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.
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