In July of 2015, Parachute took a measured risk. It rented out the closet-size front corner and window of a store on Abbot Kinney Boulevard in Los Angeles for a six-week pop-up shop. The effort was minimal: A handful of employees of the online bedding-and-bath retailer, which was based just blocks away, worked with a local creative director to showcase the company's products in the retail nook. Buckets of lavender sprigs were arranged in corners, and white linen duvets poured over raw wood benches. It all felt very chic, if a little homespun.

Ariel Kaye, Parachute's founder and chief executive, had an inkling it would work--mostly as marketing, but perhaps also to attract actual sales. After all, historically, 90 percent of sales in the bedding and bath categories had come from in-store purchases. Sure enough, by summer's end the little space began to show signs that adding a brick-and-mortar component to the company's marketing and sales strategy might lead to remarkable revenue growth.

With the possibility of transforming the business, however, came tremendous financial risk.

Kaye had founded the company in 2014 as an online-only, direct-to-consumer model, in line with modern mainstay e-commerce companies such as Warby Parker and Casper. Part of Parachute's cost-control had been built around the idea it needn't rent costly retail space or hire store employees. And Parachute's model already was working: With a mere $15 million in funding from investors, it had consistently launched new and successful products. It was moving toward profitability, and had sold more than $1 million in bedding online each of the past two years.

Kaye was torn by what the pop-up taught her. "I had seen the way people were responding to our products in person, which was so positive," she says. "It was eye-opening." But once she started shopping for actual, full-size retail spaces to rent, she got sticker shock.

It wasn't just the cost of renting real estate on a five-year contract. Kaye knew that the endeavor would also require that she hire a retail manager, as well as consultants on real estate, retail, and construction. "It was a very dark, nebulous thing to be exploring at first," she says. "I had no experience in opening a store--nor did anyone else on my team."

She sought advice from Parachute's investors, her friends, and executives at other consumer-facing companies that had opened retail stores. She toured spaces and met with contractors, taking along friends or colleagues with any adjacent skill set, including interior design.

She found a reasonable space in Venice with an available five-year lease. Her next few weeks were spent agonizing over the decision. The sheer enormity of the lease, plus massive security deposit, felt daunting. "We'd never spent that kind of money!"

Over time, thanks to counsel from advisers, she came to accept that a lease shouldn't be her main point of stress, because if everything went south, there would be ways to get out of it. But there was still the matter of the more than $100,000 she likely would need to spend building out the space. Kaye took pride in running Parachute as a lean, efficient operation, and no matter how well prepared she was, an investment of that size ultimately required taking a huge leap of faith.

After many calls with investors, Kaye recalls, a couple of them threw up their hands. They told her: "Just make the decision and sign the lease!" Finally she did--but not before putting herself through an amount of stress that she jokes shaved years off her life. "There were a lot of moments of terror, to be honest," she says. 

A different kind of store 

With the lease for 542 Rose Avenue finally signed, a vision for the store took shape. Kaye hired a retail manager, and kept other retail staff small--just two full-time employees. Parachute worked with regional designers and furniture makers to give the store a familiar, hyper-local feel.

At just 450 square feet, it was a modest space. Kaye's team decided to eschew some traditional elements of retail, doing away with checkout counters in favor of cozy seating areas for one-on-one meetings with sales reps armed with iPads for ringing up purchases. The uncluttered, open-feeling space could be used not just to lure customers and facilitate sales, but also for events that would generate publicity for Parachute and foster brand partnerships.

While creating that first store in Venice, Parachute documented every step, and started writing a company playbook for effective retail presence. A lean staff, small footprint, and cash-less, cash-register-less shopping experience was working well for them. One year later, Parachute opened a second store, in Portland. Oregon. In 2018, it opened a third, in New York City's SoHo neighborhood.

Kaye says the strategies have driven tremendous customer loyalty: "We see our shoppers in-store, repeating, all the time. Our repeat rates have been really strong."

Parachute's retail operation is now profitable, and the company is looking to open more stores across the country. Kaye's lingering regret is having agonized so much over every decision around her first location.

"I felt a lot of pressure and stress to make the right decisions--and in retrospect, that wasn't helpful at all," she said. "That's something I really learned from."

The Brick-and-Mortar Phase of E-Commerce

The Brick-and-Mortar Phase of E-Commerce
Published on: Jun 25, 2018