Will contemporary RH help Gary Friedman measure the luxury mountain? Time will tell.

    during RH
    December 2020 third-quarter earnings call, Gary Friedman announces the launch of RH’s contemporary collection, initially planned for late spring 2021. Touted as a group that “bridging the gap between RH Interiors and RH Modern,” it promises it will elevate the brand and expand its market.

    However, throughout 2021, Friedman held the group off yet again, deciding that it was not yet ready for prime time. And on each subsequent earnings call, he became more and more ambiguous about how great the group would be and what it would mean for the company.

    Claiming to be “the most compelling and potentially disruptive product introduction in our history,” Friedman just announced that the long wait was over during his latest Q1 2022 earnings call.

    The collection is now available for all to see with the publication of the 300-plus page contemporary RH catalog on the website. To introduce the collection, Friedman wrote, “We do what we love with people we love to people who love what we do,” and called RH a “Love-Style Brand.”

    RH Contemporary is the culmination of his overarching vision to expand the range of taste for fans of the RH brand – “Our goal [is] To position reproductive health as the arbiter of home taste “through the ecosystem of products, places, services and experiences” of reproductive health.

    Friedman, rightly, observed, “There are those who have taste and no measure, and those who have size and no taste,” but he does not address the larger problem. How does he plan to expand the range of healthy flair as the brand moves to the highest levels of luxury? The bigger question is whether contemporary RH is the way to do this?

    Not confident I have the right level of taste to pass judgment on the contemporary RH line, I reached out to Tom Mirabile, who certainly does. He is the founder of Springboard Futures, a consulting firm specializing in the home furnishings industry. He has spent more than 30 years navigating the local market.

    On the plus side, he praised the mixed-media selections that speak the language of luxury, such as the marble travertine tables, wool and silk rugs and the trade-exclusive Holland and Sherry wool selection for all upholstery.

    He felt the collection’s contemporary edge hits the sweet spot in today’s furniture market. “Modern and contemporary are the best styles right now, according to a survey by the International Association of Furniture and Design. So, with these two, you have about a third of the market covered,” he shared.

    Regardless of these features, his expert evaluation was not positive. “Everything is monotonous and monochromatic,” referring to the brown burlap color used throughout the catalog. “Going from room to room in the catalog, I felt like I was inside a mushroom.” Maybe my style sensitivity isn’t as poor as I feared.

    But we are a sample of only two. The real test will come when catalogs arrive in mailboxes and the collection appears at RH Galleries, now in San Francisco and later this month in New York.

    As it spreads across the country, roughly the first third of the exhibition space will be dedicated to RH Contemporary. “That’s how confident we are in this product line,” Friedman said. He continued, explaining that the company will begin to see an impact on revenue in the fourth quarter ending January 2023.

    Comparing this collection to the RH Modern collection, which was introduced in 2015 and is now worth about $1 billion, he asserted, “Contemporary will have a greater impact on this company than Modern and not just from a design point of view, but from a quality point of view.”

    The best quality for consumers targeted by the contemporary group – the top 1% earn more than $500,000 annually and represent only 1.5 million US households out of 130 million.

    “Simplistic styles, especially contemporary, are much less forgiving than more ornate designs. Every flaw is visible,” Mirabelle said. “Consumers at this level have high expectations for quality and a low tolerance for deficiencies of any kind.”

    In terms of quality and service grades, RH has some work to do. Of the nearly 100 complaints lodged with the Better Business Bureau, it scored only 1.17 on a five-point scale.

    According to Consumer.guru, the Net Promoter Score (NPS), which measures customer loyalty and the likelihood of return versus repurchase, is just -9, as is IKEA. By comparison, Louis Vuitton scored 40 and Gucci 45.

    In terms of price, RH Contemporary is an average of 35% more than Modern, which was priced 50% higher than RH Interiors. Contemporary sofas start at less than $10,000 and travertine coffee tables start at around $5,000, although paying loyalty program members ($175/year) gets a 25% discount, but delivery is extra.

    Targeted premium customers will not blink at the price, although one could argue that the prices are not high enough. However, they may fall back on the cookie-cutter look.

    Expanding taste at this level requires that the individual elements play well with other styles so that the customer can create their own personal look. For example, Chanel can mix with Hermès, Louis Vuitton with Lara Piana and Levi’s jeans can go with all of them.

    “People may love a brand, but when you see someone walking down the street in every Gucci or all of Versace, it doesn’t show any authenticity. Eclecticism should be the style for RH because clients are looking for a flexible aesthetic,” Mirabile shared. “RH talks about regulation, but they’re supervising someone who wants his ready-made style.”

    Describing RH Contemporary’s introduction as not just an evolutionary evolution but a revolutionary shift for the brand, Friedman said, “It’s almost a new business within the company.”

    This leads one to wonder what about all the clients who have grown up with reproductive health over the years. Friedman has an answer. RH is leaving behind by eliminating “less valuable market share as we continue to raise quality”.

    “As we climb the mountain, we give a share to those below us because we take this brand up,” he explained.

    Mirabell put it more explicitly, “Their current customers are just the leftovers left on the mountain.”

    Friedman acknowledges the potential dangers as he takes the brand into the raucous air up the mountain, but summing up the lavish Mount Everest may still be elusive or not even worth the pain of climbing.

    “If you are shedding about 70% of your existing customers, who is going to talk about you? RH steps into the stratosphere but it is a very unfamiliar environment that operates in unfamiliar ways,” Mirabelle said. Quality and customer expectations perspective.

    “It wasn’t true when Gary said ‘never before has a brand tried to climb to the top of the mountain.’” He concluded, “The truth is a lot of brands have tried but no one has ever succeeded and there has to be a lesson in that.”