Williams-Sonoma takes its e-commerce operation south of the border
October 3, 2014 04:01 PM
Housewares and home furnishings retailer Williams-Sonoma Inc. is expanding internationally without straying too far from its home base in San Francisco.
Distribuidora Liverpool, S.A. de C.V., one of Mexico’s biggest department store chains, has licensed the e-commerce and store brand name rights for Williams-Sonoma, Williams-Sonoma Home, Pottery Barn, Pottery Barn Kids, PBteen and West Elm. Other U.S. merchants may also follow suit and target Mexico for growth online, say other web merchants and e-commerce analysts.
Online retailers in Mexico are in a growth mode—the combined web sales of the 63 Mexican retailers ranked in the 2014 edition of Internet Retailer’s Latin America 500 grew 14% to $1.63 billion in 2013.
Williams-Sonoma isn’t releasing many details other than saying that Liverpool, No. 15 in the Latin America 500, has signed a franchise deal that gives Liverpool the right to launch Mexican e-commerce sites for six Williams-Sonoma brands and open a series of stores beginning in 2015.
Williams-Sonoma, which currently ships internationally from the U.S. to Mexico and many other countries in Asia, Europe and Latin America, isn’t saying which e-commerce sites Liverpool will launch first or when. It’s also unclear if Liverpool, which generated Internet Retailer estimated Latin American web sales of $185.6 million, will build e-commerce sites for the Williams-Sonoma brands internally or use an outside design firm.
Williams-Sonoma apparently is seeking to partner with an established retailer in Mexico because of Liverpool’s local and regional supply chain and knowledge of Mexican consumers and their housewares and home furnishings shopping preferences. Liverpool operates about 100 department stores in Mexico. “Distribuidora Liverpool’s market expertise and extensive supply chain will allow us to deliver the same high quality of service that we provide in the United States and around the world,” says Williams-Sonoma CEO Laura Alber. “We look forward to opening the doors of our first stores in Mexico.”
With e-commerce sales that reached $263.3 billion in 2013 according to the U.S. Department of Commerce, the U.S. online retailing market is 100 times bigger than the e-commerce market in Mexico, where, estimates Forrester Research Inc., web sales will reach $2.2 billion in sales this year. But over the next four years, Forrester projects e-commerce in Mexico will grow at a compound annual rate of 20% and reach $5.5 billion by 2018 while the number of Mexican online shoppers will grow by 114% to 8.4 million to 18 million.
The idea of attracting new online shoppers in a country such as Mexico has appeal to more U.S. retailers such as Williams-Sonoma, says Zia Daniell Wigder, a Forrester analyst who specializes in global e-commerce. “Mexico has a substantial growth trajectory ahead of it,” she says. “U.S. retailers that are jumping into online retailing in Mexico are hoping to establish a brand name and get a piece of the much bigger pie that lies ahead, but will need to be patient given the size of the market today.”
Many U.S. web merchants are first targeting Brazil, Latin America’s largest e-commerce market, says Wigder. But Williams-Sonoma and other U.S. retailers also are eyeing more opportunity online in Mexico because it’s closer to home and offers an opportunity to move faster in an emerging market, she says. “It's typical for brands expanding into Latin America to look first to Brazil and that’s not surprising given that Brazil's online retail market is much larger than that of Mexico,” Wigder says. “However, the Brazilian e-commerce landscape is much more crowded than Mexico, and Mexico can be an easier market to do business in than in Brazil.”
Williams-Sonoma is the latest but not the first U.S. merchant to sign a branding and franchising deal with Liverpool. Along with Williams-Sonoma, No. 21 in the 2014 edition of Internet Retailer’s Top 500 Guide, Liverpool also has similar arrangements with Gap Inc. (No. 19) and Aeropostale Inc. (No. 123).
Williams-Sonoma already has many customers that travel back and forth between California and Mexico and those shoppers may have been helped Williams-Sonoma establish its deal with Liverpool, says Diego Fernandez, e-commerce veteran and CEO of Iguama.com, an online marketplace that next month will begin selling products from U.S. brands to consumers throughout Spanish-speaking Latin America. “Williams-Sonoma has a lot of information and data on Mexican consumers that are buying their products,” he says. “People from Mexico, and Latin America in general, figure out different ways to buy from U.S. retailers by traveling to the U.S., through friends and family and freight forwarders or buying online at home.”
For the first six months of the retailer’s 2014 fiscal year, a period ended Aug. 4, Williams-Sonoma reported:
- Direct sales increased 12.6% to $1.01 billion from $896.7 million.
- Virtually all of Williams-Sonoma’s-direct to-consumer sales are online, the retailer says.
- Total sales increased 7.5% to $2.01 billion from $1.87 billion.
- Retail sales increased 2.7% to $999.6 million from $973.3 million. The company didn’t break out comparable-store sales.
- Net earnings were $96.9 million compared with $88.4 million in the first two quarters of 2013.
- Direct-to-consumer accounted for 50.2% of all sales compared with 48.0% in the first two quarters of 2013.