Pirch: Is it a first mover case study or a flawed model?

Discussion
Photo: RetailWire
Sep 25, 2017
Laura Davis-Taylor

Last week’s announcement that Pirch will be closing most of its stores while overhauling its operations came as a shock.

The bright beacon of store experience, Pirch was named one of Inc. Magazine‘s 25 most disruptive companies a mere three months ago. Its unique approach was also applauded by VMSD last year when it named Pirch “Retailer of the Year.”

Co-founder Jeffery Sears’ public response summed up what made Pirch so special. “The design of our stores informs the customer journey and ultimately the experience for our guests. It allows them to dream, discover and be inspired in an environment that promotes human connections, community, and genuine care. We set out to create a retail space that is innovative and engaging, and it is humbling to be recognized for our efforts,” Mr. Sears said in accepting the award.

By appearances, the strategy seemed to have paid off. Last October, Pirch shared that it was pulling in $3,000 in annual sales per square foot, a close rival to Apple. The company also continued its expansion, opening its tenth location in Austin, TX in May. And yet the store was already closed when this week’s announcement hit the wires.

What went wrong?

A Retail Touchpoints article published last week dissects the question from many angles, ultimately pointing to a flawed business model. The Pirch store was artfully designed to create an experience like no other for “guests”. The question is, were guests the end user or were designers?

My colleague and author Joe Hasenzahl of High Street Collective wrote, “Customers have loved Pirch like a duck loves water. They upped the ante of exactly how much someone can love a store; the everyday visitor just doesn’t buy enough to support such a monumental per-square-foot cost.”

He goes on to make the point that experience without great product and a successful business plan is just a spit in the wind — much like a dream without a plan is just a wish.

DISCUSSION QUESTIONS: What do you think was the root cause of Pirch’s store closings, despite seemingly successful numbers? Was it a flawed business model or something else? Does this change your perspective on experience as the savior for retail stores?

Braintrust
"Pirch is likely the victim of classic shopper behavior in furnishings. "
"The internet has changed everything, and it will be tough sledding for these types of stores except in a few upper-end markets in a couple of cities."
"One great shopping experience does not a relationship make. Pirch’s potential is directly related to its ability to attract and keep repeat customers."

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11 Comments on "Pirch: Is it a first mover case study or a flawed model?"

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Bob Phibbs
BrainTrust

Count me in as a fan. I came back to a store a year later and the sales person remembered me and my purchase. The challenge is expanding against your base into markets that you have no experience in. They are still doing well in California and I would expect so. But with the trend of Millennials not buying high-end appliances and Boomers scaling down it could just be a function of the category rather than this individual retailer.

Tony Orlando
BrainTrust

Hey Bob, you nailed it. Many people now are shopping around to find what they can afford and are not splurging on high-end products, as they have bills to pay. Anything high-end that has a limited clientele is fighting for the same dollar. Free coffee and wine will not win customers over unless they like the deal or, more importantly, find a unique item they can’t get anywhere else. The internet has changed everything, and it will be tough sledding for these types of stores except in a few upper-end markets in a couple of cities.

Anne Howe
BrainTrust

Pirch is likely the victim of classic shopper behavior in furnishings. The purchase journey now tends to run four to eight weeks, with most shoppers only willing to wait two to four weeks for delivery for custom-made goods after orders are placed. Most suppliers are very challenged by this expectation. And many shoppers (even Millennials) don’t have the cash flow to be repeat buyers and engage in “furnish the whole room” behavior like they did at IKEA.

Furthermore, the shoppers today like to peruse second-hand and consignment stores too. It’s the second largest “channel” in furnishings for two reasons; cost and a willingness to re-use great quality.

Art Suriano
BrainTrust

It’s hard to speculate without knowing all the facts. There have been many ad campaigns that won awards and yet didn’t increase business. So without knowing all the inside information about Pirch, them achieving recognition and “Retailer of the Year” award doesn’t offer much. What was the company’s profit structure, debt, etc.? Not knowing that makes it hard to give a valid reason. However I will say this; when you have the right product mix and pricing you can compete but when you add the trained associate who knows how to engage and truly “wow” the customer, you master the in-store experience and you will achieve great success.

It sounds like Pirch was doing a lot of things right and hopefully they can figure out where they need improvement and rebuild the company.

Ryan Mathews
BrainTrust
How many retail failures “looked great on paper?” The thinking surrounding Pirch was outstanding. The design was amazing. But the customer base was, is and probably will be insufficient. The store-as-experience model — a perennial favorite of the business book market once all the failures have been temporarily forgotten — gets everyone excited, except for a significant enough base of consumers. There are examples of how to do it well — the original Nike store for example or New York’s STORY at its best moments — but it is a tough approach to scale. Even the Apple store has some built-in safeguards. Sure its design is hip, slick and cool — but people will always have trouble with their technology and would come to an Apple store if it operated out of the back of a garage. What the store does is reinforce image/demand for the brand and that demand, in turns, creates a installed base of customers for the stores. So while store junkies like the RetailWire community love new concepts and designs, we… Read more »
Mohamed Amer
BrainTrust

When your business model revolves around a high-end experience with serious price tags, an overly aggressive geographic expansion can doom your success through dilution of focus and execution.

The business model is sound as long as brands continue to believe in the power of a physical setting to showcase their products and allow prospective buyers to indulge in a unique experience. I don’t see any reason to begin discounting the value of a differentiated physical presence which Pirch represents.

Adrian Weidmann
BrainTrust

Pirch had a business model that wasn’t sustainable. While the experience may have been fantastic, the sales needed to sustain the concept simply weren’t enough.

I’ve been helping my Millennial son remodel his first home. We’re in the middle of the bathroom remodel and he had a particular idea in mind for the shower. After considerable online searching, he found what we needed. The order was placed and the part arrived from China 10 days later. It’s the new normal and no in-store experience could compete with that search, discovery and delight.

Doug Garnett
BrainTrust
Pirch proves once again that without Apple products, Apple stores would be a failure. Apple stores are stunningly good and it required a very smart set of decisions to use that design. But store design followed the products — not the other way around. We seem to forget retail stores only exist for one reason — to sell product. Somehow the business reality of “sell stuff” is lost in today’s retail discussions. That the original stores worked suggests design wasn’t the complete reason. From working with some high-end kitchen appliance stores, my guess is that the store required a highly unique floor sales team — a type of team that couldn’t be replicated at scale. Pirch sold investors and the market on the idea their stores worked because of design (and that narrative sold exceptionally well). But that never made sense to me — for consumers, design isn’t enough. All that said, the idea that they sold $3,000 per square foot remains unexplained. I won’t guess — but I suspect we will eventually learn either… Read more »
Ralph Jacobson
BrainTrust

A sustainable revenue model that compensates for realistic shopper frequency and audience demand variances by geography are two key pieces involved in this example.

Jeff Miller
BrainTrust

I think the key part of the question here is “despite successful numbers.” $3000 per square foot by itself and comparing that to an Apple store is like comparing apples to oranges. I really like what they created, but just think that they picked the wrong product category to tackle with this kind of retail experience. The decisions on most of these purchases are now in the hands of designers and builders as much as the end consumer who is the target of Pirch.

Experience and the kind of customer service where someone remembers your name will still be the drivers of repeat in store consumers but that does not make up for a niche consumer market.

Alternatively, this could just be a matter of the VCs who are behind them getting a bit timid looking at short or near term results.

James Tenser
BrainTrust

It may seem like a paradox, but engineering an in-store experience that is too precious, too luxurious and too costly to maintain could actually limit the size of your potential customer base, not expand it.

Who spends $8K at a time on home appliances or furnishings? The Pirch target segment may extend from one-percenters down to the upper middle class. But what sub-set of those folks invests at that level more than once in a decade?

One great shopping experience does not a relationship make. Pirch’s potential is directly related to its ability to attract and keep repeat customers. Perhaps there’s the rub.

wpDiscuz
Braintrust
"Pirch is likely the victim of classic shopper behavior in furnishings. "
"The internet has changed everything, and it will be tough sledding for these types of stores except in a few upper-end markets in a couple of cities."
"One great shopping experience does not a relationship make. Pirch’s potential is directly related to its ability to attract and keep repeat customers."

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