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Brand Battle: Home Goods vs. Pottery Barn

Brand Battle: Home Goods vs. Pottery Barn

The enduring power of product value

Summary: Two brands face off, measured across brand impact determinants and evaluated by their performance data in our latest study The 360° Advantage: How Whole Brands Dominate.

In this Brand Battle, Home Goods faces off against Pottery Barn, two retailers approaching their volatile categories from different angles. One has external market performance on par with the IKEA, while the other underperforms in a way that should cause concern. Meanwhile, there’s sleeper brand on the horizon who could shake things up.

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By just looking at Home Goods and Pottery Barn, it’s possible to learn a lot about the home decor business. Decor is like fashion: full of whim and subjective interests, making it a noisy category. Buyers graze the category—a Home Goods regular might also patronize West Elm, two wildly different experiences.  

This “noise” shows up in the data as well. With an r2=0.51 correlation between the Whole Brand Index and the Total Performance Score, only men’s apparel shows more fluidity (r2=0.47). There is also a good deal of over- and under-performance in the category, which is not surprising given that home decor is a lot like fashion and is hypersensitive to short-term trends. 

Of the categories that we looked at, decor has the lowest average score for “brand bought most often”—at a mere 6%. IKEA has the highest WBI in the category, but is just average—right at 6%—for being bought most often (study average is 12%). Consumers clearly divide their loyalties. Part of this might be because many home decor purchases are made outside the category, with multi-line retailers like Amazon or Target who don’t show up in this scoring.

While neither Home Goods (WBI=71) nor Pottery Barn (WBI=64) win this category for highest WBI, there are rich lessons in looking at their battle. The contrasts between the two epitomize the nature of the sector. Home Goods is a mass penetration brand and Pottery Barn serves a niche. 

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Home Goods places third in its WBI, but leads the category in TPS with a score of 153—one of the biggest over-achievers in our study. Its strength comes from its overall product value, where it leads all other, even IKEA, with a score of 77. IKEA wins the WBI race with off-the-charts scores for ease of usage and memorable experience. Home Goods sacrifices a small bit of ground in these areas, but their product value makes up for it—driven by their eclectic, treasure-hunt-style selection model. 

Pottery Barn is an under-performer in our model. Their WBI of 64 would normally predict a TPS in the mid-70s for the category (see the scatterplot chart)---but they come in about 40 points lower at 34. Their big weakness? Product value—just the opposite of Home Goods. They’re a pricey niche brand but only pull a 61 for this important metric.  

A defense of Pottery Barn’s performance could be that they are a boutique brand who specializes and thus intentionally sacrifices high penetration scores. That certainly shows up in their TPS, where they score only 13% in past-12-month purchase. But lurking below the surface are other problems. Only 8% of consumers say they would be willing to pay more for the brand, dead last in the category even trailing their sister brand, West Elm (both are owned by Williams-Sonoma). 

The metric that pulls their score down even more dramatically is brand-on-the rise versus on-the-decline: minus-14%. In contrast, Home Goods is at +25%--a net 39-point advantage. 

Based on recent financial reports from Williams-Sonoma, Pottery Barn appears to be doing reasonably well, and they have also had something of an awakening during the COVID-19 pandemic. But their underperformance in our model should be a cause for concern. When you’re a high-price-point brand with low scores in product value, it’s a danger sign. Consumer abandonment could happen suddenly.

A careful look at the category reveals a dark horse: At Home. (Full disclosure:  At Home is a Barkley client.)  This brand is serious over-achiever. Their WBI of would normally predict a TPS of about 60 based on regression model, but the actual score is 121.  At Home operates large, warehouse style stores, and even large markets may only have two or three locations. They don’t spend lavishly on mass media so their visibility score is only 52. The brand thus lacks both physical and mental availability. But their other brand determinant scores, while somewhat lower than competitors, are consistent. They’re especially adept at delivering a simple experience and consumers reward them for that. They have a 37% recommendation score and a 22% net on-the-rise score. Those two account for almost half of their TPS.

At Home isn’t quite in a commanding position, but competing brands should worry about them. If availability increases—more locations, more messaging—their performance may well accelerate dramatically as they win more shopping occasions.

Read more about The 360°Advantage: How Whole Brands Dominate.

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Unless otherwise stated, Barkley does not have a business relationship with the brands mentioned in this article. All Barkley clients are clearly noted throughout the Whole Brand Index and Whole Brand Project website.


Barkley US

Sep 14, 2020

filed under:
Brand Battles, Marketing, Modern Consumer, Research, Retail, Whole Brand

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