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Authored by Áslaug Magnúsdóttir and can also be found here: http://is.gd/seV3Xq 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 14, we examined the challenges of going corporate. Today, we delve into customer loyalty. 
RIYADH, Saudi Arabia -- I’m writing this instalment of Finding Your M.O. from our largest market outside the US: the Middle East. Specifically, I’m in Riyadh, Saudi Arabia, not in a hotel room, but relaxing at the beautiful home of one of our very first customers. This customer, whom I had only met once before, in a Paris restaurant, not only offered to host me and four of my colleagues in her beautiful home, but is also helping us organise an M’O event at the home of her close friend. This got me thinking about customer satisfaction and loyalty, critical ingredients of any successful business. Every M’O customer is important. But we are also mindful of the fact that our business is a classic example of the so-called 80/20 rule: about 20 percent of our customers drive about 80 percent of the revenue. This means that some customers are “top customers,” who we treat very well. Of course, the 80/20 dynamic is not unique to M’O. When I worked at Gilt Groupe, we set up a special division called Gilt Noir for the site’s top customers. But how do you reach top customers? And how should you serve these shoppers so they stay happy and (hopefully) loyal? 
FINDING TOP CUSTOMERS When I look at our list of our top customers around the world, it’s clear that a large portion of them did not come to M’O via traditional online marketing channels like search and banner advertising. Rather, our most effective channels for acquiring top customers have been: Personal contacts: Most of the top customers who started shopping M’O in the first few months came through the direct personal contacts of our founders, personal stylists and a few other employees. We all knew people (or knew of people) who we thought would be big shoppers on the site and we personally reached out to these people from day one. Personal referrals from top customers: Similarly, our top customers all knew people (or knew of people) who were likely to become top customers themselves, and they happily reached out to them on our behalf. It came as no surprise that women who love fashion tend to have lots of friends who also love fashion — and they love to share fashion with each other. So, in our first few months, while we were still a membership site, select customers were given the ability (and gentle encouragement) to refer their friends for membership. Even today, personal referrals continue to be a key driver of top customer acquisition. Customer events: From the very outset, influencers in a number of US cities and international markets have helped us organise events for local women who share a passion for luxury and fashion. These events have often helped us acquire many of our top customers. And here, in Saudi Arabia, our hostess and her close friend have carefully put together a party with a guest list that includes some of the most stylish and influential women in the country. These events are a wonderful way to personally get to know future customers and introduce them to the service. Do not underestimate the power of face time to convert prospective customers into repeat shoppers. Beyond driving sales, these events also provide a context for invaluable conversations that help us understand what top customers like and dislike about our business. What could be more important than one-on-one “focus chats” with the people who are spending lots of time and money on your site? Partnerships: Partnerships with organisations that have a similar audience profile are another effective way to reach top customers. In the case of M’O, we have established fruitful partnerships with Gwyneth Paltrow’s site, Goop, and high-end wardrobe storage service Garderobe. 
KEEPING TOP CUSTOMERS
Once you have developed a foundation of top customers, how do you keep them happy and loyal? Here’s what’s worked for M’O. Dedicated stylists: Every M’O customer can connect with one of our personal stylists via e-mail or phone to get assistance or advice. But we assign our top customers a dedicated personal stylist who gets to know them well, learning their style, fit and brand preferences in great detail. In fact, many of our top customers have developed close relationships with their stylists and talk frequently about shopping recommendations, upcoming company events, even gossip. This kind of a personal “seller-buyer” relationship (and the trust that accompanies it) have been critical to building and sustaining top customer loyalty at M’O. Who doesn’t want free fashion advice from a stylish friend? Invitations to shows/events: Although this is not always feasible, some of our top customers attend fashion shows or other fashion week events with us each season. This has been a total success. Interestingly, many of our top customers don’t live in major fashion capitals or work in the fashion industry, so these events are often eye-opening experiences that allow them to see just how the fashion world works, from the runways to the designers to the drama to the after parties. Little surprises: Just like in any relationship, little surprises and gifts go a long way to keep people smiling. For example, when we provided a number of M’O’s VIP customers with hand-drawn sketches of them wearing the very dresses and gowns they had just bought on the site, they were truly thrilled, both by the thoughtfulness of the gift as well as the personalised artwork itself. Of course, we are constantly exploring and testing additional services for our most valuable customers. Some of the things we are currently considering include personal tailoring services and complimentary delivery. Now, I need to help our hostess put the finishing touches on our Saudi Arabia party. We are all very excited about the evening ahead of us and all of the new friends we will make. And, of course, we are already dreaming up a special gift to give to our wonderful hostess to thank her for the generosity and warmth she has shared with us by opening up her home and heart.
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Authored by Áslaug Magnúsdóttir and can also be found here: http://is.gd/eGtyNK 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 13, we took a close look at how a founder and CEO should allocate time. Today, we examine the challenges of going corporate. 
NEW YORK, United States -- As in life, the time comes when every company needs to grow up. It’s an amazing but challenging process. Young start-ups are like babies: unrestricted by rules, processes or systems and constantly learning, adapting and growing. But as your company grows and takes on more and more employees, it suddenly starts to become an adult. And the lack of structure that was critical to fostering experimentation and growth at the company’s early stages becomes an obstacle to long-term efficiency, prosperity and success. Suddenly, you find yourself going corporate. As the CEO of Moda Operandi (M’O), I found myself facing “corporate adulthood” earlier than expected. But, as in life, I came to realise that growing up really isn’t so bad. Actually, corporate adulthood has a lot of benefits. But what exactly does it mean to go corporate and how do you know when the time has come to face and make this transition? 
When to go corporate? The signs that your company needs to transition to a more corporate mentality and culture don’t come all at once. They creep up on you gradually. So if you anticipate this change, you can make small incremental adjustments to ease into it. If not, you may one day wake up, look in the mirror and be shocked at the pimply awkward company staring back at you. One telltale sign that you need to go corporate is when the company’s founders are no longer able to spend time with each team member every day. Our very first M’O office had only four desks (and no windows). Mary Beth, our first intern (and now a merchandising assistant), sat next to me and I knew exactly what she was working on and where she needed help. I also knew where she was going to dinner in the evening and what her weekend plans were. But as more and more employees join a company, it becomes impossible to have this level of interaction with everybody. I no longer had access to everybody’s day-to-day feedback, nor could I directly share my experience and values with the whole office by simply turning around in my chair. Another sign is when it becomes more difficult to communicate strategy and priorities to employees. One of the beauties of a start-up is that this kind of communication happens naturally and effortlessly. Business goals are clear to everyone. Everyone is on top of the numbers. We held a monthly “guess how much revenue we did” competition and people were always close. So I was very surprised when I heard for the first time that some of our employees weren’t clear on business priorities. As you grow, communication needs to grow with you, deliberately and carefully (and loudly). When functional experts take over the role of generalists, change is in the air. This means fewer people playing multiple roles within the organisation. For example, in M’O’s first few months, our chief technology officer oversaw logistics, negotiated insurance contracts and reconciled bank statements. Today we have experts in charge of each of these areas. And as functional expertise starts to solidify within the company, employees will start to ponder their career trajectories within the organisation. This is another sign that your company is growing up: your people want to grow up with it. Finally, and perhaps most markedly, you know your company is going corporate when you start hiring corporate people to work there. Early innings hires tend to be individuals who love and embrace a start-up mentality. They live to multitask, to be jacks of all trades. However, they often lack experience — experience that can be injected by hiring individuals who come from established corporate backgrounds. But in order for these new people to be most productive and efficient, they often need defined structure and processes, where roles and lines are clear and specific. When you find yourself adjusting to these needs, you know you are reaching corporate adulthood. 
How to go corporate?
Okay, so you’re becoming corporate. What are some of the steps to make the transition a success? First, prepare a mission statement and a culture statement. You may have always thought these things are hokey but they’re not. People need to know what the company is all about. That’s what new people are asking about in the kitchen. Then, put in place forums for communication: employee meetings, cross functional meetings, CEO “open hours.” Never underestimate how much you need to overcommunicate even the simplest of things. You’ll also need to clarify organisational structures and roles. Perhaps half of employee malaise stems from employees (wilfully or not) stepping on each other’s toes. Create an “org chart” and get everyone crystal clear on what he or she is and isn’t supposed to be doing. Next, define career paths. Put in place a clear performance management system: performance targets and metrics, performance reviews, bonus systems, career progression. Just like your investors hold you to your targets, your employees need to be held to theirs. That means they need to understand goals and expectations. Set expense policies. This one is key. Becoming an adult means creating accountability for what is and isn’t acceptable spending. Set a code of conduct. And create cross-functional teams to tackle various corporate issues. So what does this all mean? Is instilling a corporate culture the kiss of death? Will people run for the hills? Of course not. The reality is: although some of these steps require a change in approach, they generally lead to more efficient business processes and smoother day-to-day operations. And people like smooth. For example, having functional experts lead each part of the organisation is typically a relief for everybody. My CTO and I were pretty clueless about warehouses when we chose the one we did in the autumn of 2010. It simply wasn’t within our area of expertise and it made the ride bumpy. Now, I have a COO who has personally overseen the setup of three warehouses from scratch. No turbulence, smooth sailing. Furthermore, going corporate doesn’t mean abandoning the “fun factor” of your former start-up self. Make sure you work hard to maintain the elements of your company that made it an awesome place to work in the first place. For M’O, this means Friday happy hours, an active ping-pong table, a puppy in the office (Olive), the annual cocktail making (and drinking) competition. Whatever you were, don’t lose it. Try to combine the best of each world. Try to marry the flexibility, fun and personal interactions of start-up culture with the operational benefits and efficiencies of a corporate environment. It takes work to do this, but it is achievable. And, as always, success starts at the top. In our new office, which we are moving into next month (our fourth to date), my desk will be in the middle of the floor. This means I will have easy access to our employees and our ping-pong table — and, of course, to Olive, who has been part of the M’O family since the day she was born. Authored by Áslaug Magnúsdóttir and can also be found here: http://is.gd/9eeNpj 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 12, we examined when to shift strategies. Today, we look at how a founder and CEO should allocate their time. 
NEW YORK, United States -- In 2000, I graduated from business school and joined McKinsey & Company as a generalist consultant. My very first project was an organisational design project for a multinational corporation and I was tasked with conducting an analysis of how the company’s CEO was allocating his time. I was given access to three months of his calendar, which was filled with meetings, conferences and travel from morning to evening every single day. After reviewing his activities, my boss and I felt the CEO spent way too much time on an airplane. When we discussed this with him, he was surprised by the analysis, but agreed that travel was something he might reconsider. Twelve years later, as the co-founder and CEO of Moda Operandi (M’O), I find myself in a similar situation: constantly on the road, not because I love travelling, but because I believe I need to do it to grow our company. But if a consultant were to come in and review my schedule, she might offer me the same advice I offered the CEO on that very first project. The broader question here is: how should a CEO spend his or her time and how does this change as the company grows? Since founding Moda Operandi, whenever I am asked how I spend my time, my answer has always been the same: “I spend my time on the area of the business that needs me most at that moment.” Recently, that’s meant scaling the international business, which is why I have frequently found myself on the road. But this is not how I spent my time when I started the company and I hope that it won’t be how I spend my time in the future. As a company grows and its senior management team evolves, so does a CEO’s schedule. Drawing on my personal experience at M’O, here’s how I think a start-up CEO can make the best use of his or her time during specific phases of a company’s life. 
Phase 1: Pre-launch During the first few months of starting a new venture, the question of where a CEO needs to focus his or her time is almost rhetorical. The truth is, you need to spend time on everything. You probably don’t have many employees. And if you do, those initial employees are not likely to be senior, so you will need to closely oversee everything they do. My first few months included: writing a business plan, fundraising, meeting designers, hiring lawyers and accountants, drafting template contracts, visiting warehouses, negotiating shipping agreements, studying international customs and duties regulations, hiring developers, creating flow charts for our website experience and backend, working with a branding agency, setting up an accounting system, reaching out to key contacts to create an initial customer list, writing company slogans, and trying to figure out how in the world to hire a CTO in New York City. During this time in a company’s life, a CEO needs to be a machine. I stopped going out. I stopped sleeping late on the weekends. My life was work and whatever was left over was dedicated to spending a little bit of time with my family. Every minute of every waking (and sleeping) hour was spent thinking about the business. This is a crucial time for a CEO to draw on experience and relationships to get things done. I was lucky to have a broad range of work experience — as a lawyer, consultant, investor and operator — and all of this experience was critical in those early days. I frankly don’t understand how young entrepreneurs who lack experience get a business off the ground. 
Phase 2: The first 6 months post-launch During this phase, you have caught your breath and are likely to bring on some senior managers who can help you get things done. But there will still be meaningful holes in the team. The CEO can temporarily fill some of these gaps, but you won’t be able to cover all of the outstanding functional roles. So your hiring decisions during this phase should be prioritized around filling the most critical roles in the business, plus any meaningful gaps in the founder’s experience or skill set. In the case of Moda Operandi, the biggest hole in our experience was our lack of technology expertise, so one of our very first hires was a chief technical officer, or CTO. Another critical head to hire was a chief marketing officer, or CMO, the person responsible for acquiring our initial customer set. With these positions filled, I was able to focus my time on the other critical functions, including finance, legal, growth strategy, HR, logistics and merchandising. 
Phase 3: Growth
By this stage, your business is up and humming and most of the key members of the management team are in place. This means the company now has experts on-board in each functional area who probably understand their specific area of expertise better than you do. This is when a CEO’s role shifts to overseeing three critical needs. The first is inward focused: keeping the business growing by prioritising tasks and making sure that everyone is working together smoothly and efficiently so that orders are fulfilled, revenue is booked and numbers are met. The second is outward facing: making sure the company continues to acquire customers and vendors. And the third is perhaps the most difficult: being something of a visionary and a worrywart all at once; someone who can both see beyond day-to-day operations and embrace innovations that are vital to the company’s future, as well as look back over their shoulder to see how the competition is coming along. It is undoubtedly challenging for a CEO to balance these three tasks. And in some ways, the way you allocate your time comes full circle: a CEO has to do a bit of everything. If this quarter calls for being in the office honing the machine, in the office you are. If next quarter requires you to grow your business abroad, on a plane you are. Being a leader is about filling in potholes as they arise as much as paving the road forward. The trick is to stay on top of the larger game plan, while also focusing on the smaller details. Authored by Áslaug Magnúsdóttir and can also be found here: http://is.gd/t2sQmv 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 11, we examined how to motivate and retain talent. Today, we explore when to shift strategies. 
NEW YORK, United States -- Moda Operandi (M’O) is less than two years old. But we recently announced a major shift in strategy. In addition to our original pre-order model (pre-order clothes today that will be delivered next season), we are launching in-season e-commerce (buy clothes today that will be delivered immediately) for which we will be buying and holding inventory just like a traditional retailer. As a result of these shifts, a lot of questions have been asked of me, both inside and outside the company. Why are we making these changes? Shouldn’t we just focus on our original business model and simply add new brands and customers? And if we are going to reinvent ourselves, why do it by adding a traditional e-commerce business? Here, I explore some of the key inputs and trade-offs that we examined while making the decision. Our original pre-order model is superior to the traditional retail model we recently added for a few important reasons. 
• Upfront payment: Before a product is actually made or delivered, we collect 50 percent of the retail price from the consumer and pass on 50 percent of the wholesale cost to the designer. • No inventory risk: 100 percent of what we order from designers has already been ordered from us by end consumers, meaning we can minimise inventory costs and don’t get stuck with excess product at the end of the season. • No discounting: As all inventory is sold at full-price at the beginning of the season, we don’t need to discount product in order to drive sales. • Fewer returns: The pieces we offer are special and not easily found elsewhere, so our customers generally prefer to tailor them rather than send them back should size be an issue. As a result, we see fewer returns than traditional retail. Conversely, the traditional retail business model we have adopted will require us to lay out cash upfront in order to purchase inventory, assume inventory risk, be prepared to discount excess merchandise at the end of the season and, in all likelihood, deal with a higher rate of returns. Furthermore, barriers to entry are significantly higher for pre-order than traditional retail due to operational requirements and the relationships that need to be developed with vendors, making our original model more defensible against competition. So then, why did we decide to shift strategies and adopt a traditional retail model? 
Better servicing our customers
We realised that, as much as our existing customers love to pre-order next season’s runway pieces, they also want to buy a dress for a cocktail party that’s happening this week and have been fulfilling their ‘buy now, wear now’ needs at other retailers. With the launch of traditional, in-season e-commerce, M’O will be able to service this need. Seizing a larger opportunity Perhaps the most powerful reason for the shift, however, was the sheer size of the opportunity that traditional retail allows us to tap. Simply put, the customer base that wants to buy product for immediate delivery is much larger than the customer based that’s willing to wait. Now, take into account the fact that our pre-order business is largely for expensive runway pieces and the size of our original target customer base becomes even smaller. Ultimately, the shift towards traditional, in-season retail will allow us to capture a much larger new customer base who simply won’t prepay to wait several months for next season’s fashion. Complementary models Finally, pre-order and in-season e-commerce make a great pair. Indeed, our pre-order sales generate data that can be used to make our traditional e-commerce buys more efficient. Keeping track of our best and worst selling pre-order pieces helps us better forecast consumer demand for these (and similar) items and thereby reduce the risk of getting stuck with excess product that needs to be marked down at the end of the season. As with all things in business, however, correctly timing a major strategy shift like this is critical. At inception, a company needs to have a unique and compelling business model. If we had tried to launch a traditional online retail business on day one, we would have faced some major challenges. Indeed, a big part of our initial ability to attract both brands and customers stemmed from the fact that our pre-order model radically differentiated us from other stores. Today, however, with a large roster of designers, a loyal customer base and a recognised brand, M’O is well-positioned to make the shift towards a traditional e-commerce model. |
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