Parachute Brings Premium & Accessible Comfort Home

In this episode of TD Cowen’s Retail Visionaries Podcast Series, Ariel Kaye, Founder & CEO of Parachute, joins Max Rakhlenko, Cowen’s Retail & Fitness Analyst. They discuss the recent growth of the home décor and furniture industries, opportunities to maintain that momentum, and the company’s sustainability goals & targets.

Other topics include the benefits of opening physical stores to create a retail experience that improves digital sales and having a consumer-first mindset. Press play to listen to the podcast.

Transcript

Speaker 1:

Welcome to Cowen Insights, a space that brings leading thinkers together to share insights and ideas shaping the world around us. Join us, as we converse with the top minds who are influencing our global sectors.

Max Rakhlenko:

Hi, this is the visionary podcast series about visionary ideas and people. My name’s Max Rakhlenko and I’m Cowen’s retail and fitness analyst. In this episode, we’ll delve into a topic of the fast growing home, and decor market led by an innovative millennial focus brand. We are pleased to be joined by Parachute’s founder and CEO, Ariel Kaye. Parachute is a modern lifestyle brand that makes people feel at home. The multi-category home company offers products that are thoughtfully designed in Los Angeles, and responsibly manufactured by expert craft people around the globe using only premium quality materials. Thank you for joining us, Ariel.

Ariel Kaye:

Thanks for having me.

Max Rakhlenko:

So Parachute has seen really strong growth over the past few years. What are you most excited about today, and what are you most proud of?

Ariel Kaye:

It’s a great question. I’m most excited about, well, our continued growth trends. We have been growing, and seeing incredible acceleration of growth, as a brand, as we enter new categories over the past few years, and I’m looking forward to continued expansion into the categories that we’re in, and some additional categories that we are moving more deeply into such as furniture. I’m also extremely excited about our retail strategy. We’re open in 16 stores as of this week, and we’ll have 30 by the end of this year with a plan to open 20 more annually year over year. And lastly, I’m just excited about home as a category in general. I see so much opportunity. I see such a shift in the way people think about their homes, and I see that trend as something that will not change, and so excited to be a part of this important category for our customers today. And as they go through the many life moments that will continue to be a part of their spending power and the way that they consume.

Max Rakhlenko:

Yeah, absolutely. And to your point, the category has seen massive growth, and with rise of work from home, we think that’s probably going to continue. So, I guess the next question would be just how big is Parachute now? Can you share growth or customer metrics with us? And then how did the pandemic changed the trajectory of the business?

Ariel Kaye:

Sure. So we ended 2021 very strong with a growth rate of about 60%, doing about 150 million in revenue, our customers, more than quadrupled in the past five years. Our repeat order rate within the first two years of purchase is at 84%. So we have an incredibly engaged audience. We see our growth rate this year continue to be quite strong, and we believe as we continue to diversify our assortment, and to be where our customers are in a bigger, more profound way that will just continue to grow. And there’s a few areas that have driven our success to date investing in our customer experience, investing in technology, our digital platform, brick and mortar, which I’ve now mentioned a few times, our product innovation, and just the way that we think about our aesthetic and our strong point of view around brand. It continues to just… We have this appetite from our customers for more, and comfort continues to be a high priority for people. And we’re really ready to capitalize on that trend.

Max Rakhlenko:

Sure. That makes a lot of sense. And there’s recently been a big debate in the markets, whether growth may be slowing given some of the numerous macro headwinds that we’re all seeing. So just curious, what are you seeing and what are your shoppers telling you?

Ariel Kaye:

Sure. I mean, we have seen, and continue to believe that home will remain the center of activity. Even as folks go back to work, we’re going to see some sort of hybrid model in a bigger way moving forward, but we actually are looking at trends around more city dwellers moving to the suburbs where homeowners spend about 80% more on furniture, and 126 more on home textiles. And we’re also seeing this shift with the millennials who are a huge part of our audience. Our customers are about 70 plus percent millennials, and we’re seeing that the share of millennial home buyers have risen over 43% over the past year. And that millennials are making up of half of all home loan applications.

Ariel Kaye:

So we know that our customer is really focused on the home and that a big part of their spend will go to the home. And so we believe that these are huge drivers that will continue to push the industry forward. And while the world may be reopening and people may be diversifying where they’re spending, whether it’s on travel or apparel, we really do believe that home continues to be a huge focus for our customer base.

Max Rakhlenko:

Yeah, I think you’re absolutely right with both work from home, as well as to your point, millennial home ownership trends. We think that’s going to continue. So, if we were to take a step back, can you discuss your framework as you continue to expand the breadth and depth of your selection? You started with a pretty select assortment, which has now expanded to cover essentially all the rooms in the home.

Ariel Kaye:

Yeah, absolutely. So, I think there’s a few different ways to build a brand. We’ve taken this more home lifestyle approach. So, our goal is really to be in every room of the home in a very major way. We still are very curated in our assortment. So we’ve created this new beloved aesthetic, which is this perfectly undone, timeless feel. And so it allows us, as we move into different categories, we don’t need to design into a number of different aesthetics as some of the other retailers do where you see things like a mid-century modern aesthetic and a more coastal aesthetic, and a more, you get the point, like different aesthetics that you have to design quite a few skews into.

Ariel Kaye:

We are really creating our own aesthetic, but furniture is a huge initiative for us. And where we see a lot of revenue coming from, in terms of the public company brands that are out there. So it’s an important category for us. And one that we’re continuing to really invest in from both a team perspective and just a category perspective. But we, our goal is to truly be in every room of the home, and to be where our customers are and to be this one stop shop for all things comfortable, all things quality for the home.

Max Rakhlenko:

What are your shoppers telling you that they want next? If you can give us a sneak peek into what may be in the pipeline.

Ariel Kaye:

Our first furniture collection that we launched last September was really focused on the bedroom, and coming next is really a move towards the living room. So, we have an incredible feedback loop through our retail source, through our customer experience channels. My background actually was in consumer behavior research before launching Parachute. So, we have built an organization where we look at every possible interaction as a focus group. We’re always learning from our customers and we know that they want more. And so we know we’ve got this information that really helps us drive our strategy, also of course, looking at greater trends within the industry, but we have an opportunity to really learn from our customer and we really look to grow with our customer instead of being a brand that our customer grows out of. And I think that multi-category approach is critical to achieving that goal.

Max Rakhlenko:

Yeah. That’s really interesting. And given your background, I’m sure that gives you a step up over some of the competition, so I’m sure it’s very helpful. And then you’ve got a deep focus on a very specific aesthetic, which shows very much both on your website, as well as in your stores. So just curious how you would describe what the Parachute aesthetic looks like to our audience?

Ariel Kaye:

Sure. So we, if you, if you’d like to close your eyes and dream with me, imagine Sunday morning you’ve just gotten out of bed, you’re pouring that perfect hot cup of coffee, and you’re getting back into bed, and you just take a deep, deep breath. And you look around the room and the sun is coming into the windows. I mean, that is the Parachute aesthetic. It’s this perfectly timeless like perfectly undone, we focus on this sense of comfort of the sense of being relaxed, and relaxed casual. It’s very lived in, but really timeless. And it does work with a number of different aesthetics, which is why we don’t have to design into these predetermined, and described aesthetics that have kind of been the way of the past.

Ariel Kaye:

We really focus on neutrals, and texture and depth and dimension and adding something that’s really beautiful to the home, but can work in a number of different settings, a number of different styles of homes, but really it’s this relaxed, casual that Parachute has pioneered. And we see people try to emulate, but we do it with such an authenticity that it’s hard to replicate, and is what our customers really come to us for and have loved and want more of.

Max Rakhlenko:

So, on the topic of customers, you’ve said before that you lead the business with a consumer first mindset. So, you recently, you just mentioned earlier on the podcast that 70% of your shoppers are millennials. So just curious how that’s driving your decision making and really, as you focus on this one subset of the demographics.

Ariel Kaye:

Sure. I mean, look, we have our customers do go beyond millennials, but we do know that’s an important customer for us. And if we think about the behavior, and the preference of the typical millennial shopper, we know that they are more likely to buy a product recommended by a social media influencer. We know that they are 95% more likely to buy online without seeing a product in store. We know that they shop with their values, and find sustainability to be important when shopping. And so we use those insights to engage our consumer at multiple touchpoints. We have an incredibly engaging social media presence that seeks to both educate, and inspire. We have a digitally led browsing, and shopping experience. We really seek to create an immersive in-store experience. I believe that this is a customer that above all wants to buy beautiful products in beautiful spaces.

Ariel Kaye:

And that’s truly what our retail experience is like. Our stores are designed to feel like a home. They’re designed so that our customers can see the products in their most authentic state. And then lastly, I would just say that we are deepening our public commitment to sustainability, and responsible operations. So, that’s how we hope to continue to deepen the relationship. We also and this goes back to my past experience, we believe in the relationship we are a transaction second business. The relationship always comes first. And we’re really listening to our customers, whether it’s, like I said, through our eCommerce platform in store engagement, social media channels, to understand what they’re looking for, to understand whether that’s a new product or a new category or a new color. And we’ve also been able to digitize that experience a bit with our virtual styling consultation program. So there’s a lot there that is really top of mind. And as we continue to invest in our physical retail across the US, and in the next many years have 100 plus stores we know that relationship will just get deeper.

Max Rakhlenko:

That’s very interesting, very insightful on the shopper. So, going back to your comments on expanding into furniture last fall, just curious if you could share with us any learnings, and then how those are driving key progress going forward, as you expand into additional rooms, and continue to add skews.

Ariel Kaye:

Yeah. Furniture is a totally different category in business than textiles. So, certainly there have been a lot of learnings. We launched our first furniture collection at a time where many retailers were experiencing significant delays in their furniture shopping. I mean, it’s quite normal at this point to see a 30 to 50 even longer 60 plus week lead time for furniture. And so one of the things that we really worked on ahead of our launch was how do we shorten that lead time? How do we make sure that we’re setting clear expectations with the customer, and how do we set up our white glove delivery experience. So, that end to end the experience is significantly improved from what our customers were facing. So we were able to develop a quick ship program, which was incredibly exciting for our launch, where we had enough inventory that was ready to go, that was essentially finishing touches, being made, but we pre-made a number of our furniture products so that they could be shipped within three to four weeks.

Ariel Kaye:

That’s a program that we hope to be able to continue, although our target lead time is still significantly better than what many are facing at looking at more 12 to 16 weeks as we move forward. But there’s a lot of learnings around lead time around white glove delivery, and just the supply chain in general. So we are always looking to learn, and grow and get feedback from the customers. One of our practices is to really make sure that we’re having in depth conversations with these early adopters of these products. But the last thing that I’d mentioned is that we saw a really interesting split between returning customers, and first time shoppers that were buying furniture with us, as well as a huge uptick in interior designers buying our furniture, which we think is a great indicator that the style, and the aesthetic, and the quality, are premium, and are in line with the rest of our assortment, and really appealing to our customer base.

Max Rakhlenko:

Yeah. And to your point, I think we’ve heard many, many furniture retailers talk about how the last thing you ever want to do is disappoint your shopper. So, there are very long lead times, but it seems like cancel rates don’t go down as long as you stay in front of your shoppers, continue to communicate, because shoppers do ultimately understand and see sort of what’s going on in the world around us.

Ariel Kaye:

Yeah. And you know what, I actually think that the fact that the way supply chain works I think the fact that has become top of mind for all consumers, and people are having conversations about the challenges in a more, just in regular conversation. I think actually benefits all brands as we can shift expectations around this instant gratification as people really understand what it does take to get products from point A to point B and the cost associated with that. And so I actually, I think it’s net/net a positive thing that people are starting to understand and shift away from this instant gratification mentality.

Max Rakhlenko:

Yeah. I think the longer this goes on, the more, the average person learns about supply chains and how everything sort of works, so that’s interesting. Just switching gears to marketing, can you discuss your general marketing strategy? How are you thinking about paid versus unpaid, and then also the channels that make the most sense for you, and then anything on how you look to attack influencers as well?

Ariel Kaye:

Our marketing strategy is pretty diversified. We have, since very early on looked to diversify our channel mix so that we are never too dependent on any one channel. We, like many other brands, have a pretty strong test, and learn component of our marketing mix. And we’ve seen success in some of the traditional digital channels, as well as some of the older school, more old school, traditional channels like catalogs, and now streaming TV, and commercial influencer is an important category, or an important channel for us. We’ve moved from a more pay to play to more of an affiliate program looking to build relationships that are longer term with those influencers, so that they’re incentivized to promote our product, but to talk about it, to use the product and really share with their followings in an authentic way, like many brands we’ve moved away from or we’ve moved our focus more to quality over quantity in terms of follower count.

Ariel Kaye:

We’re seeing really incredible success rate with influencers that are in the more kind of 10 to 20,000 followers versus million plus followers. And yeah, I mean, we continue to make sure that both our organic and paid initiatives are balanced and cohesive. But we have not had many challenges as of late, in terms of kind of iOS changes or things like that have impacted a lot of brands.

Max Rakhlenko:

Yeah. I think to your point balance is the key word that we’ve been hearing a lot about recently. It seems like a lot of brands went 2D bond either channel, or how they’re approaching marketing, and now looking to scale back a little bit, and become much more balanced going forward. So, totally makes sense. And as you continue to add categories, and become a bigger part of your shopper homes, are you starting to see an improvement in your LTV to CAC ratio, and then just overall, where do you see the biggest opportunity to further expand?

Ariel Kaye:

Further expand in marketing?

Max Rakhlenko:

Just your LTV to CAC.

Ariel Kaye:

As we increase our assortment, I think that has a huge impact on our LTV. We’re really actually focused more on incremental when we’re looking at key KPIs, and growth, and success metrics. So, looking at the business less, and kind of taking a new lens on attribution, and how we are identifying opportunities. And that’s become a real focus for us and will continue to be the focus moving forward.

Max Rakhlenko:

Yeah. And I would imagine that shoppers are returning much more often, much more quickly than they have in the past now, as you offer a lot more categories, and you’re building trust and share wallet as well.

Ariel Kaye:

Exactly. Yeah, exactly. I think what’s been really exciting about our business is that while we did start as a betting brand, we, at this point now eight and a half years since launching we are seeing people enter across multiple categories. We’re seeing a lot of people shopping across multiple categories, and there’s not just one path that our customer takes on their journey. We see them coming back quite quickly. We see them moving from bedding to bath. We see them entering now in furniture. So we know that we’re appealing to our customers in different parts of their journey within the home. And as we add more assortment, that just increases.

Max Rakhlenko:

Sure. And then you’re also quickly expanding your store base, which really ties into the last question. So how do you think about the right physical footprint for you? What data do you leverage as you make these decisions? Whether it’s the city, the neighborhood, the exact street. So, just curious, how you go about that.

Ariel Kaye:

Yeah, sure. So, we’ve done some interesting exercises lately to kind of look at where we see long term, our retail footprint netting out. And we really do believe that we have the opportunity to open over 100 plus like around 100 plus stores in the next many years. As I mentioned, we’ll have 30 by the end of 22, and there’s a few different ways when it comes to choosing new markets that we approach our decisions. So, we’re looking for locations where our brand already resonates with the customers. So looking where our customers live, we like to be in neighborhoods where we know that we have communities. And then we also are looking at neighborhoods that have the right co-tenants. We love to be in neighborhoods that have a vibrant food and beverage presence as well, so that our stores become part of a neighborhood that is not just about shopping from 10 to 7:00 PM.

Ariel Kaye:

But really we can be visible on top of mind, for our customers as they’re eating dinner, and enjoying their evenings, and I think when we look at different markets, we’re diversifying our presence. So, we started really being on street level. Now we are moving into some premium luxury centers because that’s just where people shop in those cities. And so we take a very local centric approach to make sure that we’re in the right neighborhoods, that we’re by the right tenants, and that we are near people who are already Parachute fans, and can be very helpful, in terms of word of mouth and telling their friends and helping to get word out. We also know that people do love to touch, and feel our products. We see a huge halo effect on our digital shopping when we open a store, and we see a huge increase in traffic online, so that’s something that… To bring it back to marketing. When we think about our marketing mix long term, our retail presence will greatly impact the way that we think about marketing as it drives brand awareness.

Max Rakhlenko:

Yeah. And to your point, we do hear it often, whenever an online brand opens a store, you end up getting a really nice halo, both in-store shoppers coming in, trying the brand. And then it also does have a nice live to the traditional e-comm channel as well, so serves many purposes. And additionally to your point, it’s a really nice marketing channel as well that sometimes, or oftentimes be cheaper than traditional e-comm [inaudible 00:23:44]

Ariel Kaye:

Exactly. We really see that inflection point and believe that inflection point happens right around where we are today 15 to 20 stores. And so we’re excited to see how that impacts kind of the marketing mix in 2023, and beyond, as we start getting 30 to 50 stores.

Max Rakhlenko:

That’s great. Yeah. I think over the years, as you do continue to open stores, I’m sure that’s going to continue to inflect in a positive direction. And then just switching gears, we are traditionally big fans of retailers leaning into in-house design, as we think it’s a great way to build long term relationships, and unlock share of wallet with the shoppers. So just curious if you can discuss what you’re doing in this category, the benefits that you’re seeing, and then what’s ahead.

Ariel Kaye:

Yeah, absolutely. So, that’s one of the things that truly sets Parachute apart. All of our products are designed in Los Angeles. We’re working with kind expert craftspeople around the world who are truly the best at manufacturing, but we really own that whole process. We have an incredibly impressive design team, both on for our soft lines, and now our hard lines. And we have never kind of been a brand that’s bought off a line, or seeks to do so. Everything that we’ve done has been truly designed by Parachute. And we’ve built these incredible relationships with our manufacturers where they’re bringing us innovative fabrics, and they’re designing alongside us and really giving us true partnership in that sense. And so, that is something that is so important to us. We are also a brand that enjoys doing collaborations.

Ariel Kaye:

And so we’ve been able to collaborate and partner with some exciting brands that share design sensibility and an emphasis on quality, and being customer first. And that’s allowed us to test the waters, and kind of go outside the box in terms of design, but we’ve still, that does not change our philosophy. And, and those partnerships still are designed in house and maintain our standard for excellence. We’re really excited about our newest collaboration, which launches, it launches in April. And it’s a collaboration with an incredible interior designer named Jake Arnold, who is truly the designer of the moment, and is just doing such beautiful work. And so we’ve designed a limited edition piece with Jake. And so this will be kind of a trend for us moving forward. When we decide, as we look beyond our own design team really leveraging the talent of interior designers and other design minded leaders within the industry to help us think differently about our products, and texture, and detail, and design aesthetics.

Max Rakhlenko:

That’s interesting, you actually took my next question from me, but it sounds like that’s really the path that you want the company to take going forward. Instead of last year, you had a partnership with Crate & Barrel. So, just curious if we could see those types of partnerships, or now that you grow your own physical footprint we might see less of those, and more of you partnering with other leading designers.

Ariel Kaye:

Yeah. I mean, Crate & Barrel was a really, really exciting opportunity for us. We were in 80 plus doors, we were able to build a shop, and shop within those locations, as well as introducing unique colors, and exclusive colors for the Crate & Barrel shopper that we were only available in Crate & Barrel locations and online. That was a huge wholesale opportunity for us to test what that looks like. And we also were able to get a ton of interesting information around with retail, and retail penetration in which stores we’re outperforming. And that has, then, helped us inform our retail strategies. So there were a lot of benefits there for us, as well as of course, many benefits for them. It was their most successful collaboration to date, at that point. So, which is really exciting, but yes, I mean, I think we’ve used a similar model in Canada.

Ariel Kaye:

We launched in Canada, in last fall, and we partnered with Hudson’s Bay to create similar shop, and shops in 20 of their locations to allow the Canadian customer to touch and feel products first hand. So I think we’re being really intentional as we think about wholesale. Crate & Barrel was always designed to be a limited time offering, and I think that has been our approach has been more of a kind of test, and learn. A limited kind of more exclusive experience than taking a more traditional wholesale route, although we’ve now tested into that in Canada. Yeah, there could be more, we’ll see what happens. But we do love owning the experience. We do love owning that relationship with the customer, and owning just the way that customers experience the brand from end to end.

Max Rakhlenko:

That’s great. And you touched on Canada, how has that launch gone? We know Hudson’s Bay well. It’s a very iconic brand in Canada. So just curious to learnings, and does that make you potentially interested into entering other international channels, or do you stick to US, and Canada for now?

Ariel Kaye:

Yeah, I mean, for now we’re sticking to US, and Canada, the success, or the entry has been a success. We opened up a distribution center in Canada and we’ve seen a real appetite from that shopper. We are definitely keeping our eyes and options open when it comes to entering international markets that could be the right fit for Parachute, and are in sort of a discovery phase in terms of what comes next.

Max Rakhlenko:

Got it. That’s helpful. And you recently introduced a number of senior individuals to the Parachute family. What attributes do those leaders bring, and where do you see additional needs, or opportunities as Parachute does continue to very quickly grow?

Ariel Kaye:

Sure. I mean, so we’ve had this incredible growth momentum in our business, and really made sense at this inflection point to expand our leadership team, but we really… Whether it’s executives, or more junior team members we’re always looking to seek out people that are obviously exceptionally talented, who share our core values, who believe in the brand, who lead with kindness, who are curious, and really just have a passion for the brand. One of the benefits for being a consumer brand is that you often find talent who have a personal relationship with the brand, and really share the mission, and the vision, and again, share our core values. But yes, over the past few months we hired our first chief commercial officer who joined us from Amazon.

Ariel Kaye:

We hired our first chief merchandising officer who joined us after consulting for a few years with Parachute, but had previously been at Pottery Barn, and Gap. And we also just most recently hired our first CFO, and we are incredibly excited to have these brilliant people on our team. And they’ve all been able to scale companies have been part of incredible growth, both from a business perspective, from a diversifying category perspective. And so we feel very confident in our ability to continue our growth momentum with this additional leadership.

Max Rakhlenko:

Yeah. And to your point, I think it’s an incredible feeling when you’re able to add team members that truly love the brand that understand the brand that appreciate the brand. And it really makes the entire experience much more rewarding, I think.

Ariel Kaye:

Absolutely.

Max Rakhlenko:

And I can’t let you go without discussing your commitment to ESG. It’s something that Parachute really stands firm on. So can you just discuss some of your projects, goals and targets?

Ariel Kaye:

Yeah, sure. So, we are… It’s always been important for our company to think about our people, and our planet. And so we are doubling down on our initiatives in 2022, and beyond. These commitments are intended to further our ongoing approach to conscious consumption, and making products that customers really do feel good about will be climate neutral, certified, and announcing that officially on Earth Day. But all of our commitments are really focused on a few different key pillars, climate and earth, responsible materials, ethical manufacturing, and then diversity, equity, and inclusion. And so we have a very, a robust section on our website now that’s dedicated to our commitments and our timeline for continued initiatives. And we will be updating that frequently as we continue to evolve, and grow, but this will be a focus for us, and in a more public way, moving forward.

Max Rakhlenko:

Sounds like you’ve got so much on your plate. Lots going on at Parachute.

Ariel Kaye:

Yes, absolutely. A very exciting time.

Max Rakhlenko:

Yeah. So, with that, my last question for you, but what’s been the most rewarding part of the job? You’ve now led Parachute for many years, and obviously as we’ve discussed lots of big plans ahead. So, what really gets you motivated and is rewarding for you?

Ariel Kaye:

I would say two things. First, the customer. So every time I meet a customer who has had the pleasure of enjoying our products, and many of whom are lifelong fans, and have actually can like tell me about how their sleep experience has improved or the way that they think about the home has changed. And it never gets old. I’m so deeply moved and touched that our brand has an impact on people’s lives, and that we are able to so intimately improve their experience at home. It is so inspiring. And then I would say the other thing is really is my team. I’m so grateful to have such an incredible team of leaders who inspire me every day, who I constantly learn from, and feel like that I grow alongside. And so I would say that it’s really all about the people, and being able to continue to learn, and build a brand that I so believe in is truly the biggest gift. And now being able to share it with my own kids is pretty special, too.

Max Rakhlenko:

No, that’s great. Really enjoyed my conversation with you and look forward to all the progress and growth ahead.

Speaker 1:

Thanks for joining us. Stay tuned for the next episode of Cowen Insights.

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