Chief Executive Officer & Co-founder of Cuyana, Karla Gallardo

Karla Gallardo, chief executive officer and cofounder of Cuyana, a direct-to-the-consumer accessories and fashion brand, believes a combination of brick-and-mortar and an online business is a winning formula.

The seven-year-old brand, which has stores in New York, Los Angeles and San Francisco, offers quality essentials for women, such as leather totes and makeup cases. The company’s philosophy is fewer/better. “We really encourage our customers to pause and think before they buy,” she said, a strategy that encourages brand loyalty.

Speaking at the summit, Cuyana explained that in the first few years, the brand focused only on product and scoured the world to take advantage of a growing trend where bigger premium brands were going to Asia for lower-cost factories. She began using these specialty factories in Italy and Scotland that focus on leather and cashmere, respectively, that they left behind to create a full assortment for the modern woman.

Cuyana knew they would be a direct-to-consumer brand and that there would be a lot of advantages to starting online. The barriers to entry and costs were lower, and they could gather better data. They could also enhance the assortment and control the message. “But, the human connection piece was something they couldn’t get online,” she said. “We were the first direct-to consumer brand that said physical stores would be a key ingredient of its growth strategy,” she added. There were two key things that led them to draw that conclusion. The first thing is that building a brand is very hard and doing it through digital interactions only is “pretty much impossible.”

“Digital allows you to build efficiency, and build convenience for your customer, but you’re not able to build an emotional connection with your customer through transacting online. Human interactions allow us to build stronger loyal connections with our customers and build that longer-term loyalty that we’ve seen in the past seven years,” she said.

She recalled when she was 21 years old and saved up some money from her banking job, she took a vacation to Paris and wanted to buy a luxury handbag. She remembers going into the Chloé store and “walking into a space that made me feel feminine. It smelled great like the Chloé perfume. The customer service was wonderful. I felt elegant and light on my feet. I purchased the bag, and walked out, feeling super proud, bag in hand and just transformed. And that experience can’t be compared to an e-mail that ends the transaction that tells you what your tracking information is, and the fact that you’re going to get your bag in two to three days,” she said.

The economics of opening a store of scale was more attractive than marketing digitally only, she said. The order size is one aspect. When a customer walks into a Cuyana store, she spends 30 to 60 percent more than online.  “When you walk into a store, you can smell the leather, we constantly hear how there’s no better version that seeing our product in person,” she said. While the company spends a lot of money on photography and to build a digital experience, “there’s nothing like seeing it in person.” There’s also the high cost of shipping associated with e-commerce, and as a new brand, returns can be high. “When you buy the product in person, returns are lower,” she said. In terms of customer acquisition costs, she said they don’t need a lot of real estate and the rent costs are pretty attractive. When you take into account customer acquisition, rent, staff and electricity, she said they’re acquiring customers at a lower cost than online.

Customers can order online and pick up in store. They own their own distribution center, and they monogram in store. When one walks into Cuyana’s New York flagship on Prince and Elizabeth Streets, one can learn about top-selling products, their philosophy, their values, the supply chain and can even get immersed at deeper levels. Customers can watch their bags be monogrammed. They have try-on areas for accessories throughout the store, and have wooden blocks so the customer can tell whether a 15-inch laptop can fit into their bag, or how much weight the bag can carry. She said customers say that their stores bring them calmness.