Will RH Contemporary Help Gary Friedman Scale The Luxury Mountain? Time Will Tell.
However, throughout 2021, Friedman held the collection back, deciding it was not yet ready for prime time. And in each subsequent earnings call, he became increasingly hyperbolic about how great the collection would be and what it would mean for the company.
Claiming it as “The most compelling and potentially disruptive product introduction in our history,” Friedman just announced the long wait is over during the most recent first-quarter 2022 earnings call.
Now the collection is available for all to see with the posting of its 300+ page RH Contemporary catalog on the website. To introduce the collection, Friedman wrote, “We do what we love with people that we love for people who love what we do,” and called RH the “Love-Style Brand.”
RH Contemporary represents the culmination of his overarching vision of scaling taste for those lovers of the RH brand – “Our goal [is] to position RH as the arbiter of taste for the home” through an RH “Ecosystem of Products, Places, Services and Experiences.”
Friedman rightly observed, “There are those with taste and no scale, and those with scale and no taste,” but he doesn’t address the bigger issue. How does he plan to scale RH taste as the brand moves up into the higher reaches of luxury? And the even bigger question is whether RH Contemporary is the vehicle to do it?
Not trusting that I have the suitable taste level to render a judgment on the RH Contemporary line, I reached out to Tom Mirabile, who certainly does. He is the founder of Springboard Futures, a consultancy specializing in the home furnishings industry. He’s put in more than 30 years navigating the home market.
On the plus side, he praised the mixed-media selections which talk the language of luxury, such as the travertine marble tables, wool and silk rugs and the choice of to-the-trade exclusive Holland & Sherry wool fabrication for all upholstery.
And he felt the contemporary edge of the collection hits the sweet spot in today’s furnishings market. “Modern and contemporary are the top styles right now, according to the International Furnishings and Design Association’s survey. So with those two, you’ve got about one-third of the market covered,” he shared.
Those features aside, his expert assessment wasn’t so positive. “It’s all a monotonous monotone monochromatic,” referring to the burlap brown color used throughout the catalog. “Going from room to room in the catalog, I felt like I was inside a mushroom.” Perhaps my style sensibility isn’t as poor as I feared.
But we’re just a sample of two. The true test will come when the catalogs hit mailboxes and the collection shows up in the RH Galleries, now in San Francisco and later this month in New York.
As it rolls out across the country, approximately the first third of Gallery space will be devoted to RH Contemporary. “That’s how confident we are in this product line,” Friedman said. He went on to explain that the company will begin to see an impact on revenues in fourth quarter, ending January 2023.
Comparing this collection to RH Modern, which was introduced in 2015 and now is about a $1 billion business, he asserted, “Contemporary will have a bigger impact on this company than Modern and not just from a design point of view, but from a quality point of view.”
The quality better be there for the consumers the Contemporary collection is targeted to – the top 1% who make more than $500,000 per year and represent only 1.5 million U.S. households out of ~130 million.
“Minimalist styles, especially contemporary, are far less forgiving than more embellished designs. Every flaw is visible,” Mirabile said. “Consumers at this level have high expectations for quality and low tolerance for shortcomings of any kind.”
On the quality and service score, RH has some work to do. Out of nearly 100 complaints filed with the Better Business Bureau, it gets only a 1.17 on a five-point scale.
According to Consumer.guru, its Net-Promoter Score (NPS), which measures customer loyalty and the likelihood to return for a repeat purchase, is only -9, the same as IKEA. By comparison, Louis Vuitton scores 40 and Gucci 45.
Price-point-wise, RH Contemporary is on average a 35% step up from Modern, which was priced 50% higher than RH Interiors. The starting price for a Contemporary sofa is under $10,000 and travertine coffee tables begin at around $5,000, though paying members of its loyalty program ($175 per year) get a 25% discount, but delivery is extra.
The targeted high-end customers won’t blink at the price, though one could argue the prices aren’t high enough. However, they may push back on the cookie-cutter look of the pieces.
Scaling taste at this level requires individual items play well with other styles so that the customer can create his or her personal look. For example, Chanel can mix with Hermès, Louis Vuitton with Lora Piana and Levi’s jeans can go with them all.
“People may love a brand but when you see somebody walking down the street in all Gucci or all Versace, it shows no originality. Eclecticism ought to be the style RH is aiming for because customers are looking for a flexible style aesthetic,” Mirabile shared. “RH talks curation, but they are curating for someone who wants their off-the-shelf style.”
Describing the introduction of RH Contemporary as not just evolutionary but a revolutionary transformation for the brand, Friedman effused, “It’s almost a new company within the company.”
This leads one to ask what about all the customers that have grown with RH over the years. Friedman has an answer. RH is leaving them behind by shedding “less valuable market share as we continue to raise quality.”
He explained, “As we climb the mountain, we are giving share to people below us because we’re moving this brand up.”
Mirabile put it more bluntly, “Their existing customers are just the detritus left behind on the mountain.”
Friedman acknowledges the potential dangers as he moves the brand into the rarefied air up the mountain, but maybe summitting the Mount Everest of luxury is still out of reach or not even worth the pain of the climb.
“If you’re shedding about 70% of your current clientele, who’s going to talk about you? RH is stepping into the stratosphere but it is a very unfamiliar environment that works in unfamiliar ways,” Mirabile said. “The atmosphere at the top of the mountain is very different from a service perspective, a quality perspective and a customer expectations perspective.”
“It not true when Gary said ‘Never before has a brand attempted to make the climb to the top of the mountain.’ The truth is lots of brands have tried but nobody’s done it successfully and there should be a lesson in that,” he concluded.