Authored by Áslaug Magnúsdóttir and can also be found here: http://is.gd/YfNBrs
NosaFashions claims no copyright to this material and is strictly for educational purposes.
Finding Your M.O. is an on-going series on The Business of Fashion penned by Áslaug Magnúsdóttir, co-founder and CEO of Moda Operandi, on her experience at the helm of a fashion-technology start-up. Last time, in Part 10, we examined the process of team building. Today, we explore how to motivate and retain talent.
NEW YORK, United States -- Any MBA programme will tell you that managing people is perhaps the biggest challenge that a business leader faces. At business school, I heard this message repeatedly. But, to be honest, it never really rang true for me. I have always thought of myself as being a ‘people person,’ someone with a strong sense of diplomacy who can get along with nearly anyone. And after business school, in my years as a consultant, a private equity director and an executive in the retail world, I found motivating and engaging employees to be fairly second nature. As the co-founder and CEO of a fast-growing start-up, however, I can tell you that those business school words of wisdom have truly sunk in. Keeping your employees happy and motivated is both critical and difficult to achieve. I dedicate a lot of time to it.
Some of the things that can undermine employee happiness and motivation levels are common to companies of any size and development stage. Others are specific to start-ups. Today, I’m going to focus on the major issues I’ve faced at M’O and the steps we have taken as a company to try and tackle them. While no CEO can keep each and every employee happy and motivated, every CEO needs to keep the company as a whole happy and motivated.
I have learned a lot along the way (though no doubt have more to learn) and hope this edition of Finding Your M’O helps others benefit from my experience.
KEY CHALLENGES AND ISSUES:
Clash of personalities. In any work environment, you are likely to experience a clash of personalities. Big egos clash with each other, creative people clash with business people, etc. What is somewhat specific to an early stage business like M’O is a clash between ‘start-up people’ and ‘big company people.’ At the very early stages of this kind of business, most employees tend to be ‘start-up people.’ These individuals are natural risk-takers who are comfortable operating without much structure in an ever-changing environment. They are willing to roll up their sleeves, wear multiple hats and be scrappy. However, as the company grows and roles become more defined, a company increasingly needs to hire ‘big company people.’ They bring with them valuable experience, but tend to like structure and process. They are used to having more resources to throw at any given task or problem. When start-up people and big company people collide, it can be like a spark to a powder keg. To be clear, some tension in this regard is normal, even healthy, and can lead to better overall results. But when the frustration boils over, resulting in some employees shutting each other out, or worse still, screaming matches, then the company as a whole can become a destructive environment in which to work and productivity can grind to a halt.
Uncertainty about changing roles. Relating to the previous point, in a start-up, an employee needs to take on tasks beyond those required by his or her formal role. Furthermore, as the company grows and new people come on board, roles and responsibilities often change, sometimes in unforeseen ways. Many employees find uncertainty surrounding their changing roles uncomfortable.
Uncertainty about career path. Start-ups typically don’t have clearly defined career paths. No employee can gaze into a crystal ball and clearly see his or her future at the company. This includes the CEO. Moreover, many functional areas are lean with only a few employees, so there aren’t conspicuous or established promotion paths. Not knowing where they will be in a year makes some ambitious employees uneasy.
Need for recognition. Let’s face it, there are so many things at a start-up that needed to be done yesterday that formal performance reviews are often overlooked. Between the pressures of getting a company funded and launching a product live, one can sometimes forget to give employees the recognition they desire and deserve. One of my most important learnings as a CEO has been remembering to take the time to provide the recognition and reassurance that many employees crave and need.
Rolling with the punches — quickly. Start-ups are always in a state of flux and process often needs to change very quickly to accommodate new business opportunities and growth. Amongst employees, tolerance for rolling with the punches and changing directions on the fly can vary greatly. As somebody who is comfortable operating in a dynamic environment that lacks structure, I sometimes underestimate the anxiety this type of business can provoke among certain members of the team. This can be true in particular for junior employees, who may be new to work in general and may not yet have learned how to read changing winds and tack with them.
Extreme growth targets are stressful. Another source of anxiety can be the strenuous growth targets that are set when you take on VC funding. While some employees are invigorated and emboldened by the need to meet these targets, others want to hide under the desks when the board meetings come around.
KEY STRATEGIES FOR ADDRESSING THESE ISSUES:
Over communicate. As the CEO, you need to talk to your employees constantly about these issues. This can be done in the weekly company meeting or one-on-one in your office or over drinks after work. But it is key that you make sure employees understand the tradeoffs of working in a start-up compared to an established company. Emphasize the positives, acknowledge the negatives, but make sure they hear your voice regularly talking about these issues.
Let employees freely communicate their concerns. This is closely correlated to the point above. Half of keeping people content and hard-working is getting them to talk to you about what’s bothering them. Help them to vent and listen to what they say. You might just learn something.
Lead by example. Smile. It may sound silly, but happiness is contagious and it starts at the top. And show employees that you are a team player; that you are not there to take sides, but to do what is in the best interests of the company.
Remember to thank people. Again, this can be in a group setting, or in private, but share the love. It works wonders.
Remember to tell people where they can improve. This is the flip side of the point above. Sometimes employees feel anxious because they know they are not doing something right but don’t know how to ask for help. Get in there. Steer them away from the rocks. They will feel relieved and you will get better results.
Create clear processes when possible. While start-ups are constantly in orbit, nailing down as much structure as possible can reassure those who need it. This might mean holding a weekly company meeting or having all employees use a common platform or tool. But injecting some sense of “gravity” into the atmosphere can help to keep people on track and reduce stress.
Eliminate overlap between roles. This one is tough. Start-ups often operate with a matrix structure where some overlap can provide strength. But to the degree possible, eliminate any major overlap in roles, as it can often only lead to the butting of heads. If you need more than one person on something, then be very clear with both people that they BOTH own the task and need to work together on it.
Ensure consistency between your performance management system and the behaviours you want to encourage. At M’O, when it comes to bonuses and career progression, teamwork is emphasised and rewarded.
Encourage social interaction between employees. M’O has drinks at 5pm every Friday, either in the office or at a local watering hole. Some of the team’s best ideas have come to life in a social context where people feel free and relaxed.
Have fun! As the CEO, if you don’t enjoy yourself, people sense it and nobody else will either. Keep a light heartedness to whatever you’re doing, wherever you’re doing it. People are always watching the leader. If you project fun, they will also have fun and great things will happen.
Authored by Áslaug Magnúsdóttir and can also be found here: http://is.gd/iIlbcF
NosaFashions claims no copyright to this material and is strictly for educational purposes.
Finding Your M.O. is an on-going series on The Business of Fashion penned by Áslaug Magnúsdóttir, co-founder and CEO of Moda Operandi, on her experience at the helm of a fashion-technology start-up. Last time, in Part 9, we looked at customer acquisition. Today, we examine how to build a great team.
NEW YORK, United States -- To build a successful business you need to have the right team in place. But what constitutes the right team? And how and when should it change and grow? Who are the key people you need at the concept phase? At the launch phase? At the scale phase? Who do you keep? Who do you let go?
These are the tricky questions I asked myself often in the early days of Moda Operandi (M’O). Getting the team right is not easy. It’s a careful balance between talent and timing, needs and “nice to haves.”
Here’s how I went about team building during key stages of the company’s growth and lessons learned along the way.
Phase 1: Finding a Partner
My first step was to find a partner and co-founder. While not every start-up requires a partner, it was important for me to bring in somebody who understood the concept and would complement my skill set. With a highly attuned aesthetic sensibility to complement my business acumen, I knew Lauren Santo Domingo would be the perfect partner. When she agreed, I was thrilled — and the team had just doubled in size.
If you think you need a partner, making the right choice is perhaps the most critical decision you will make for your business. Take your time to find somebody you really think will give your business the best shot at succeeding. Beyond filling holes that you may have, a good partner tends to share your uncompromising passion and conviction for the concept. A good partner keeps a thick skin and a cool head that helps survive long, late hours and fend off stress and criticism. A good partner stands side by side with you, in the best of times and in the toughest of times.
Phase 2: Getting the Product Live
Unless you are an engineer yourself, one of the most bedevilling challenges any internet start-up CEO faces is how to attract in the right technology talent in order to get the product live. It’s something of a catch-22, as good engineers are in such high demand that they command high salaries and often prefer to join businesses with a proven concept and cash, while you need someone to get the product live before you can prove your concept and raise money.
Knowing this, one of the smartest things you can do is find a partner who is technical. In fact, many investors will shy away from investing in a start-up if one of the founders is not an engineer, as the proof is ultimately in the product and they want someone with skin in the game to oversee the actual build.
Since neither Lauren nor I had a technical background, however, this was a real gap in our team and a significant challenge. We had limited resources in the early days and knew we had to keep the team lean. But we also knew we needed to move fast and launch the product.
As we aimed to go live by New York Fashion Week in February of 2011 (which was just a few months away), we decided to parallel track two approaches: recruiting a chief technology officer (CTO), while simultaneously hiring in an external agency to start building our platform. To be clear, this was not ideal, as Lauren and I lacked the technical expertise to really assess prospective CTOs and agency proposals. But we asked people for advice and recommendations and ultimately went with our gut and hired an agency whose engineers seemed really smart.
We were lucky. The agency did a great job for us, putting the early platform in place. Then we got lucky again: 5 months into our search, we found a CTO. With the combined around-the-clock efforts of the agency and our new CTO, we were able to deliver a functional site on time for our Fashion Week deadline.
Phase 3: Proving the Concept
Now that you’re live, with perhaps a couple of partners, a technology lead and some external support, the team issue becomes even more complicated. You’ve burned through cash to get the site up and running and you need to prove the concept to raise more money. But proving the concept requires a bigger team. Who do you hire with the money you have left to get the business to the next level and the investors back to the table?
M’O launched in February 2011 and had just enough cash in the bank to survive until May. So we decided we had to keep the team extremely lean. Just before launch, we hired a chief marketing officer to acquire customers, a producer to handle our photo shoots, a merchandising assistant to write product descriptions, an editorial assistant to write content for our magazine and a couple of customer care experts-cum-stylists to work with our customers. We figured these roles were essential. Everyone else was freelance. We took on interns. We all crowded into a tiny office space and plugged away.
We went live at 12.20pm on February 16th with our very first trunk show: Alexander Wang Fall/Winter 2011. Lauren made the first purchase, a dress and puffer jacket. I made the second, a knit sweater. Then, we waited. For the first three days orders were really slow. Trickles only. Those were a tough few days. I wondered whether we had been wrong about the whole viability of the concept. I didn’t sleep and was obsessed with staring at the site and our (lack of) sales. Then we realised that a small user interface issue was making the shopping experience confusing. We made a quick fix on the fourth day and the orders started flooding in. In fact, our first two months of sales were so strong that we were able to quickly raise a second round of financing significantly larger than our first.
The takeaway: be very careful about the size of your team. Hire only the key people you need to get by and nobody else. Use freelancers and interns for everything else. If you run out of cash before your concept takes off, you are dead in the water, so every dollar saved is very precious.
Phase 4: Prepare to Scale
Once you have your second round, you can take a breath and start to fill out the team properly while you prepare to scale. This doesn’t mean going nuts, but it means taking on a few more key people who can own areas of the business.
At M’O, we hired experts in each of the functional areas. Over the following months, we brought on a more experienced chief marketing officer, a chief operating officer and an artistic director. These senior hires were expensive for an early stage company, but we knew we needed to grow quickly and could not do it without this level of talent. At the same time, we began to hire across the organisation to support the various functional areas. We also moved offices.
Phase 5: Getting Big
As the business takes off, it will hopefully start generating meaningful numbers. You may want to raise another round. This is when you can really grow your team out.
Today, in our new office, with our latest round closed and most of our senior executives in place, M’O’s recruitment efforts have primarily be focused on broadening the team across various functional areas. We are now over 70 employees. A middle management layer has taken shape. In some cases, some of the early employees have stepped up and taken on the bigger roles within a larger business. In other cases, people were unable to keep pace with the growth of the business and have been replaced with new hires. Dealing with this is always a difficult part of being a good CEO, but sometimes good people no longer fit their roles.
Our current senior management team is my bedrock. As M’O has grown and taken on momentum of its own, I need to spend more and more time with customers, partners and investors. This means I don’t have as much time to address smaller issues that I used to welcome tackling directly, which makes it critical to have strong senior managers in place, reporting back to me only on critical concerns and updates. They batten down the hatches, while I steer the ship into the growth storm I see on the horizon.
Authored by Áslaug Magnúsdóttir and can also be found here: http://is.gd/62YW7P
NosaFashions claims no copyright to this material and is strictly for educational purposes.
Finding Your M.O. is an on-going series on The Business of Fashion penned by Áslaug Magnúsdóttir, co-founder and CEOof Moda Operandi, on her experience at the helm of a fashion-technology start-up. Last time, in Part 8, we examined the importance of managing investors. Today, we tackle customer acquisition.
NEW YORK, United States -- When our website went live, we all stood around a desk watching Lauren Santo Domingo, my co-founder and partner at Moda Operandi (M’O), and I ceremonially make the first two purchases. We held our breath. When the sales went through, our small team celebrated with a big cheer. But as the launch euphoria abated, we looked up at each other like the proverbial deer in headlights. We realised the hard part was just beginning. No sale would ever be that easy again. How were we going to keep the purchases coming? How were we going to find customers?
Today, nearly two years and millions of dollars in sales revenue later, M’O is often asked the same questions about customer acquisition that we asked ourselves during those early days. People tend to be interested in three things: (1) How did M’O first acquire customers with a very lean marketing budget? (2) How did M’O, a US-based company, acquire international customers? (3) Is offline marketing important for an online business like M’O?
As finding and retaining customers is critical to the success of any company, I want to address each of these important questions, one by one, with the hope that it can shed light on the process for others.
How we first acquired customers with a very lean budget
While every start-up is different, each one needs to identify its own target customer long before launch. There is little point putting together a customer acquisition plan until you have done this homework, as the plan will depend meaningfully upon whom you are going after. In the case of M’O, our target customer is a woman who loves fashion and is willing to pay full price for luxurious clothes and accessories. So our initial marketing efforts were focused on reaching and recruiting this customer in an elegant way that made her feel special. Since we had a tiny budget, we also had to be creative. Here is what we did in our first 6 months:
• Exclusivity: We built an aspirational site based upon an exclusive membership model. While the “members only” concept was a thorny issue for some our investors, we stuck to our guns, as we believed strongly that this would help us attract our target customer (which it did). Total cost: $0.
• Friends and family: We asked our initial members to refer their friends and family, which they generally loved doing, as they believed in the concept and it allowed them to offer access to ‘something cool’ to others. Total cost: $0.
• Influencers: We identified ambassadors in various cities and asked them to try the product. These tastemakers often liked the site and spread the word via their networks, helping our customer base to grow. Total cost: a few dresses here and there.
• Press: We had a small budget to retain a PR agency, who did a great job of landing us a few articles prior to launch about the company and our concept. Total cost: about $10,000 per month
• Editorial partnerships: We partnered with brands, sites and blogs such as Goop, Rachel Zoe and others where they integrated mention of M’O into their editorial in exchange for a special product sale to their fans on our site. Total cost: $0. The first time we partnered with Goop and Rachel Zoe, they simply wrote about us in their editorial, which drove traffic to us for which we did not pay. Later we have done specific paid advertisement programs with both.
• Original editorial: We created our own unique editorial content to drive traffic to our site, drive customer conversion and sales. Total cost: Editorial was not free, but employees were multi-tasking to take on this additional role.
• Affiliate relationships: We forged select partnerships with Vogue (where Lauren is a contributing editor) and others to generate traffic and sales from key third party sites. Total cost: a percentage of revenue on each sale, typically around 10 percent.
• Social media: We used social media sparingly, enough to learn what services and tools help acquire customers but without diluting the then-exclusive nature of our concept. Total cost: We had one junior employee creating editorial and content for the website, and managing social media.
And equally importantly, here’s what we didn’t do: No shopping credits for referring friends. This is a bad precedent to set and a great way to erode margins. No discounts on product. The entire premise of M’O is that product is full price. And no easy access to membership. In fact, we made it pretty difficult to become a member, with a long and cumbersome application form, which our staff would manually review. While this was inefficient, both for the customer and our team, the lengthy application created a feeling among prospective members that M’O was special and, therefore, worthy of receiving this kind of granular data. The data, in turn, helped us precisely understand the demographics of our customer, which was invaluable to our future marketing efforts.
How we acquired international customers
Finding and selling to international customers can be challenging for any business, particularly a start-up. This is why global expansion is often tucked away into the back of a budding company’s business plan as part of a later phase. Identifying and recruiting customers abroad is expensive and international fulfilment can be really expensive. So should a start-up even focus on this? And if so, how? Every start-up is different. Some businesses might be better served by focusing on their local market. The cost savings are meaningful and the headaches are fewer. But if you believe you need to go global, here are a few tips:
• Plan way ahead: Setting up an international customer base and fulfilment operation takes a lot longer than you might think. We knew that to succeed we needed to be an international company with a global customer base. We believed that one of our key advantages was our first mover pre-order model and that the only way to fend off imminent competition would be to set-up a presence at home and abroad. So we began planning for efficient and cost-effective worldwide fulfilment from the get-go.
• Learn on the cheap: Pre-launch, we didn’t really know where our international customers were going to come from. Europe? Sure. But where? Asia? Which specific countries? So we first did everything we could to amass data without committing to massive research and build-out plans. We jumped on pre-launch press opportunistically to learn about potential international markets, partners and customers. An introduction from an investor led us to a partnership in Kuwait, which has helped us grow our Middle East presence. An invitation from the fashion counsel of Brazil to attend São Paulo Fashion Week helps us tap a customer base throughout Latin America. The point: leverage international partners, press and local events to learn about selling abroad before you pull the trigger on a specific plan. The people on the ground in these markets are often your best allies.
• Execute on the data: After we had gotten our feet wet abroad by engaging with friends, press, affiliates and others, we started to review and make sense of the data to develop a plan. Customers in English speaking markets were low-hanging fruit, since little website localisation was required. Thus, the UK, Canada and Australia became near-term priorities. At the same time, customer response to our initial engagements in the Middle East and Latin America had been surprisingly strong, so we knew we needed to beef up in those markets, as well. Eventually the puzzle pieces fell into place where we were able to develop a clearer picture of our worldwide target customer base, both online and offline. We could now focus on the geographies where we had seen traction and well as those regions where we expected traction to soon increase (Asia, for example). Armed with all of this data, M’O developed a local presence in the UK to service customers abroad, translated the site into several languages and hired-in multilingual customer service managers. The key here: harvest your early foreign sales data and then build out a plan that targets fertile soil. You can’t do everything at once and less is definitely more, so pick one or two places to start, bring in partners and go deep.
Is offline marketing important to an online business?
The answer to this question, of course, depends on the business. Some online pure plays are proud to have never spent a dollar offline. But for us, in addition to the traditional online marketing we do (partnerships, SEO, etc), offline marketing efforts have been a important ingredient in our recipe for success. A few examples:
• Personal stylists: These are the experts who help M’O customers in times of need. Think of them less as “personal stylists” than “personal marketers.” They are not just answering phones and fielding questions, they are building relationships with customers, learning their tastes and helping them discover and purchase items they wouldn’t otherwise buy. Apple did an amazing job setting up its team of smart, personable “Geniuses,” not just to handle complaints, but recommend product. Remember, customer service managers can be your best sales people.
• Events: Whether it’s a physical trunk show (a private sale held for influencers and VIPs), a sponsorship (M’O’s sponsorship of the 2013 Metropolitan Museum Gala) or a trade event (Fashion Week), events have helped us cement our brand and product offering in the minds of customers. As noted above a meaningful percentage of our foreign customer base came from co-hosting events abroad. Meanwhile, during Fashion Week, our team makes sure M’O-branded iPads are visible in the hands of front-row celebrities. With attendees that include friends, tastemakers, partners and press, events can generate both formal and word of mouth buzz.
• Packaging: Packaging can be a powerful marketing tool. For M’O, our beautiful, luxury packaging is one of the things our customers look forward to receiving when making a purchase. We carefully design our packaging to be showcased at home, which helps promote the brand. However you ship, whatever you ship, make a statement.
• Customer outreach: The positive effects of picking up the phone and calling a customer to check up on her cannot be understated. And the ripple effects are meaningful. Customers really appreciate it and they tell their friends about it. So call your customers!
• PR: Of course, a great public relations agency can work wonders in the offline world. Whether it’s designing media kits, lining up interviews or coordinating events, the right agency can really help. Indeed, if there is anything that is worth spending your marketing budget on, it’s hiring a good agency.
Authored by Áslaug Magnúsdóttir and can also be found here: http://is.gd/BrCVcz
NosaFashions claims no copyright to this material and is strictly for educational purposes.
Finding Your M.O. is an on-going series on The Business of Fashion penned by Áslaug Magnúsdóttir, co-founder and CEO of Moda Operandi, on her experience at the helm of a fashion-technology start-up. Last time, in Part 7, we examined the complexities of serving global markets. Today, we tackle the topic of managing investors.
NEW YORK, United States -- Late one night, about a year after launching Moda Operandi (M’O), I received an urgent e-mail from one of my investors. He was making a last minute trip to New York the following morning and wanted to meet to review a host of topics and materials when he was in town. I was exhausted, but jumped out of bed and scrambled to prepare. At 3am, bleary eyed, when I had finally pulled together everything he had requested, I thought to myself, “This can’t be right. Shouldn’t investors be a help rather than a burden?”
Finding the right investors, as discussed in Part 5 of this series, is a critical part of any business’ success. But managing your investors is perhaps even more important and challenging. You must strike a balance. Of course, you need to engage your investors to get the best out of them. But you also need to avoid being distracted by investors, so you can get on with running your business properly.
Different investors will have different needs. Board member investors typically require the most information and are hands-on. They usually have put meaningful money into your business and want to protect their interests by helping to shape the company. Non-board member investors are typically less engaged, although some of them may have distinct opinions about how you run your business. Finally, a company will typically also have passive investors who prefer not to be involved in decision-making at all, but expect regular reports about how the company is performing.
To be clear, every CEO needs to manage investors according to the specific dynamics of the company they are running. Some companies require very regular engagement with investors, where all levels of decision-making are discussed. In other companies, investors give management the autonomy to run the business without looking over their shoulders. It’s up to the head of any company to understand the company’s investors and manage them accordingly.
I have learned three key lessons about managing investors: (1) you need to manage your time and know when to engage, (2) investors aren’t always right and (3) ultimately, it’s the CEO and founders who are responsible for the health of the company.
Manage your time and know when to engage
During fundraising, a large part of a CEO’s time is spent engaging existing and potential investors. So it’s very important that in between fundraising periods, you aren’t distracted from running your company. Your investors may not necessarily understand this. If they lack operational experience, they may not appreciate, for example, how a series of small requests can add up fast and prevent you from honouring your core responsibilities. Therefore, you must manage your time and your investors’ expectations, providing them with sufficient information, but not to the detriment of the business. Learn how to say no nicely. Practice in the mirror or with a loved one — and then try it on your investors. Even if they grumble at first, they will ultimately respect you more for it.
• Get rid of monthly board meetings
Early stage investors will often require monthly board meetings. For first time entrepreneurs, these meetings can be useful as they help solve problems and keep deadlines on track and costs within budget. However, once a company is up and running, monthly meetings can become an unnecessary drain on time. In most cases, quarterly meetings are adequate — and they give the company enough time to progress before being measured against investor goals.
• Standardise your board pack
Standardising your “board pack” (the materials you assemble and present to investors) allows management to save time and focus on running the company. A board pack should be a brief overview that highlights key data related to a company’s business performance. There is no reason to re-invent the wheel and create a different format each time you need to put a board pack together. Decide on a template and use it every time.
• Send out flash reports
One way to minimise time spent on investors is to proactively send out regular information about the performance of the business. Many investor questions and concerns can be nipped in the bud by simply communicating key data via email. Give your investors a monthly (or weekly) one page update on how the company is doing. They will love you for it.
• Know your numbers
Investors are all about the numbers and they want to know that their management team is also. This includes not just revenue-to-cost numbers, but all kinds of statistics and metrics. At M’O, for example, our investors often want to know about total visitors, first time visitors, bounce rates, total customers, new customers, the proportion of international customers, conversion, average time spent on site, average transaction values, return rates and more. As CEO, you need to know your key performance indicators (KPIs) like the back of your hand. Never walk into a board meeting without memorising these numbers or at least having them at your fingertips.
• Engage your investors when problems arise
Your investors should never be the last people to hear about problems with your business. If an important problem arises, notify your investors immediately. This is one of the reasons you have investors after all: to help solve problems. So use them. Pick up the phone and leverage their expertise and experience. Whatever the problem, a professional investor is likely to have gone through a similar situation at some point. And they will appreciate that you came to them for perspective and input.
• Involve your investors in key decisions
Related to the previous point, you should consult your investors when making key decisions. The small stuff you can handle, but if there are big decisions to be made, they need to be part of the process. It’s tempting to use board meetings simply as opportunities to update investors on company performance, but I recommend using this time to also talk about the big decisions that need to be made.
Investors aren’t always right
Like parents, investors are sometimes right and sometimes wrong. When M’O raised its first round, I was compelled to make my investors happy. So I sometimes followed their suggestions and direction, even when it didn’t make sense to me.
For example, early on, one of our investors didn’t like our company’s name and suggested we hire a specialist to help us find a better name for the business. So we spent tens of thousands of dollars on a naming company only to have them suggest mediocre alternatives. It was a waste of time and money. This experience taught me that investors are people, too, and are, therefore, prone to error just like the rest of us. As an entrepreneur, you have an obligation to listen to advice from your investors. But ultimately, you need to do what you think is right for the business. That’s why you’re in charge.
The buck stops with you
As CEO, one way or another, you are accountable for everything. The company will live or die by your direction and you need to deal with investors accordingly. Board members will inevitably express concerns. Listen to them, mull things over, talk to your management team, call mom and dad if you like. But know that, at the end of the day, you are responsible for what happens to your company.
Go with your gut, because if things go wrong, nobody is going to blame the board.
Authored by Áslaug Magnúsdóttir and can also be found here: http://is.gd/sRUk9T
NosaFashions claims no copyright to this material and is strictly for educational purposes.
Finding Your M.O. is an on-going series on The Business of Fashion penned by Áslaug Magnúsdóttir, co-founder and CEO of Moda Operandi, on her experience at the helm of a fashion-technology start-up. Last time, in Part 6, we asked the question: how wise is conventional wisdom? Today, we look at the complexities of serving international markets.
NEW YORK, United States -- Today’s fashion industry is truly international, with designers, manufacturers, retailers and end consumers scattered across the globe. And as an Icelander living abroad, it is doubly important to me that M’O is an international company. We hire employees from different countries. We showcase emerging designers from markets like Australia, Brazil, Israel and Scandinavia. We ship product to customers worldwide. And our website, customer care managers and personal stylists operate in multiple languages.
But being a global business comes with a number of challenges. Indeed, when it comes to things like multilingual support, customs and duties, and managing different currencies, deciding what to do, where and when, is tricky and M’O has learnt its share of painful lessons along the way. Here are some of the key challenges around going global and how we tackled them.
Customer Acquisition and Awareness
Going international means having international customers. But how do you acquire customers spread across the globe? Young start-ups rarely have extensive marketing budgets, which means pursuing the whole world at once is not an option. When M’O launched, for example, our marketing budget barely covered the cost of our PR agency. What to do?
Global companies need to serve global customers, so we launched with a small 24-hour customer service team that was spread between New York and London. We assumed most of our business would come from the US, so we focused the majority of our resources there. Our initial team also included Spanish speakers in order to better serve speakers of at least one other major language. And as we grew and became more international, we began to upgrade our customer service team to support additional markets and languages.
The take-away: start small but make sure somebody smart and personable (and, ideally, multilingual) is by the phone at all times. You will soon learn what you actually need and can adjust accordingly.
When M’O launched in February 2011, the site was only in English. While we knew that many of our international customers would not necessarily read or speak English very well, we decided to learn more about those customers first and then adjust our approach to meet their needs. Indeed, following customer demographic data, we partnered with an external online translation company to offer the site in Spanish and Portuguese and we are adding further language support gradually as our customer base develops in different geographies.
The key here is not to go crazy at inception and build overly robust language support. Localising your site to accommodate many languages is harder and costlier than it seems, whether the work is outsourced or done in-house. As with customer service, get your feet wet first and then integrate additional languages based on demand.
Pricing and currency
Two critical complexities of selling fashion internationally are: 1) some designers price their collections differently in different regions and 2) customers tend to prefer purchasing items in their local currency. Having anticipated these issues, M’O took a ‘wait and see’ approach to tackling them. We didn’t really know if these issues would be massive or manageable. We first launched with US dollar support only. But as our international business grew, this became a problem for both our designers and consumers, at which point we added support for Euros and Pounds Sterling and are now working on adding other major currencies to the site.
The lesson we learned: offer a few major currency options from the get-go. The value of being able to weigh and complete a purchase in a familiar local currency is extremely meaningful to customers.
Warehousing, Shipping and Duties
One of the big decisions you need to make when selling merchandise internationally is deciding where you store inventory. Selling product around the world can be very expensive when you consider the costs of warehousing and shipping, as well as duties that are typically applied to commercial goods when they arrive in the country of destination.
At launch, M’O warehoused and shipped all product from one location in the US in New Jersey. The location of this facility allowed us to ship to North America and Europe relatively quickly and cheaply. Initially, M’O offered free international shipping to encourage international sales, but this meant bearing significant costs. We then added an international warehouse in the UK to service customers in Europe, the Middle East and Asia, a move that reduced shipping costs considerably such that customers have been willing to absorb these costs as part of the purchase price. Finally, in order to help international customers anticipate any duties they may be asked to pay on receipt of their order, we partnered with an international shipping company to help calculate and communicate these costs prior to purchase.
The key for young businesses: project where your core customer is located at launch and warehouse your product in that market. If you grow a customer base elsewhere, you can expand accordingly. And be sure to carefully calculate who is going to cover shipping costs: you or the customer. While it may be attractive to offer free shipping, these costs can really add up, especially if you also offer a generous returns policy.
When going international, how you get paid is also complicated. Consumers in different countries prefer different payment methods and terms. In Japan, Paypal is a popular method of payment when shopping online; in China, UnionPay and Alipay are the most prevalent payment methods; in Brazil, customers are used to being able to split payments for online purchases across several months. And in some countries, consumers are still not comfortable using a credit card online.
Clearly, to be competitive, you need to offer payment methods that local consumers are used to. Here, M’O also took a gradual approach. We launched accepting only major credit cards. And now we are gradually adding additional payment methods to better serve our growing international customer base.
While you want to help customers everywhere pay in the way that is easiest for them, you can spend a lot of time and money implementing billing methods that might only produce nominal sales revenue. Go slow, start with the ubiquitous payment methods and expand one option at a time, based upon who is buying how much and where.
To effectively serve international markets, there are other issues to consider, as well, including differences in sizing, regulatory issues, the need for regional microsites and how social media is used differently around the world. But these are fine-tuning points that can be addressed after your global business begins to take off.
Overall, if going global is critical to your company, it’s important to remember that internationalisation comes with many challenges and should be pursued carefully and iteratively, one step at a time. Figure out which features and solutions are most critical to success and knock those out first. Then step back, assess how you’re doing and make adjustments.
Authored by Áslaug Magnúsdóttir and can also be found here: http://is.gd/KZfLi1
NosaFashions claims no copyright to this material and is strictly for educational purposes.
Finding Your M.O. is an on-going series on The Business of Fashion penned by Áslaug Magnúsdóttir, co-founder and CEO of Moda Operandi, on her experience at the helm of a fashion-technology start-up. Last time, in Part 5, we examined how to choose the right investors. Today, we tackle the topic of whether to follow conventional wisdom.
NEW YORK, United States -- In business, we often hear about conventional wisdom. There can be great pressure to do things the way things have always been done. But is conventional wisdom always correct?
To be sure, things are often done the way they are done for good reason. Trial and error has taught business leaders, often painfully, to steer towards an established set of norms and processes because history has shown that these practices increase the likelihood of success. Moda Operandi (M’O) is no exception. Indeed, the company has certainly benefited from following established business conventions and best practices. But some fundamental aspects of our business model and execution flew in the face of conventional wisdom. As a result, many early investors and partners were skeptical. And sometimes, so were we. There were moments when we weren’t sure whether to stick to our guns or follow precedent.
As a business leader, knowing when to go by the book and when to throw the book out the window is more art than science. Here are some examples of the issues we grappled with when launching M’O and how we sometimes had to disregard established wisdom to build the business we believed in.
Conventional wisdom says people don’t buy expensive, size-specific items online. Our website sells really expensive clothes and shoes.
The idea behind M’O was to give customers access to those special pieces that go down the runway but traditional retail stores don’t buy for fear of being stuck with expensive inventory. And I mean expensive. Many of the dresses and gowns that we sell are in the $5,000 to $20,000 price range. Moreover, these are items customers can’t touch, feel and try on anywhere, including at physical retail, because they have not yet been put into production. As you can imagine, some eyebrows were raised. “Don’t you want to start by selling less expensive items?” some of our early potential investors asked us.
About 60 percent of what we sell are expensive clothes and shoes that are size-specific and therefore may not fit the customer. But M’O customers are passionate about buying them because they are beautiful items that they might not be able to secure elsewhere again. Indeed, our shoppers often prefer to buy pieces and have them tailored, if necessary, rather than run the risk of not being able to get them at all.
Conventional wisdom says online shoppers look for the lowest price. We sell everything at full price.
M’O launched at a time when many insisted that, in order to be successful, fashion e-tailers needed to offer designer items at a 50 to 70 percent discount. The market was just recovering from a major economic downturn, luxury sales were in decline and the need to liquidate excess inventory was high, conditions that gave birth to the popular flash sale model. Indeed, when my co-founder Lauren Santo Domingo and I first began raising money for M’O, many investors asked: “So where does the discount come in?” When we said there was no discount, their response was often: “Why would a woman shop full price from your store when she can shop at a discount on Gilt or Rue La La?” Nonetheless, we disregarded conventional wisdom and launched at full price. We knew a certain customer type was being neglected online, a woman who lives for fashion and wants access to the latest pieces, not just discounted items from last season.
Conventional wisdom says online shoppers want immediate gratification. We don’t ship product for three to six months after purchase.
Amazon is generally considered to be the king of speedy e-commerce fulfillment. For our customers, immediate gratification comes in being able to order items straight off the runway, but our pre-order model simply does not allow for fast delivery. We take orders for items long before they have been produced, meaning the wait time for customers can be as much as five to six months. Has this been a nail in the coffin for our business? The opposite: by the time shoppers finally receive their goods, there has often been a substantial amount of media excitement generated around the items and our customers experience what we like to call “sustained gratification,” like holiday gifts that get better the longer they sit there, wrapped up and looking pretty, just waiting to be opened. Moreover, we discovered that the “buy and wait” model is not unusual in other industries, such as consumer electronics.
Conventional wisdom says people don’t want to pay before an item is ready to ship. We charge customers 50 percent upfront.
Many said that shoppers would resist paying for an item until it was ready to ship. But rather than a deterrent, some customers see our “fancy layaway” model as a draw. They actually like being able to split the payment for expensive items into two parts. As one journalist in her 20s described the psychology to me: “You have doubled the dress price I am able to afford. I used to spend no more than $500 on a dress. Now I can buy dresses for $1,000 since I only have to put $500 down at a time!”
Conventional wisdom says people demand a shopping experience that is as frictionless as possible. M’O’s early shopping experience was anything but easy.
Sagacious business leaders will tell you to put as few barriers as possible between your customer and a sale. But in M’O’s first months of operation, we created demand by putting substantial hurdles between potential customers and our product. By making M’O an exclusive, by-invitation-only store to which only a small group of friends and influencers were given access, fashionistas from around the world were drawn to the site like bees to a hive. These prospective members were asked to complete a comprehensive application containing questions on why they wanted to join M’O, who had referred them, which brands they liked and more — all of which was very useful information that helped us better understand and manage our customer base and product mix. Since then, M’O has replaced its members only model with an open approach. But the moral of the story is: sometimes you need to create friction to get traction.
Conventional wisdom says online businesses need to prove their concept locally before expanding globally. We starting shipping product to over 250 countries on day one.
Having grown up in a country where there was limited access to high end fashion, one of my key motivations behind creating M’O was to give women all over the world access to the latest runway styles. Also, I was wary of copycat businesses in other geographies popping up while we were still perfecting our US business. So despite the admonishments of many investors, partners and mentors, who felt strongly that we should first get it right in the US before branching out, we launched with the ability to ship product almost anywhere.
To be fair, building a profitable global business is easier when you are selling $1,400 dresses, and not $20 sneakers. There is enough margin to cover the costs of global shipping and handling. But the decision to ship product around the world has served us well. Twenty percent of our revenues in our first year came from outside the US. And this year, it’s likely to be closer to 30 percent.
So should you listen to conventional wisdom or not?
In business, it’s a good idea to learn the rules and listen to conventional wisdom. There is generally a reason things are done the way they are done. But don’t be pressured to fall into line if you think your business or personality require something different. Remember, the genesis of groundbreaking ideas and business models can often be traced to business leaders who dared to step off the well-trodden path and venture into the forest without a compass.
Authored by Áslaug Magnúsdóttir and can also be found here: http://is.gd/ZlER35
NosaFashions claims no copyright to this material and is strictly for educational purposes.
Finding Your M.O. is an on-going series on The Business of Fashion penned by Áslaug Magnúsdóttir, co-founder and CEO of Moda Operandi, on her experience at the helm of a fashion-technology start-up.
NEW YORK, United States -- Last month, in Part 3 of this series, I wrote about the importance of putting together a good business plan to focus your company and drive the fundraising process. But just as critical as building a good plan is finding good investors to read it and put money into your business.
Raising money is a two-way street. You need to make yourself attractive to investors, but you also need to select investors who are right for you. Of course, based on your business concept, industry experience and relationships — as well as where you live and the macroeconomic climate — you may be forced to take money wherever you can find it. But nonetheless, you need to understand that there are many types investors with different interests and motivations and a wide range of resources, track records, expertise, relationships and reputations.
1. A RANGE OF INVESTOR TYPES
When you start fundraising for an early stage business, you need to be clear about exactly what you are looking for from a potential investor and why. Key investor types include friends and family, professional angel investors, venture capitalists (VCs) and strategic investors. And each type offers specific advantages and usually invests at a specific stage of a company’s lifecycle.
Today, Moda Operandi (M’O) has approximately 20 different investors of various types. But the sequencing of our investors was somewhat atypical. VCs like New Atlantic Ventures came in ahead of angels, while strategics, including Condé Nast, IMG and LVMH, invested earlier in the lifecycle of our business than we had anticipated.
Friends and family: As the name suggests, they are your friends and family members who invest because they love you. F&Fs typically invest the earliest stage of the venture. They probably don’t have industry expertise and don’t want to be particularly involved. For M’O, my co-founder Lauren Santo Domingo and I raised a small seed round from F&Fs in June 2010. This allowed us to get a small office space, mock up some site designs and start putting key contracts in place. But on a parallel track, we started meeting with VCs and strategic investors. We were on a mission to launch fast and therefore kept several balls in the air.
Professional angels: These are individual investors who make regular investments in businesses and often bring deep industry expertise or relationships to the table. They are typically investing for themselves and aren’t bound by the bureaucracy or exit pressure that can burden other investors. They can be very passionate and hands-on, adding real value to the mix. While professional angels didn’t invest in our seed or Series A rounds, surprisingly, they took part in our Series B and C.
VCs: These are professional investment firms who help companies grow and then divest to achieve a maximum financial return. Many partners at VC firms are former entrepreneurs themselves or have worked with enough entrepreneurs to know how to predict success and failure. While VCs bring immediate credibility to a company, they are under extreme pressure to maximise short-term value so that they can exit and realise their return. One of my early investors told me: “VCs have a herd mentality. They want to get what everyone else wants to get. The key driver for them is to not lose out to their competition.” Indeed, by our Series C, this became clear. The round was greatly oversubscribed, meaning there was too much interest, and not all members of the herd made it. But the VC we picked to lead the round demonstrated an ability to lead rather than follow. They liked us for us, not just because other investors showed interest.
Strategic investors: Strategics are investors you engage not just for money but for the non-cash synergies and resources they bring to the table, for example, industry expertise, infrastructure and relationships. Importantly, they are investing, not just for the money they hope to make, but because the product or service you provide compliments their existing business. As a result, strategics are often deeply involved in your operations. Usually a strategic investor will join at a later stage, when your business is up and humming. And in many cases, a strategic will be the company that eventually acquires your business. Of course, strategic investors often don’t want their competitors investing or working with your company, so you have to be careful about whom to ally with. At M’O, Condé Nast was an early strategic investor that saw synergies between our business and their Vogue property. Later, LVMH and IMG invested, as several of the brands we sell on the site are owned by LVMH or hold fashion shows managed by IMG.
2. WHAT MAKES A GOOD INVESTOR?
Looking good on paper: When reviewing potential investors, key criteria to consider include reputation, their previous investments and the size of their fund.
Shared values and objectives: Feeling out your alignment with an potential investor on values and objectives is critical.
Then there is the magic: Just like in dating, the chemistry needs to be there. This is perhaps the hardest element to find and you can, of course, live without it. But if the magic is there — that intangible je ne sais quoi that inspires you to work with this person — you are likely to have more fun building a company with a fruitful outcome for everybody. I feel fortunate to have a couple of investors on my roster who fall into this category. They help me to build a better business with a smile on my face. When you find these kinds of investors, hold on tight. If you play your chips right, you may have them investing with you for life.
But ultimately, of course, the terms of any deal matter a ton. You can find an investor who ticks all the boxes above, but then lays a mediocre offer on the table. More often that not, however, a good investor who sees things your way puts good terms on the table. They, too, are focused on building a bigger and better business, not rushing to bake and sell a smaller pie.
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