Armed with the knowledge of a financial analyst, Charles Chanaratsopon knows what makes a successful business and how to manage that success. In 2004, he took that knowledge and applied it to an advantageous investment market and founded Charming Charlie, a women’s boutique and accessories store.
“I saw an opportunity, not only in an operating store but also in the realty business,” says Chanaratsopon, founder and CEO. “The capital or investment market was very frothy. So you could quickly develop shopping centers on leverage and build quickly.”
Deciding to break into the market for women’s accessories, Chanaratsopon saw an opportunity for big growth with little competition, and his plan has worked. Since 2008, Charming Charlie has been opening new stores at a furious pace, and today, it is one of the fastest-growing private companies in the country.
“The operating business had a lot of demand,” Chanaratsopon says. “A lot of customers were coming in and buying product from us. We had lines outside every day before the stores opened. People just loved the product. I wanted to figure out a way to grow even faster.”
For the last six years, that’s exactly what he has gone out and accomplished. He knew that with the right mix of employees, strategy and innovation, Charming Charlie could be big.
“From the very beginning, when we had three stores, I always thought we had the potential to be all over the country,” he says. “People always talked about how I had big aspirations and thought I was crazy, when at three stores, I thought we could be all over the country. Now we are all over the country, and I think we could be all over the globe.”
Listen to the consumer
Chanaratsopon saw an opening in the market for women’s accessories, due to a lack of stores that strictly focused on accessory needs instead of clothing. Only large department stores offered those products to women.
“Once we saw what the market looked like, we knew we had an opportunity to create a specialty store around it,” Chanaratsopon says. “We saw it as an opportunity that we could exploit, so we did.”
As Charming Charlie took off in the Houston area, Chanaratsopon knew he could grow the business quickly if he continued to offer what customers were looking for and wanted to see in the store.
“That thesis worked out and held very well for the first two or three years,” Chanaratsopon says. “As we opened stores, stores were very busy and business picked up. We went out and built another center and then another center and went out and did it again and again. As we focused on listening to the customer and building our team out, that was basically the steps for our success.
“The key thing is, you need to listen to your customers before you break into a market,” he says. “You can’t really go until you do a market feasibility or market study about what they need. Does it make sense for Charming Charlie to come; do they like the concept? We always explore to see what opportunities are out there before we do a big push. We test the different markets to see if the concept will work. Our concept is very portable, so we are able to now move quickly through the different markets.”
It’s all about making sure there is a net demand for what you sell, before you go out and start something.
“I think that is just moral hazard,” he says. “Whatever you plan, plan on not meeting it. Have a worst-case, base-case and an upside-case plan, because most of the time, it’s very unpredictable in the beginning. You have to mitigate the downside and make sure that you have contingency plans if things don’t go well in the beginning, because capital will be a constraint.
“In our first year or two as we solidified our playbook, we had a lot of key takeaways in ‘learnings’ and mistakes. So before we could go out and do a cookie-cutter approach, it took us a few years to make sure we had the right recipe for success.”
Everything starts and ends with the customer.
“My best advice is to go out and learn the customers, and make sure there is a need before you go out and build anything,” he says. “You survey your current customers and your noncustomers, and you ask them questions about what you can do better to improve. At the end of the day, our boss is the ultimate shopper. We just listen — that’s what we do. I don’t mean to make it sound so simple, but it is. We listen to what they need, and we do it, often. We spend a lot of money listening to their needs, and we try to give them what they want.
“We are not a tech company or a research group. We sell on experience and what we do is listen to our customer and make sure we deliver the best that we can, and that’s our mantra.”
Innovate and adapt
Growth in any industry naturally causes issues that must be overcome. The higher the rate of growth, the quicker a company has to adapt to that growth in order to succeed.
“You’re running at red line all the time,” Chanaratsopon says. “What I mean is when your car is running at 6,000 rpm, to get everybody used to running at that speed and understand what you’re doing is challenging. Not many companies grow this quickly, and that’s evidence that shows the percentage of retailers that can actually go out and do what we’re doing [is small].”
Charming Charlie has seen revenue grow from $9.2 million in 2006 to $51.9 million in 2009, a three-year growth rate of 463 percent. Chanaratsopon expects 2010 revenue to be around $140 million, and he realizes just how special his success has been.
“The odds are against you,” he says. “Five percent of businesses make it, and 5 percent of businesses only make it to $5 million. A very low percentage of businesses make it to a critical mass. So it’s very challenging to move at the current pace we are doing. It’s also very hard to change the mindset of your team when you’re managing three stores to now managing 100 stores. Your management team has to be open to change. When you don’t innovate and adapt to the business, I view it as binary. Either you innovate and you win, or you lose. There’s no common ground these days.”
In today’s economy, innovation and adaptation are very important to a company’s success. Chanaratsopon pointed to the examples of Linens ‘N Things and Circuit City, both of which went out of business within the last few years.
“That’s one of the great things about American capitalism,” he says. “You’ve got to be very sharp and very on, or there’s no room for you. You have to have the mindset to implement your information technology ahead of time and to plan for that is very challenging.
“You need an ability to split up what’s needed during your day-to-day part of the business. You also need to be cognizant of planning for the future and future roadblocks. You need to be able to set up radar or a systematic view for upcoming issues and be ahead of the curve. Have a cognizant view of how you spend your time between your short- and long-term strategy. Depending on what your long-term strategy is, set a blueprint to that plan and measure yourself constantly so you hold yourself accountable to your own business and personal plan.”
Hire smart, build smart
Since the founding of Charming Charlie in 2004, the company has grown to roughly 3,600 employees and has stores in 23 states. Continued success and the ability to keep opening stores in new markets, takes hiring more employees — and good ones at that. Chanaratsopon says the hardest part about getting the business up and running was finding the right people.
“This is a people business,” he says. “It’s hard finding the right team members to help you facilitate growth. There are a few things that are very challenging. No. 1 is finding the right people to help build a team. Whatever you do, be creative in the way you find people.
“We have gone through different people in the organization, and most businesses are team businesses, and without the right team, you can’t do it. You should overhire. If you think you have conviction in that your product or business will succeed, go out and get the best people that you can. Don’t be cheap on it.”
Start by focusing on attitude.
“You need to have people with good attitudes, specifically in a growing business. Attitude is half the battle. You also want people who have the same set of core values. A lot of people undermine that. When you have a small business that’s growing, you have to do many different things that you’re not accustomed to coming from a big retailer. People have to be able to adapt, and hiring on ability alone is not enough.
“My focus is trying to hire experts that are smarter than me in their specific function. I try to find people who are passionate about what they do and the business. I try to just give them the tools and support to help grow the business.”
A fast growth rate and an equally fast hire rate caused Chanaratsopon to adapt once more and create ways for his team to focus on common goals and visions.
“As you get more people, there’s a lot more people to build, as we call it, an ACA model with,” Chanaratsopon says. “That’s alignment, commitment and accountability. What we try to do now to achieve one goal is to find a team dynamic.”
In order to get his management team all on the same path and chasing after the same goal, Charming Charlie holds weekly one-on-one meetings and they build a company goal.
“That’s our road map to success or our blueprint to our business,” Chanaratsopon says. “That gets us all aligned and committed to the business, and we build accountability by having published goals that we need to achieve. It’s during these types of meetings that you need to follow up on your company goals. You need to make sure that people are executing to your goal. If I said, ‘Hey, I want to meet you in Florida.’ I’m sure you’ll get there. But if I said, ‘Hey, I want to meet you in Florida, and here’s a map.’ I’m sure you’ll get there faster. You need to have something mapped out. It may not be a perfect map, but you can change it along the way.”
One way that Chanaratsopon maps out his company’s future is by hiring ahead of time in order to acclimate new employees to the company and the goals it has set moving forward.
“Growth is challenging, but we weather through it by planning ahead,” Chanaratsopon says. “I invest in the future knowing that we are going to grow. I try to put our team players on early so that we can jell before we grow fast. A lot of people talk about what’s your capital budget plan. I talk about what’s my human capital budget plan. I need all these different team members to do this if we are going to open another 100 stores next year. I’m going to hire the overhead or infrastructure today, so we don’t have to do it last minute.”
Chanaratsopon emphasized that having fun and recognizing when employees do a good job are valuable aspects of creating a good rapport within your team. It also helps company culture to provide employees with ways to give feedback.
“Have a good feedback system,” Chanaratsopon says. “Your company is your customer. You want to survey about how your management team is doing. The same way you listen to customers, listen to employees.”
How to reach: Charming Charlie, (713) 579-1936 or www.charmingcharlie.com
The Chanaratsopon file
founder and CEO
Born: Houston, Texas
Education: I attended Loyola Marymount University in Los Angeles and received my MBA from Columbia University in New York City.
What was your first job out of college, and what did you learn from it?
I was a financial analyst at a bank, and I learned how to access money, how to put capital together, and how to understand a balance sheet and the ins and outs of financing businesses. I also learned about what makes a business work and what makes a business fail and the different metrics and how to measure against it.
If you could have a superpower, what would it be and why?
I wish I could fly. I always had dreams of flying as a kid. It felt pretty real in my dreams, so it would be pretty interesting to be able to fly around like Iron Man or Superman.
If you could invite any three people you wanted, living or not, to a dinner party, whom would you invite?
Rodger Federer, Warren Buffett and Barack Obama. I would be curious about how they think.