cooking equipment. Led by Macys, department stores were making their kitchen ware departments increasingly fashionable. Williams was not impressed by these new departments. It wasnt that much, he told the San Francisco Business Times. Serious cooks continued to flock to the Williams-Sonoma store, and by the early 1970s, Williams, exhausted from shouldering the burden not only of stocking and operating the store, but also from running the business end, began to look for help. One frequent customer and close friend was Edward Marcus of the Nieman-Marcus retail chain. Marcus suggested that Williams either sell his company, or expand it himself. Williams decided to expand, and in 1972, Marcus and Williams formed a corporation, Williams-Sonoma, Inc.

Williams continued to handle the purchasing and merchandising, while Marcus brought in a team of executives to guide the companys business end. A second store was opened in Beverly Hills by 1973. In that year, the company brought out its first mail-order catalog. As Williams told Gentry, the catalog was a learning experience. We found that we could sell items by catalog that wouldnt sell in the stores. We could tell a story that couldnt be explained in the store, especially where the item and its use werent intuitively obvious. Unlike in the stores, where customers merely saw the products on the shelf, the catalog, called A Catalog for Cooks, featured photographs of the products in use. The first mailing of the catalog went to 5,000 people. Sales took off, and the catalogs mailing list quickly went nationwide.

The corporation added stores, too. By 1977 the Williams-Sonoma chain had grown to five stores. The following year Marcus, who held one-third of the company, died, and a change in management led the company into trouble. With $4.9 million in sales, the company carried a debt of $700,000 and posted a net loss of $173,000. [The new management] proceeded to run it the wrong way, Williams told the San Francisco Business Times, In a years time, the company was in financial difficulty. I decided to sell. If it was going to have these kinds of financial problems, I didnt want it. Id never had those kinds of problems before. Id never borrowed money. For years, I never had credit because I paid cash.

New Ownership for the 1980s

In 1978 Williams sold the company for $100,000 to W. Howard Lester, a former IBM salesman and founder of several computer services firms, and his partner, James McMahan. With the sale came the requirement that Williams remain in charge of selecting merchandise and running the catalog.

Williams-Sonoma turned around quickly under Lester. Within five years, the retail chain grew to 19 stores. Catalog mailings reached 30 million customers by 1983, and catalog sales accounted for more than 75 percent of the companys $35 million in annual revenues. In 1982 the companys catalog sales expanded when it acquired the Gardeners Eden catalog, then posting $100,000 in annual sales. In order to finance further expansion, Lester took the company public in 1983, with an initial public offering of one million shares at $23 per share. Lester retained about 22 percent of the company; Williams, who continued to lead the companys catalog, held about 1.9 percent of the companys stock.

With the money raised in its IPO, the company established a new distribution and warehouse facility in Memphis, Tennessee. Over the next three years, the retail chain grew to 31 stores in 14 states, and the company opened a second retail chain, Hold Everything, which would grow to five stores. The company also sought to expand its catalog business, introducing a catalog featuring table settings and a second catalog featuring more exotic cookware, both of which did poorly. Coupled with the catalog losses, the move to Memphis cut heavily into the companys profits, which were down to $445,000 in 1983 from a net of $1.5 million in 1982. By 1984, with sales reaching nearly $52 million, earnings had sunk to a mere $38,000.

This setback proved short-lived. By 1985, sales climbed to $68 million, earning the company a net of $2.4 million. The company continued to expand, adding 14 Williams-Sonoma stores by the end of the following year. Expansion went beyond Williams-Sonoma. In 1986 the company acquired the struggling Pottery Barn, a chain of 27 retail home furnishings stores, from The Gap for $6 million. Pottery Barn was also added to the companys growing line of catalogs, which by then included Hold Everything and Gardeners Eden. Meanwhile, the retail end was contributing a growing percentage of the companys sales, up to 36 percent by that year. By the end of the 1986 fiscal year, the companys sales climbed past $100 million.

The company continued to grow aggressively, raising the number of Williams-Sonoma stores to 64 in 1988. A joint venture with Tokyo Department Store brought the first Williams-Sonoma storeand the Catalog for Cooksto Japan. The companys sales surged to $136.8 million, and net earnings of $3.4 million, by year-end 1987. To guide this burgeoning empire, Lester brought in former Pillsbury Co. president Kent Larson as Williams-Sonoma president. Under Larson, the company formed a joint venture with Ralph Lauren to open a chain of Polo/Ralph Lauren Home Collection stores. A fifth catalog was added to the Williams-Sonoma ranks in early 1989. This catalog, called Chambers, featured bed and both products. By then, retail sales accounted for 53 percent of Williams-Sonomas sales.

Between 1986 and 1989, the company added an average of 12 stores per year, bringing the total number of Williams-Sonoma, Pottery Barn, and Hold Everything retail units to 102 in the United States, with another unit in Japan. Not all of Williams-Sonomas ventures were successful, however. After one year, the company and Ralph Lauren agreed to dissolve their joint venture partnership. An attempt to establish a Gardeners Eden retail chain also failed, in part because of the inherently seasonal nature of that market. Nevertheless, the companys revenues, led by its growing Williams-Sonoma retail chain, continued to make steady gains, rising from $174 million in 1988 to $287 million in 1990.

Williams-Sonomas rapid expansion, and the economys turn into the recession of the early 1990s, badly hurt earnings. The companys $11.2 million net profit in 1990 fell to $1.6 million and $1.8 million in the next two years, while revenues increased slowly, to $312 million in 1991 and $344 million in 1992.

Recovering after the 1990s Recession

Yet Williams-Sonomas troubles proved short-lived. Management was restructured, the company introduced new merchandising strategies and catalog designs, and catalog production was brought in-house. The company also slowed expansion of its retail chains, focusing instead on improving store design and on increasing store square footage. In 1992 the company joined with Time-Life Books to create the first in a series of Williams-Sonoma Kitchen Library cookbooks. Sold initially only through Williams-Sonoma retail stores, the first four books offered simple recipes, clear instructions, and tips on cooking techniques for pasta, pies and tarts, grilling, and hors doeuvres. The books sold well, adding to Williams-Sonomas image as a resource for the serious and even not-so-serious cook.

By year-end 1993, the company had posted a strong turnaround. Revenues rose to $410 million, and earnings again climbed past $11 million. A chief architect of the turnaround was executive vice-president Gary Friedman. Friedman introduced major changes throughout the companys retail operations. The Catalog for Cooks was redesigned from digest to full size which, as Lester explained to the San Francisco Chronicle, gives you a lot more punch. You can show bigger recipes and more dramatic photographs on major ideas. The new design spurred an increase of 40 percent on the catalogs sales. Next came a reorganization of the Williams-Sonoma store chain, including grouping in-store promotions around monthly themesso that, for example, if the theme for the month was pasta, the largest share of in-store displays featured pasta-related merchandise. Within several months, the reorganization helped boost per-store sales by over 20 percent. For the Pottery Barn division, which had lost more than $5 million in 1992, Friedman introduced even more dramatic changes, including replacing more than 80 percent of the retail stores merchandise, while increasing square-footage in new and future stores. The newly designed Pottery Barn reflected Friedmans own frustration when trying to furnish his home, as he told the Austin American-Statesman. It was a confusing proposition, Friedman said. I needed a place where I could find everything I needed. To the Dallas Morning News, Friedman added: I wanted a store that would sell me window treatments, lamps, sofas and chairs. The Pottery Barn redesign proved immediately successful, and helped spark the divisions growth from combined store and catalog sales of $103 million in 1992 to $165 million in 1993.

With total catalog sales rising to $200 million, Williams-Sonoma rolled out new formats for its Williams-Sonoma flagship chain and its Pottery Barn chain. The expanded Williams-Sonoma stores featured professional demonstration kitchens, larger cookbook libraries, tasting bars, and a food hall featuring high-quality foods and the companys own line of private-label foods. The new format for Pottery Barn stores included an average 10,000 square feetabout triple the size of older Pottery Barn storesfeaturing a design studio, lighting gallery, and interior finishings shop. The company also started construction on a 300,000 square-foot addition to its 750,000 square-foot Memphis distribution and warehouse facility. The company also entered an agreement with Time-Warner and Spiegel to introduce a 24-hour television shopping network.

With the implementation of these latest changes, Williams-Sonoma was once again on the fast tract. Sales in 1994 reached $528.5 million, for net earnings of $19.6 million. The following year, with the number of Williams-Sonoma, Hold Everything, and Pottery Barn stores topping 200, revenues jumped again, to $644.7 million. Industry analysts began to look to the still relatively tiny Hold Everything store chain to spur even higher growth for the company. Williams-Sonomas predictions in 1995 called for the company to reach $1 billion in sales by the turn of the century. If the company continues its success of the mid-1990s, Williams-Sonoma should easily reach that goal, and beyond.

Principal Divisions

Williams-Sonoma; Hold Everything; Gardeners Eden; Pottery Barn; Chambers.

Further Reading

Breyer, R. Michelle, Pottery Barn Bringing New Format to City, Austin American-Statesman, August 19, 1995, p. D1.

Fisher, Lawrence M., A Store for the Gourmet Cook, New York Times, July 30, 1986, p. D1.

Garry, Michael, Upscale Image Reaps $35 Mil for Williams-Sonoma, Merchandising, September 1984, p. 17.

Halkias, Maria, Mending Cracks at Pottery Barn, Dallas Morning News, July 6, 1995, p. 1D.

Joss, John, The Kitchen Gods Life, Gentry, January/February 1994, p. 61.

Meeks, Fleming, Williams-Sonoma, Forbes, February 18, 1991, p. 60.

Shaw, Jan, Williams Learned to Delegate, but He Hasnt Given up Working, San Francisco Business Times, December 19, 1988, p. 12.

, Williams-Sonoma Cooks Up Growth, San Francisco Business Times, November 28, 1988, p. 1.

Springer, Bobbi, Cooking on Four Burners, San Francisco Business Magazine, July 1989, p. 44.

M. L. Cohen

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Williams-Sonoma, Inc.

Williams-Sonoma, Inc.

founded: 1956



Contact Information:

headquarters: 3250 van ness ave.
san francisco, ca 94109 phone: (415)421-7900 fax: (415)616-8359 url: http://www.williams-sonomainc.com

OVERVIEW

With 2002 sales of more than $2 billion, Williams-Sonoma, Inc. is one of the top retailers of home products, including cookware, through the Williams-Sonoma chain, and contemporary tableware and home furnishings via their Pottery Barn chain. The company has two segments, made up of the retail segment and its four chains, including Williams-Sonoma; Pottery Barn; Pottery Barn Kids, selling children's furnishings; and Hold Everything, selling storage items; and the direct-to customer segment with its six direct-mail catalogs, including Williams-Sonoma; Pottery Barn; Pottery Barn Kids; Pottery Barn Bed+ Bath; Hold Everything; and Chambers, a bed and bath product seller; along with four Web sites, which includes an online bridal registry. Williams-Sonoma merchandise may be found at its 415 stores located in 41 states, Washington DC, and Toronto, Canada. Of these 415 stores, Williams-Sonoma is the largest, with 214 retail outlets, 145 Pottery Barn stores, 27 Pottery Barn Kids, 15 Hold Everything, and 14 outlet stores.



COMPANY'S FINANCES

The retail segment of the company accounted for 59.3 percent of net revenues in 2001, while the direct-to-customer segment accounted for the remaining 40.7 percent of revenue. Sales for the fiscal year ending February 3, 2002 were nearly $2.1 billion—a 14.1 percent increase from the previous year. 2002 net income stood at $75.1 million, up 32.2 percent from 2001.

Williams-Sonoma has shown a consistent increase in profits over the past five years. The company's stock ranged from a low of $21.73 to a high of $46.00 over a 52-week period. Williams-Sonoma's price-earnings ratio was 76.87.



ANALYSTS' OPINIONS

As a leading home products retailer with a growing business, Williams-Sonoma will tell any potential investor that it is a solid investment. Several analysts also agree the retail home products industry is a growing one and in which Williams-Sonoma is a strong leader. In a 2002 report, U.S. Bancorp Piper Jaffray upgraded Williams-Sonoma stock to Strong Buy, based on stronger than expected sales and the belief that the company is in the middle of a beneficial operational turnaround which would allow it to outperform others in the retail market. A 2002 Lehman Brothers report concurred, noting that Williams-Sonoma's cost cutting measures, strong sales, increased store expansion, and extremely positive customer response to new Pottery Barn merchandise in particular has made the company's stock a very attractive buy. Robertson Stephens noted that with a proven growth track record, the company that began with a single concept begun in 1956 has now expanded to include six distinct brands that enjoy strong brand recognition that holds meaningful potential for continued long-term growth.



HISTORY

The first Williams-Sonoma store opened, aptly enough, in Sonoma, California in 1956 by founder Charles E. Williams, currently vice chairman and one of the company's directors. The store's first product offerings were a small variety of cookware imported from France. Williams then moved the store to its current headquarters location, San Francisco, California. That year, the store began its first in-store bridal registry service.

Williams-Sonoma's direct-to-customer business began with the introduction of the company's first catalog in 1971, called A Catalog For Cooks, marketing some of the company's products. The company was incorporated the next year. In 1973, the second Williams-Sonoma store opened in Beverly Hills, California. The store began expanding throughout the Golden state, with a third store opening in Palo Alto, and a fourth in Costa Mesa. The company's first distribution center was opened in 1977, in Emeryville, California.

Williams then sold his fledgling retail chain in 1978, to Howard Lester and Jay McMahan. Currently, Chairman Lester owns almost 9 percent of the company, while McMahan has a 10 percent stake. The company also opened its first out-of-state store in Dallas, Texas the year of its sale. Another effort to expand its direct-to-customer reach came with the acquisition of the Gardeners Eden catalog, which was eventually sold in 1999.

The company went public in 1983 as Williams-Sonoma, Inc., trading on the NASDAQ under the symbol WSGC. That year, the company also began distribution of its Hold Everything catalog, offering storage solution products. To sustain its growing operations, the company built a 450,000 sq. ft. distribution center in Memphis, Tennessee, which opened in 1984. The next year, the company's first Hold Everything store was launched in Corte Madera, California, but the company's acquisition of the 21 Pottery Barn chain of stores in 1986 was what really signaled that Williams-Sonoma intended to become a retail force to be reckoned with. The Pottery Barn chain sold retail and direct-to-customer merchandise, including casual home furnishings, flatware, and table accessories from around the world. Ever expanding its brand, the company issued a Williams-Sonoma cookbook in 1986, as well.

Following their proven business plan of establishing retail and direct channels, the company began mailing out the first Pottery Barn catalogs in 1987. Two years later, the company issued its Chambers catalogs, offering a variety of high quality linens, towels, robes, soaps, and accessories for the bed and bath. With all the new business, the company began to outgrow its Memphis distribution center, and finished expansion of the center in 1991, extending it 307,000 sq. ft. At the same time, the company dove into technology with its launch of a nationally-linked, computerized bridal registry hitting all Williams-Sonoma stores. Building on its publishing presence, the first of the Williams-Sonoma Kitchen Library cookbooks hit the bookshelves in 1992, the same year innovative founder Chuck Williams received the first annual Retailer of the Year award at the San Francisco Gourmet Products Show.

By 1993, Williams-Sonoma stores numbered more than 200, nearly half its current total. The company proceeded to launch new store formats, Williams-Sonoma Grande Cuisine, which featured upscale cookware, and Pottery Barn Design Studio in 1994. Williams, who was then named to the Who's Who of Food and Beverage by the James Beard Foundation, issued his Simple American Cooking and Gifts from the Kitchen, books. The following year, Pottery Barn launched its gift registry and Williams was lauded again, this time received the Lifetime Achievement Award by the Beard Foundation.

As the company celebrated its fortieth anniversary, the new Customer Care Center opened in Summerlin, Nevada, in 1996. The Williams-Sonoma cookbook became the best-selling cookbook series of the 1990s, when its ten millionth copy was printed that year. Building on the successful venture, Williams published another book in 1997 about the history of food in the United States entitled, Celebrating the Pleasures of Cooking.

In 1998 the company reached $1 billion in sales and Williams-Sonoma, Inc. was listed on the New York Stock Exchange (NYSE) under the symbol WSM, which it stands today. The corporate Web site was also launched that year and a second Customer Care Center was opened in Oklahoma City, OK. The company launched both its Williams-Sonoma Internet wedding and gift registry Web site, wsweddings.com, and its Williams-Sonoma e-commerce site, williams-sonoma.com, in 1999. Additionally, Williams-Sonoma began its Pottery Barn Kids catalog, offering stylish, quality children's furnishings. The next year, the first of the Pottery Barn Kids stores opened nationwide followed a year later by its own Web site. In 2000, the company introduced its Pottery barn Web site, potterybarn.com, and launched Pottery Barn Bed+Bath, a catalog offering bed and bath goods. The company's TASTE magazine was also published. 2001 brought the company's Pottery Barn online gift and bridal registry along with a Pottery Barn Kids online gift registry. The company also expanded internationally with five new retail outlets opening in Toronto, Canada, including two Williams-Sonoma, two Pottery Barn, and one Pottery Barn Kids.




STRATEGY

The overall corporate vision consists of enhancing the quality of life at home. As part of its 2002 growth strategy, Williams-Sonoma plans expand businesses that have done well or exceed expectations, including the Pottery Barn Kids and the company's direct-to-customer segment. The company will open 66 new stores throughout the year, including 25 new Pottery Barn Kids, adding to its existing 27 PBK stores; 23 Williams-Sonomas, 15 Pottery Barns, one Hold Everything and two clearance stores. The company will also close 16 underperforming locations. The new stores include the three additional stores in Toronto, Canada, adding to its existing five Canadian locations. Toward goals in the direct-to-customer category, Williams-Sonoma plans to increase catalog circulation by 10 percent, mailing out 270 million catalogs. Other plans include a private label credit card launch in May 2002 and expanding their seasonal gift assortment.

Williams-Sonoma will further efforts to streamline supply chain operations and lower expenses begun in 2001, with inventories down 10 percent from the previous year. The company plans to reduce merchandise costs by increasing purchasing volumes and pursuing possible new supply channels. Also, through increased sourcing quality, the company hopes to reduce customer returns.

FAST FACTS: About Williams-Sonoma, Inc.


Ownership: Williams-Sonoma, Inc. is a publicly owned company traded on the New York Stock Exchange.

Ticker Symbol: WSM

Officers: W. Howard Lester, 66, Chmn., 2001 base salary $899,787; Dale W. Hilpert, CEO, 2001 base salary $754,038; Charles E. Williams, Founder and VChmn., 86; Laura J. Alber, Pres. Pottery Barn Brands, 33, 2001 base salary $407,700; James E. Boike, EVP and COO, 55, 2001 base salary $544,462; Patrick J. Connolly, EVP and CMO, 55, 2001 base salary $506,065; Patrick Cowell, Pres., Williams-Sonoma Brand, 52; Sharon L. McCollam, SVP and CFO, 39

Employees: 27,000

Principal Subsidiary Companies: Williams-Sonoma has subsidiaries including Pottery Barn, Pottery Barn Kids, and Hold Everything.

Chief Competitors: Williams-Sonoma competes with other companies in the cookware and housewares industry, including Bed Bath & Beyond, Euromarket Designs, and Pier 1 Imports.




INFLUENCES

With a history of building distinct brands, Williams-Sonoma's success in that area has led them to aggressively pursue new retail sectors and create new brands to reflect new times and new customers. Building on the success of Pottery Barn, the company built 27 Pottery Barn Kids stores. The stores outperformed expectations, and as a result, will be one of the main areas of new growth for the company, which plans on opening another 25 in one year alone. While Williams-Sonoma and Pottery Barn are relatively mature brands, Pottery Barn Kids is exactly what the company foresees will keep its name fresh and attractive to new consumers. The creation of the West Elm catalog, the company's answer to more affordable home furniture, is another way for the company to build on the success of Pottery Barn, while forging out another niche—a lower-priced, alternative Pottery Barn. Enjoying sales success in late 2001 and 2002 while other retailers were struggling, growth in these areas will most likely continue in these areas.




CURRENT TRENDS

Along with many old-school retail chains, one trend that Williams-Sonoma is following is that of e-commerce. Launching its first e-commerce segment in 1999, the company took many of its key brands online—not an easy task for a retailer with such diverse products and segmented corporate structure. Challenges arose due to the lack of communication between the retail side of the company and the catalog division. The two had different shipping methods from the warehouse and had unique compensation systems. The company soon established a cohesive online strategy, however, coupling its retail houses, direct marketing and online selling along with its wide range of brands from Pottery Barn, Pottery Barn Kids, to Williams-Sonoma. The trend has proved successful, with direct-to-customer sales, which include Internet and catalog revenue, increasing 15.4 percent in the second quarter of 2001. With several cutting-edge Web sites, the company, however, does not plan to focus on enhanced technology to bring them future success, preferring, instead the more tried and true strategy of improving customer service.

CHRONOLOGY: Key Dates for Williams-Sonoma, Inc.


1956:

Chuck Williams founds Williams-Sonoma in Sonoma, California

1958:

Store moves to San Francisco; in-store bridal registry launched

1971:

First catalog is mailed

1972:

Williams-Sonoma incorporates

1978:

Williams-Sonoma is bought by Howard Lester and Jay McMahan

1983:

Williams-Sonoma goes public on the NASDAQ

1985:

First Hold Everything store is opened

1986:

Williams-Sonoma acquires Pottery Barn, with stores

1987:

Launch of Pottery Barn catalog

1995:

Pottery Barn gift registry launched

1998:

Williams-Sonoma listed on the New York Stock Exchange under new symbol WSM; corporate Web site is launched

1999:

Williams-Sonoma.com is launched; Williams-Sonoma online bridal registry is launched; Pottery Barn Kids catalog introduced

2000:

Pottery Barn Bed+Bath catalog introduced; PotterBarn.com launched; Pottery Barn Kids stores open

2001:

Opens first Canadian stores in Toronto; Pottery Barn online gift and bridal registry launched; Pottery Barn Kids online gift registry introduced

2002:

Launch of West Elm catalogs

PRODUCTS

The company offers a variety of merchandise through its four retail chains, catalogs, and Internet Web sites. Chains include Williams-Sonoma, selling hundreds of high-end products for kitchen and entertaining, including cookware, serveware, tools, linens, food products, cooking ingredients, and a large cookbook library; Pottery Barn, offering a variety of contemporary home furnishings, bedding/bath, rugs, window treatments, ledges and lighting for the home, tableware, flatware, and decorative accessories; Pottery Barn Kids, selling stylish, quality children's furnishings and decorative accessories for children aged 0-12; and Hold Everything, selling a range of storage solution items. Pottery Barn has also adopted the Design Studio, a service that helps customers plan their living spaces. Additionally, the company's Grand Cuisine specializes in upscale cookware. Its six direct-mail catalogs include Williams-Sonoma; Pottery Barn; Pottery Barn Kids; Pottery Barn Bed+Bath; Hold Everything; and Chambers, a bed and bath product seller. Four company Web sites sell the company's merchandise and offer online bridal and gift registry. Williams-Sonoma merchandise may be found at its 415 stores located in 41 states, Washington DC, and Toronto, Canada.

Williams-Sonoma plans to test a new catalog in 2002 called West Elm. The new brand will offer quality items at accessible prices and target young, design conscious consumers seeking home furnishings and accessories for their apartments, lofts, or first homes. Product categories in the new brand will include, furniture, decorative accessories, table top items and a wide range of textile collections. Williams-Sonoma will launch the catalog nationwide in the summer of 2002 and, if proven successful, may expand the brand into retail outlets beginning in 2003.




GLOBAL PRESENCE

The company opened its first stores outside of the United States in 2001, launching three Williams-Sonoma, three Pottery Barn, and two Pottery Barn Kids in Toronto, Canada. Three locations were chosen for the stores, which opened in late 2001 and early 2002. The company acknowledged that many Canadians already shopped at the U.S. retail stores and that their entry into Canada was a response to the demand of the company's home products in the country. To help penetrate its new market, Williams-Sonoma plans to be competitive price-wise and offer good value. The company also plans to use the newly opened Canadian stores as benchmarks for possible future international expansion, and as of March 2002, had exceeded the company's expectations. They further estimate another 15 to 20 location there are feasible.




EMPLOYMENT

With 27,000 employees, Williams-Sonoma offers many career opportunities in their various corporate departments, including the corporate headquarters; customer care centers; data center; distribution center; retail stores; Canadian retail stores; and through the Corporate Internship Program for college juniors seeking retail experience. The company is an Equal Opportunity Employer and offers a benefits package that includes an Associate discount program; paid vacations and holidays; health, life, and travel insurance; short-and long-term disability programs; health and dependent care tax-free spending accounts; medical, family and bereavement leave; tuition reimbursement; same-sex domestic partner benefits; and a stock incentive plan.

THE MAN BEHIND THE COMPANY NAME

Beginning with a 1952 trip to Europe, Chuck Williams became fascinated with French food. With a desire to recreate it in his hometown of Sonoma, California, the then-carpenter purchased a run-down hardware store in Sonoma and began stocking professional-quality, imported French cookware in his store—now the cookware and home furnishings giant known as Williams-Sonoma. Eventually weeding out hardware in favor of cookware, the store attracted a following of inquisitive epicures to the newly relocated San Francisco Bay Area store. The rest is (a long and prosperous) history. Although penning numerous cookbooks, Williams, as the company's vice chairman, is still a vital part in guiding the company's successful growth.




Williams-Sonoma seeks employees with skills in the following areas: critical thinking, planning and organization, decision making, business knowledge, people skills, customer focus, job knowledge, interpersonal communication, and commitment to please customers and continuous long-term financial growth. Additionally, they list their corporate values as people, customers, quality, shareholders, and ethical sourcing.




SOURCES OF INFORMATION

Bibliography

"old retailer whips up new recipe." san francisco business times, 19 october 2001.

williams-sonoma home page, 2002. available from http://www.williams-sonomainc.com.

"williams-sonoma, inc." hoover's online, june 2002. available at http://www.hoovers.com.

"williams-sonoma, inc." the gale group. available at http://galenet.galegroup.com.

"williams-sonoma outlines overall growth plan." home textiles today, 4 march 2002.

"williams-sonoma sets foot in canada." dsn retailing today, 10 december 2001.

"williams-sonoma tries a new recipe." business week, 6 may 2002.


For an annual report:

on the internet at: http://www.williams-sonomainc.comor write: williams-sonoma inc., 3250 van ness ave., san francisco, ca 94109

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. williams-sonoma's primary sics are:

5719 miscellaneous homefurnishings stores

5261 retail nurseries and garden stores

5961 mail order houses

6719 holding companies, not elsewhere classified

also investigate companies by their north american industry classification system codes, also known as naics codes. williams-sonoma's primary naics codes are:


442299 all other home furnishings stores


444220 nursery and garden centers


454110 electronic shopping and mail-order houses


551112 offices of other holding companies

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