Billionaire VC Chris Burch: To Compete With Digital, Stores Must Entertain

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By Lauren Indvik2013-07-21 16:18:14 UTC

These days, "retail startup" is generally synonymous with "new ecommerce site." Given the relative low costs of building an online shopping destination, combined with projections for online shopping growth across the globe, the notion of launching a retail brand through bricks-and-mortar seems a little misguided — if not downright foolish.

Unless you're J. Christopher Burch. The billionaire venture capitalist, best known for co-founding fashion label Tory Burch with his ex-wife, is building his portfolio of brands through an aggressive — and innovative — physical retail strategy. Among them: C. Wonder, which opened a 5,000-square-foot flagship in SoHo in late 2011 and now has 19 additional locations across the U.S.

What's making it work? One, an emphasis on a beautiful and inviting retail environment for "our girl" — the term Burch uses to describe his target shopper. Shoppers can dim fitting room lights and set their own soundtracks. Chairs are laid out for the comfort of men waiting for their shopping partners. Just like an Apple store, customers can avoid the line at the counter and check out from a smartphone-wielding sales associate instead.

The store isn't just designed to be pleasant: It's also designed to be novel and memorable, the kind of store you tell your friends about. Any customer who returns an item gets a free pair of earrings to compensate for the pain of returning merchandise to a store.

C. Wonder is just one of Burch's many current projects, which include lifestyle brand Monika Chiang, office supply company Poppin, and dozens of investments in technology, consumer beverage, office supply and hospitality businesses, among others. Last month, we stopped by Burch's Manhattan office to discuss his views on retail, what he looks for in an entrepreneur, and what other companies and sectors he's eyeing for opportunity. An edited version of our conversation can be found below.

A lot has changed since you launched your first apparel company, Eagle's Eye, in 1976. What's the same about shoppers today?

My customers, primarily women, still love clothing and shoes. They want to feel beautiful, to look good, to have different outfits, to be fashionable. In my first business, women would wait six or seven hours in line for an Eagle's Eye warehouse sale. Women today wait just as long.

At a conference in Singapore last year, you rattled off some impressive statistics about your C. Wonder flagship store: Specifically, you said that 38% of shoppers who spend 45 minutes or more in-store buy something before they leave. How were you able to collect that data?

We've been tracking a lot of data about customers, [including] how long customers spend in store and how many people purchase. We have a new system where we're putting RFID chips in all of our products, which we use to track inventory at the warehouse, and [soon in stores] to see if a product is picked up, if it's put down. [The chips are] going to be critical to understanding if a customer likes a product or doesn't like a product. It's useful to know if 30% of women tried on one dress but didn't buy... but 80% of them bought another dress. We'd have to ask, 'Does the dress fit better? Is it a better color?'

With customer data, we're trying to delve deeper into her, what her shopping patterns are, every aspect of her lifestyle and who and what she is. We are looking to use this data in more innovative and intimate ways.

Why did you decide to start C. Wonder as a brick-and-mortar, and not an ecommerce, business?

It was expensive. I'm not sure I made the right decision. [I] could have really powered a massive brand online. [But] I always believe in the in-store experience. I believe brands that are going to be really big will have it all — in-store, online, mobile. [At C. Wonder] we'll have everything.

C. Wonder has often been criticized for imitating other fashion brands, namely Tory Burch. How do you respond to those accusations?

Tory and I both get along really well, we have different lives right now. [Our stores are] very different if you walk in. Her clothing has much more designer look, we're much more affordable and aspirational in our own way. We're about color, music, a third of the price. It's a very different customer.

You said at a WWD conference in January that you "see big gaping holes in the market where people should go,” and go after them. What are those holes? How do you identify them?

We know they're everywhere. In apparel, in technology. I believe in hotels today there is a gaping hole in privacy. Holes appear as customers change… [and] women have changed dramatically. I believe 90% of products are bought by women. If you appeal to change in women, you have so many products to offer them since they're changing so fast. That can be as direct as teaching women how to start own companies and drive new business, creating food that's more natural and more healthy and fits in their budgets and schedules.

Here's an example. As our home TVs get better, more connected, we're changing. If you look at the NFL, they've done a terribly job of making the stadium experience as good as the home experience. So people would rather watch TV and watch a football game at home than go to a stadium. Games are not sold out like they used to be. The movie industry has done the opposite. [They've] done an effective job of making that seat more comfortable, the screens bigger, offering better food, and now they're talking about having even bigger screens.

I think about that with retail and mobile. We as retailers have to understand that with mobile applications, customers can shop on the go. We're lucky we build very pure brands, only sell our own things, distribute everywhere. Technology is so good, that stores and malls have to be entertaining. Shopping has to be something people love. Otherwise they'll sit in a restaurant, look at girl in dress, take a picture, find out that it's from J.Crew, open up an app and buy it. Why go to a J.Crew store? That's why we have to make sure we find a way to make shopping as entertaining as we do in other areas.

How do you make stores more entertaining?

[At C. Wonder] you can go into the dressing room, put on your own music, turn the lights on or off. A lot of gals don't like to look at themselves in the mirror, so they go in, put on their pants, change, get out. We want to meet every need. We have a disc jockey on the weekends, try to stay very '60s fun, motownish. We try to offer new and unique things. It's about entertaining our customer, making fun, making people smile. People want to be happy.

If customers return something, we give them a pair of earrings, they are shocked. We really care, so much so that it hurts you in business some times. It costs a lot of money.

Besides C. Wonder, what else are you focused on?

I'm focused on 30 things. I'm building out a resort in Sumba. It's the most backward-in-time place in the world, for people who want to be away from everybody. I invest in a lot of technologies and technology companies — Jawbone and Jambox, Powermat, wireless electricity, color kinetics, LED lighting, a fabric company called Coolcore that cools your body temperature down. [One of my] largest investments is in Liquipel, which can make your handbag, your iPhone waterproof. You could put it in the shower. There are nine fashion companies I'm launching.

You recently made an investment in Bib + Tuck. There's been a proliferation in companies (and investment) in the wardrobe re-sale space. What's the opportunity in this area? Why invest in this company in particular?

I invest in people who are passionate. I like [the founders'] energy and passion. It's a good platform, an interesting investment as they had a unique take on wardrobing and [competing against] eBay. eBay is like a store that's just white. [Bib + Tuck] is stylized, emotional, has a point of view AND customers want an environment, even online.

When investing, what do you look for in entrepreneurs?

Heart. People who can't sleep, who have a lot of curiosity, people who aren't arrogant, [who have] new ideas that are disruptive. I try to stay away from things that everyone is running to. Usually I prefer people who make products.

What do you look for in a new hire?

I ask about their family, where they grew up, what their best friend is like. I want to find out who they are as human beings, what kind of kindness they have, what excites them in life, what energizes them, how they relate to their last job, how they think about the future. [I judge their] speaking skills, the way they dress, look, feel. [They] have to be really passionate. I try to ask a lot of questions, some question many, many times to find out what is the truth. I know [about people] pretty quickly.

How do your pair creative and business talent?

Certain people have both. Creativity is tied to business — think of disruption, gross margin, think about offering customers great stuff. For some roles, [like] distribution, it's not as important.

Images: Burch Creative Capital

Topics: Business, c wonder, chris burch, christopher burch, Marketing, retail, Startups, venture capital