How Kendra Scott became a $1 billion business built on direct retail

With 80 stores, 10,000 annual nationwide in-store events, 2,000 employees, an in-house technology team, Kendra Scott has built her one-time department store brand into a direct-retail business valued at $1 billion.

According to CMO Tom Nolan, Kendra Scott started as a wholesale brand in 2002 because direct retail was too expensive. Retail stores now account for the company’s biggest sales channel by volume. With support from minority stake holder Berkshire Partners, a private equity firm whose deal earned the brand its $1 billion valuation, the company has been opening about 15 stores per year. Its first physical store opened in 2010, eight years after launch.

Next, it will open its first New York City store in Manhattan’s SoHo neighborhood on Sept. 4, which will feature in-store elements like a customization “Color Bar,” where customers can design bespoke pieces, and regular events.

Kendra Scott still has four department-store wholesale partners – Nordstrom, Neiman Marcus, Bloomingdale’s and VonMaur – and about 1,000 speciality boutiques in its retail network. But wholesale now counts for less than half of the business, a balance that more traditional wholesale brands are trying to strike in order to gain control over brand experiences and first-party customer data. Brands like Milly, Theory, Gucci and Coach have focused on direct sales and better-managed wholesale partnerships in order to drive more customers to store experiences and events, taking ownership of that sale and data.

“It’s not the end of wholesale, the end of retail or the end of any channel for modern brands,” said Richie Siegel, founder of retail adviser firm Loose Threads. “The future is going to look like a healthy mix of sales channels that let brands get control of data and scale outside their own means.”

For Kendra Scott, data collected in stores, from both its own and department stores, around what pieces are performing, what’s not selling, and how trends perform geographically, is used to make decisions around design, merchandising and new store locations. When it first began opening its store network, it focused on second-tier U.S. markets like Dallas and Charleston in order to ride the momentum built by department stores in that area. It used department-store trend reports to better place product according to geographic trends. But of course, much more data could be captured in its own stores and, not to mention, stores built a brand-first environment.

“Our wholesale partners are monumentally important. But ultimately, all you have is your own brand, and when your name is on the building, it changes the dynamic a little bit. It’s really important for any brand to control the message and the customer relationship,” said Nolan. “If you’re walking into our store, we can do a lot more to make you a customer for life.”

To be able to act on the customer data it collects online and in stores, Kendra Scott built an in-house system that funnels in-store and e-commerce purchases, as well as feedback and other customer behavior, into one place. It uses that information to make decisions, either by investing more in one style, updating a piece or retargeting customers with appropriate messaging down the line. According to Nolan, marketing used to be based on a “gut feeling,” and now it’s about “telling a brand story supported by facts.”

Denise Chumlea, vp of design at Kendra Scott, said the brand’s advancements around technology, like CAD software and customization, have pushed the pace forward — while the brand still releases new collections four times a year, it’s more frequently replenishing and adding additional capsules in response to customer demand.

The stores are the main touch point for customer response to new collections, and Nolan said that it will continue to open at the rate of 15 stores per year as long as stores are fueling more business.

“The key to all of it is that we’re always listening,” said Nolan. “We’re constantly trying new things. That’s been a relevant part of our success. If you listen to your customer, you’ll learn what they want from you from a product perspective and what they want to hear from a messaging perspective. It’s our job and obligation to respond to that as a company, if we want to survive.”

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