Parsing Through the Problems with Pirch
Once considered one of the most innovative concepts in the retail industry, high-end appliance and kitchen retailer Pirch has announced that it will close more than half of its locations in order to better focus on its profitable stores.
The move means that Pirch will shutter stores in Chicago, Dallas, and Atlanta. According to a Bloomberg report, the company is also in negotiations to get out of two locations in New York’s SoHo neighborhood and Paramus, New Jersey. Pirch has already closed up shop in Austin, Texas (a 21,000-square-foot showroom that just opened in May), and the remaining locations are expected to cease operations by the end of September. That will leave the San Diego-based company with a handful of storefronts in California.
“Pirch has made the strategic decision to refocus its footprint and pace of expansion,” it said in the statement to Bloomberg. “Our California stores are performing well and profitable, and we remain focused on growth in this region.”
Though it will remain in business on the West Coast, the news of the closure is a blow to the already slumping retail industry and a bit surprising given the accolades and praise that have been heaped down on Pirch since its launch in 2009. They’ve been named one of Forbes most promising companies, and were just recently honored by Inc. Magazine as one of the most disruptive companies of 2017.
All of that was in response to Pirch’s positioning as an experience-first kind of retail center. If you were looking for one buzzword to define the retail community at the moment, experience would be that word. We’ve seen ‘experience’ pop up in all sorts of conversations over the course of the past year—with Apple, Staples, Pirch on a number of occasions, and others.
What was so appealing about the Pitch model was that it took the idea of experience retailing to a much higher level. Geared towards the luxury, high-end customer, Pitch was all about providing the type of atmosphere that made the visitor feel right at home. Chefs lined their kitchens and cooked up real meals, their showers and saunas were actual functioning vignettes that someone walking through the store could actually test out if they so chose, all the while trying out top-of-the-line kitchen and bath equipment.
So what went wrong?
Partly to blame, also, could be the decision of co-founders Jefferey Sears and Jim Stuart to step aside and hand the keys to the company to current president and CEO Andrea Dorigo. That’s not a slight against Dorigo, who has experience leading successful brands like Oakley and Brooks Brothers. But there’s certainly something to be said about a company visionary, or visionaries in this case, leaving. (See: Steve Jobs and Apple.)
But that alone isn’t the problem.
One of the first words that comes to mind when I think about Pirch is overextended. The company in just the last year or two added locations in Chicago, SoHo, Austin, and more, in an attempt to bring their experiential shopping center to nearly every corner of the country. That decision, given the company’s self-reported $3,000-per-square-foot in annual sales estimate (a number that rivals Apple retail locations), seemed like a safe one. But the business model and certain business practices of Pirch prevented the company from experiencing the revenue growth that it expected to go along with the physical footprint growth.
Speaking with a Forbes contributor recently, Chris Ramey, president of Home Trust International, explained that while Pirch did an excellent job showcasing luxury products in a useful, real-life environment, there were a number of problems with the experience itself. For one, the products weren’t being sold. He noted that many of the in-store staff were actually employees of the companies that were represented throughout the store (i.e. Sub-Zero reps standing next to one of their high-end ranges). Those vendor employees were there to “engage customers,” Ramey said, but weren’t going to help push other brands that were positioned alongside them, thus preventing a true experience-shopping package to be sold in-store. “Suppliers were complicit because they didn’t care where the sale came from, as long as it was their brand,” he said.
That, in turn, turned Pirch into a showroomed for showroom. Potential customers, Ramey said, went to the store to experience high-end, luxury brands only to go home and buy the product from someone else. And that right there shows the disconnect between Pirch and its target customer. The Pirch business model is one molded around the concept that, if a customer experiences a truly luxurious kitchen or bath lifestyle, they’d be willing to overlook the price and buy on-the-spot simply because they enjoyed their in-store demo. That just wasn’t the case though.
“The one commonality amongst the affluent is they save money,” Ramey told Forbes. “Luxury is a fantasy. Product and pricing is reality. The greatest experience doesn’t trump the need for a value proposition that resonates with the best prospects.”
And if you think about the clientele Pirch was targeting, they really aren’t in the DIY market. They’ve got deep enough pockets that, if they want to remodel their kitchen or rebuild their bathroom to look like a country club spa room, they probably already have a contractor on speed dial who can come to their home, draw something up for them, and get it done with a best-friend discount included. Sure, they might go to a place like Pirch for some inspiration on how they can drop bucketloads of cash, but they’re probably not going to just spend it there on a whim because they enjoyed some in-store chef’s cooking class.
Pirch absolutely created a ton of buzz with its innovative take on retail, but buzz alone doesn’t equal sales. A refocused strategy that pays greater attention to the needs of the targeted clientele along with a more streamlined in-store experience should help. Certainly, decluttering the portfolio and bringing things down back to earth from a footprint standpoint is a first step in the right direction. As innovative as the concept of Pirch is, the company’s move to reign itself in and operate on a smaller, more profitable scale could be the most important story for the retail industry.