Not All E-Commerce Is Created Equal
One Kings Lane was the darling of e-commerce. At one point in 2014, the company valuation was nearly $1B, yet it was sold in August 2016 for $30M to Bed, Bath and Beyond. How can a company lose 97% of its value in less time than a toddler learns her full name? Keep in mind the company also had $225M in VC funding through its life, so its exit had a negative ROI of $195M or 650%.
The e-commerce business model is still sound, but execution is everything. Take a company like Touch of Modern. In many ways, they have a similar DNA to One Kings Lane on the surface. Both deal in limited time / limited quantity, discounted, luxury, edge goods for specific demographics. Both build an audience through membership and work with a multitude of suppliers large and small. Both live and die in e-commerce: a high-transaction, low-margin, uber-competitive battleground. Yet Touch of Modern has had healthy growth (from $9M to $100M in revenue) with only a modest investment of $17M from VCs. Why?
The answers may rest on the supplier side rather than the customer side.
Many e-commerce companies are obsessed with acquiring new customers. Companies spend a lot of digital advertising to attract those prospects, but online shoppers are about as loyal as the Boltons in Game of Thrones. If they find the product at a lower price, they’re going to move on.
Companies spend a lot of digital advertising to attract those prospects, but online shoppers are about as loyal as the Boltons in Game of Thrones. If they find the product at a lower price, they’re going to move on.
But Touch of Modern is built for customer retention and repeat buyers. As such, they spend more time curating and presenting products. They can’t be Amazon, which simply has everything. Instead, they have their niche audience and sustain them with products that they likely will want, rather than purely push “remnant inventory” delivered in a flash sale. Many of the suppliers they work with are one-hit-wonders, almost more art than product. In other words, many of their products are going public for the first time.
Suppliers Need to Trust the E-commerce Site
For a supplier to be willing to limit production of their products and avoid flooding the market – and give Touch of Modern exclusivity – they have to trust their e-commerce distributor.
That trust is evident when you’re on the Touch of Modern site. Curated products get the royal treatment with professionally photographed galleries, compelling word-smithing, and efficient, conversion-focused execution. Existing customers keep going back because there’s always something new to look at. It’s fun to window shop.
Everything on the backend is the true expense of an e-commerce business. Beyond the curation process, Touch of Modern is also streamlining as many steps as possible, including onboarding suppliers, order processing, fulfillment logistics, and inbound and outbound payments.
For this engine to run smoothly, the team decided it had to build the bulk of their technology in-house, integrating with key services that were outside its core competency.
Here’s a video from earlier this year, where Touch of Modern COO Jonathan Wu discusses how they built their e-commerce technology stack to enable their growth, reduce supplier friction, and maintain lean business operations.