Company Profile

COMPANY:Pirch

HEADQUARTERS: San Diego, CA

YEAR FOUNDED: 2009

2016 REVENUE: Between $200 million and $300 million

EMPLOYEES: 500

Having laid out the honey oat bread on baking sheets, Tracy Justynski turns her attention to a chicken bronzing in the rotisserie from French oven maker La Cornue. "You can have six chickens at a time on here. I've done whole fish, a rack of ribs, Brussels sprouts wrapped in bacon," says Justynski, as she demonstrates how the rotating bird self-bastes. Drippings moisten a mound of bread cubes below.

Justynski is one of several trained chefs working at the SoHo branch of Pirch, an experiential upscale appliance retailer, based in San Diego. At Pirch, almost all the products on display are operational. Customers can put a stove, steam cooker, or grill through its paces by preparing food alongside a professional who uses that appliance regularly. In the store's aqua-tiled Sanctuary room, 40 showerheads ranging in shape from a teardrop to a letterbox disgorge torrents of water at the touch of an iPad. Reserve a time, don a bathing suit, and you can wander beneath them, sampling their sprays.

With at least 10 retail bankruptcies so far this year among major U.S. chains and waves of individual store closures, traditional brick-and-mortar shopping looks wobbly. But experts see growth potential for stores that act as entertainers, educators, interactive environments--anything but mundane nexuses for commerce. In that next-wave category, Pirch is among the most radical.

"You can think about Pirch in terms of a restaurant in the sense that we have commercial kitchens and you can also think about it in terms of a spa, where we have environments with steam and dry sauna and all these different showerheads running," says founder Jim Stuart. "So it is really an amalgamation of several different backdrops wrapped in a culture of hospitality. It does not look a lot like retail."

The stores are also platforms for appliance innovations, such as ovens that automatically adjust temperature and moisture level as a meal cooks, and refrigerators that can place food orders over the internet. In the SoHo store, showroom director Ronald Ferguson rummages through a refrigerator stocked with produce, sets an eggplant and an asparagus stalk on a cutting board, and activates a system by the San Francisco smart kitchen startup Innit. Recipes that use those ingredients appear on a display.

Pirch's 2016 revenue was between $200 million and $300 million, and the business employs north of 500 people. It has 10 stores in six states: the newest, in Austin, opened last month. Starting in 2018, Stuart hopes to pick up the pace by opening five or more stores a year.

Paco Underhill, author of several books on retail including Why We Buy: The Science of Shopping (1999, Simon and Schuster), is one admirer of the business. "If you think of the historic places people bought appliances--they went to Sears, they went to an appliance showroom where nothing worked," he says. "Nobody showed you what a top-of-the-line stove could do, what it would mean to the customer to move up the line."

Underhill adds, "The other cool thing about Pirch is that it's a playpen. You never knew you needed something until you went to Pirch and experienced it."

Banishing the sterile showroom.

Stuart is the kind of serial entrepreneur who has to count when you ask how many companies he's started. Most of his businesses developed either real estate or software for the real estate industry. Those ventures were successful enough that, in 2007, when he was 40, Stuart "took my chips off the table" to become a full-time dad to three young daughters. "I set out to build what would become the ultimate memory-making factory, which is our home," he says.

But outfitting said dream house got Stuart's wheels turning. Specifically, he was dismayed by small-format, high-end appliance stores that were typically generic showrooms fronting warehouses stacked with boxes. "I could not reconcile that the most expensive products I would put in my home, that would serve as the backdrop for all these memories, were served up in this mercenary, transactional environment," Stuart says. "If I couldn't turn a product on or speak to someone who interacts with it every day, then that was a very risky proposition."

Stuart opened the first Pirch store in San Diego in 2010. He covered the $5 million cost himself, with additional investments from a few friends. That store featured many of Pirch's signature touches: a barista café, appliances displayed in vignettes, products plumbed and plugged and ready for demonstration. Still, "it was not a cohesive well-organized consumer journey," says Stuart.

He sought help from Fitch, a London-based consultancy whose customers include Adidas, Dell, and Lego. Their design ideas elevated Pirch's second store, in Costa Mesa, California, which became the prototype. "After Fitch," says Stuart, "the store went from a concept to a symphony."

The company also internalized every aspect of service. Purchases are delivered in Pirch trucks, installed and serviced by Pirch technicians, and covered by Pirch warrantees. Those additional services, which currently operate at break-even, are meant as experience enhancers more than profit centers.

Stuart concedes that the decision to let people shower in-store was largely a publicity tactic. Very few do so, and "in some cases, I think it's just for the fun and sheer madness of it," he says. But even if you don't frolic in the spray you can still stick an arm into the stream.

The offer of showers also helps the public think more broadly about their relationship with the business. Couples have celebrated their anniversaries at the stores and, on one occasion, the wedding of two dogs. "We are here to be a welcoming environment and say, 'Let's dream about what's possible,'" says Stuart.

The path to profitability.

Scaling such ambitious retail environments is a challenge. The builds are difficult: a store requires as many as 500 penetrations through each floor to pipe in utilities. Local governments are often mystified how to permit a retail space that cooks--but does not sell--food (and by the way, you can shower there). Some municipalities applaud Pirch for recirculating its water. Others prohibit recirculation. Because food is being prepared. the health department can drop in at any time.

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Not surprisingly, the cost is high. The company has raised more than $100 million, with private equity firm L Catterton its major investor.

Pirch's team is learning as it goes. For example, early on it held frequent in-store cooking classes during which appliances could strut their stuff. The public loved that but "we were not providing the extra mile to our own customers," says Andrea Dorigo, who became CEO in September. Now, instead of cooking classes for people who may or may not be prospects, Pirch offers private classes for actual customers, either in stores or in their homes. "You just purchased a beautiful Thermidor kitchen and we appreciate your business," says Dorigo. "Maybe you can organize a cooking class with your friends. Or maybe we just teach you how to make a certain type of meal you've always wanted to cook."

A growing number of Pirch stores are profitable; but the company itself is not. "This is traditionally a low-margin industry and we are offering a service and environment that is way above what anyone else does," says Dorigo. He adds that the company's distinctive character gives it leverage with mall landlords who view the experiential retailer as an attraction, and that customers willingly pay full price to de-risk their purchases.

Manufacturers, some skeptical at first, also enthusiastically support the business. "They really elevate [the retail experience] on a grand scale from the sea of chaos that is out there now," says Anthony Ascione, vice president of sales at the appliance maker Sub-Zero Group. "All premium brands are fighting the path of commoditization. Pirch allows us to have a far more meaningful engagements with consumers."

Stuart says those engagements are especially compelling when compared with the relative sterility of e-commerce. He believes that Pirch will re-connect consumers with the sensory experience of both shopping and life. "This extends beyond the bounds of being a fascinating retail showroom," he says. "We encourage people to be more deliberate in designing experiences in their homes with the people they care about. Those are the moments that contribute to a life well lived."

Published on: Jun 13, 2017