Who Runs That?

Closing the Gap Between Luxury Goods and Affordable Fashion

Karla Gallardo, head of the apparel company Cuyana, explains what it takes to make minimalist products that still have royal appeal.

Side-by-side of Duchess of Sussex Meghan Markle, as seen holding a Cuyana saddle bag, and a Cuyana product image of the bag.
Duchess of Sussex Meghan Markle as seen holding a Cuyana saddle bag. Photo illustration by Slate. Photo by Rick Rycroft/AFP/Getty Images; Cuyana.

You’re probably loyal to certain brands. But have you ever wondered about the businesses behind them? I have. It’s why I launched Who Runs That?—the new interview podcast from Slate. In each episode, I’ll sit down with the CEOs of some of America’s most interesting brands and ask them how they came to lead their companies, and how they’re making their business work.

In Episode 1, I speak with Karla Gallardo, the co-founder and CEO of Cuyana, a direct-to-consumer luxury fashion brand that sells everything from leather totes and backpacks and purses, to apparel pieces like silk blouses, dresses, and Pima cotton tees. Read a lightly edited transcript of our conversation below, or get the show via Apple Podcasts, Overcast, Spotify, Stitcher, or Google Play.

Seth Stevenson: Tell me about how you launched Cuyana. What is the origin story? When did you begin with this?

Karla Gallardo: I’ll take you back all the way to my childhood, because that’s important. I grew up in Ecuador and I was raised in a home of fewer, better things. Not necessarily as a choice, but really because the financial situation in Ecuador is such that you grow up thinking of purchasing like you do of investing. You don’t just buy things—you invest in things, and you think of your purchases as long-time purchases, at least that’s the way it was when I was young.

At home, we really thought of everything we bought. My father was a very big influence in my upbringing. Not only in thinking [about purchasing things] this way and always focusing on quality, but also in pushing me to think bigger than the average Ecuadorian woman, and pushing me and my sister both to leave Ecuador when we were 18 and to get our education here in the U.S.

I left Ecuador with this big responsibility to take advantage of this great education I was going to get. Even though in my heart and as a customer, I always truly loved the fashion world and I used to make my clothes with a seamstress back in Ecuador, I embarked on this journey of getting an applied math degree at Brown University, and then eventually moving on to a banking career in New York in Wall Street.

So fast-forward to my days at Goldman Sachs, when I was a banker working in New York, having the job that I always dreamed of and that my family was so proud of. After a little over three years, I realized I was really reaching the top in terms of what success meant for my family at home, but it wasn’t really success for me as a person. I was really missing making more impact to the world. I had this business idea itching, which was the creation of Cuyana and this brand that would connect customers to the products and how they were made. I really wanted to go out there and do it.

And so, I left my great job and I moved to California to get my MBA at Stanford, because for me, letting go of such an incredible job wasn’t gonna be done from one day to the other. I wasn’t just going to quit and start this business. I really wanted to take it step by step and learn how to get started with a business, build a network that would support me through it, and then take that leap of faith. I ended up here in California and graduated from Stanford. I worked for about a year at Apple in the online store, getting experience on the digital side of the world. I had never worked in a digital channel before, and that was a great opportunity for me. And then, I left to start Cuyana.

What happened in all of those years of transition is that the market actually set itself up for the creation of Cuyana. On the one hand, the supply chain was wide open for small brands to work with luxury factories. Through globalization and the movement of a lot of the big brands to produce in Asia, there were a lot of amazing factories left behind in the world that were open to doing business with small brands. This is a moment in time back in the early 2000s.

How did you figure that out? How did you become aware that there were these small factories that maybe you could work with that were being left behind?

A lot of these micro-industries aren’t hidden. We’re talking about leather in Italy, leather in Argentina, cashmere in Scotland. The decay of these micro-industries was already on the news—factories were shutting down, family factories were going out of business. While everybody was moving on to China, for me, the opportunity [to] go back to those factories that have years of experience in specific luxury materials and see if we can work with the survivors.

In order to launch this, you needed to start getting funding. Tell me about that. How did you fund this dream?

Yeah, it was really tough back then. We were starting this company in Silicon Valley. Venture investors here were really our target. However, the hard thing about this was, No. 1: This was a business that held inventory, and investors back then were not investing in companies that held product. The second part is that investors didn’t really understand the concept of brand back then. They weren’t investing in companies that were building brand and making product.

And then the third challenge that we had is that this was a company made by women, for women. From a customer standpoint, it’s a beautiful concept and the branding is something we’re really proud of. The design of the product is something that fits a wide demographic. But the true intelligence is in the behind the scenes.

What we encountered is that when our audience was male, we were stuck on explaining what brand is and why all these beautiful front-end aspects of the brand are so important for a woman customer. Instead of spending time on our supply chain, on the unit economics, on the repeat rates, and on why this wide gap in the market of luxurious products for affordable pricing was really where the big business opportunity was.

And so, we shifted gears to pitching to the very few women venture investors that were out there. One of them, Maha Ibrahim from Canaan Partners, believed in the concept and we spent most of our time talking about the supply chain, the marketing side, and why this was gonna be a big business, and she wrote us a check.

Can you tell me what were the male funders you were talking to not getting about brand? What is the thing that’s hard to understand? What is your brand and what’s important about that?

Yeah, you know, No. 1, back then the model of choice for investors was the subscription model, so the question always was, well, why don’t you push a product every month? Why does the woman consumer care about where the product is made, or care about the quality, or why does brand matter? Can’t they buy a tote anywhere else? Why wouldn’t they buy it from Coach?

The bottom line answer really was about the fact that the consumer was changing, and she wanted a better choice. She wanted better quality, logos didn’t matter anymore, but the substance of the product mattered. So really getting to that intangible idea of what the customer of today was looking for was something that was hard to explain with words. Cuyana really addressed the customer need—it was not just one more fashion brand, we were targeting the customer that was tired of low-quality products out there that were overpriced.

You said there were these objections to companies that hold inventory. I’m sure when you were at Stanford business school, a lot of your classmates were launching things like apps where, you know, you don’t actually touch any product. Everything is a user and you’re connecting people, and you’re just off in the cloud somewhere. Did you feel some pressure to do something like that? Did you feel out of step with them because you were doing something that actually had a physical product and inventory?

No. I mean, to me this was so much more interesting because we were being so smart with our inventory. That’s what we spent all of our time with Maha on. We had developed this optimized model in the back end where we could actually be much better about inventory than the traditional retailer. The interesting thing is that a company like ours doesn’t burn the amount of money that a tech company burns, and so we are actually using that cash to buy product that actually has a value.

You said you felt like there was this gap between luxury goods and affordable goods. Maybe you can give an example of one of your products and what you get for that price, and what it’s up against—its competitors—and what you might pay for something else and what the quality would be for that?

Yeah. At Cuyana we have a saddle bag that’s made in Italy. It’s priced at $295. We make it at a factory in Italy where other luxury brands make their products. So comparably, a luxury brand that makes their product in Italy in probably comparable factories sells a saddle bag for $1,850, with similar materials, probably a little bit more hardware than us, but that’s what a saddle bag made in very similar factories with similar materials would sell at if you were buying it from a luxury brand. There is the piece of luxury that is the exclusivity factor and the premium that’s embedded into that price point, so when we think of luxury, we think of that price point including that brand premium.

So, you’re saying you might have the same materials, the same craftsmanship, but [your competitor has] maybe slightly different hardware and a name that [the customer is] paying the extra $1,600 or $1,500 for?


What’s the name? You can tell us. You can tell us the name.

Oh yeah, I mean, Celine has a saddle bag, Chloe has a saddle bag, most luxury brands that focus on brands have a saddle bag. It’s not exactly our design, but the price points are north of $1,500 for a saddle bag from a luxury brand.

But [the Duchess of Sussex] Meghan Markle was recently photographed holding your saddle bag, which must have been pretty exciting, right?

Yes. It was super exciting. She was actually wearing the mini version of our saddle bag, which is priced even lower than the $295, but yeah, it’s super exciting.

That is the perfect example of how Cuyana’s coming in to give a better offering to a customer. We’re not only making our bags with better materials and in better factories, and when I say better, by the way, I don’t mean that China’s bad, but Italy has a true history of leather making and true heritage in leather, so it’s more specific to that specific product—but you have Cuyana coming in to offer a bag that’s half of the price of these other contemporary bags, that’s made in a factory that’s more specialized in leather. And so overall, that offering ends up being much, much better.

How do you make your margins work if you’re still paying for the Italian factory instead of the Chinese factory, if you’re still paying for the high-quality leather, but you’re selling it for like $1,000 less or even more? How are you making your margins work?

Because we don’t distribute through other channels. We don’t have other retailers needing to make a margin off the product. We sell direct to consumer, and so our consumer is able to buy our products at the wholesale price. If we were to sell the saddle bag that’s $295 to our customers through another retailer, say Bloomingdale’s, or any other retailer that would carry Cuyana, the price point of that bag would have to be three times what it is right now. We would have to sell it at anywhere from $500 to $750. That’s when we start being priced at a similar level as the other contemporary brands.

Was this direct-to-consumer model, was that baked into your idea from the very start?


What that means is, it means people can buy the bags from your website, or you have a few brick-and-mortar stores that we’ll talk a little more about later.


But that’s where they can buy it. They can’t buy it on Amazon. They can’t buy it at Bloomingdale’s or any other department store or anywhere else, just directly from you.

Exactly right. That said, the other channels are starting to think about distribution differently because of the creation of all of these direct to consumer brands, which are the brands of the future.

When you talk about these other direct-to-consumer brands that are maybe the future, just for our listeners, what are some famous direct-to-consumer success stories so they can picture what you’re talking about?

Yeah, I mean, my favorite, and really the inspiration behind the direct-to-consumer model at Cuyana, was Warby Parker, and they were really the leading brand in this direct-to-consumer model. They’re focused on eyewear, but they were the first to think about it in this way.

We mentioned Meghan Markle. Meghan Markle was photographed with your saddle bag. I feel like for a women’s brand targeting women 30 to 40, that is like the No. 1 possible person that you could have your product photographed with. So, first of all, did you have any involvement in that or was that pure happenstance?

Yeah, you know, I can’t really comment on that, unfortunately.

OK. Fair enough. What is the impact of having Meghan Markle photographed with one of your products?

I mean, it’s great. I’ll say that there was a point in time where a celebrity or influencer wearing a brand’s product would make that brand a hit. This was back in the day where you didn’t see celebrities and influencers on Instagram every day being photographed with every single product they wear. That time is no longer here. We are so honored that Meghan Markle wore our bag. But it’s not the kind of peak of [our business]—it’s not what’s going to make Cuyana a success in the coming years.

You see them bump.

We see the bump. We see the bump.

OK. How else, other than possibly having some involvement you can’t comment on with having Meghan Markle carrying one of your bags, how else do you market Cuyana?

Our key ingredient is the happy customer. Most of our sales and most of our growth has been driven by our own customers’ word of mouth, and our customers buying other customers gifts from Cuyana. That’s how it started, and it continues to be the strongest driver behind our growth. We also have other efforts that we are actively doing internally to grow the business. We talked about retail being one of them. A refocus on digital marketing, as well. We do some grass-roots marketing, too. But all of these efforts are done in a way that continues to be very authentic to our brand.

Our goal is to grow the business in a way that the experience of the customer continues to be top-notch. I think what you’ve seen in the past few decades are brands growing too quickly, and quality getting deteriorated or the experience, or customer experience being deteriorated alongside that growth.

You’re probably not very different from your target customer in lots of ways. You probably identify with them fairly closely. Can you envision a time in your life where you are different from your target customer? Could that happen? Is that something that you think about or fear?

No. I actually don’t. I told you, we have customers that are older than 60 that come to buy from us. The awesome thing about this brand is that you don’t grow out of it. It’s a brand that can be your brand for all your adult years. So I don’t envision that, and that’s the cool part of building this, that even as I grow up in age, I get to understand the customer in her different stages in life and what those transitions are about.

We’ve done some studies, and it turns out that Cuyana’s a very appealing brand for women when they’re going through a transitional state: when they’re moving up in their career, and they need to start feeling more sophisticated or elegant in the office. When they’re going through the years of becoming a mom or getting married—when wardrobe changes need to happen, and you need to start thinking differently about what you wear. That happens all the way through the later years. Your body changes, babies happen, your taste starts changing. You start going from the trend focus to more of a classic focus, and that’s exactly what Cuyana’s about.