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ModCloth’s Customers Are Always Right

The online fashion retailer that made it big by blurring the line between shopper and seller, then erasing it completely

Author Cristina Rouvalis Illustration Marta Antelo

industry

Just over a decade ago, Susan Gregg, then a 17-year-old business and German major at Carnegie Mellon University, hit upon a novel way of thinning out her bulging wardrobe. Along with her boyfriend (now husband), Eric Koger, she set up ModCloth, an online marketplace where she could sell her excess clothing.

The site featured a rather sparse collection of quirky thrift-store finds, for the simple reason that these were the clothes Gregg tended to wear. Its commercial aims were modest; as Gregg Koger puts it today, “I thought I could make some extra money for books.” ModCloth sold its first item, a vintage button-down shirt, in 2003. Today, the site has more than 500 employees in offices in San Francisco, Pittsburgh and Los Angeles, and generates more than $100 million in sales annually.

It’s a success largely built on the notion that ModCloth’s customers want to look like the company’s founder.

With a gamine haircut and an affinity for playful retro dresses, Gregg Koger has a Zooey Deschanel air about her (the actress is a ModCloth fan). When she set out to find funding for her enterprise, it was her look, as much as her business plan, that sealed the deal. “In walks Susan, dressed to the nines in this vintage-y dress and peacock tights,” says Ann Miura-Ko, managing partner of Floodgate Fund, one of ModCloth’s investors, recalling their first meeting. “She understood that girl better than anyone.”

Upon graduation, with her wardrobe depleted and more than 70,000 visitors a month, Gregg Koger devoted herself to finding similarly funky retro-inspired fashions to satisfy what had become a rapidly growing demand. Today, ModCloth’s 8,000 products include accessories and home décor. In large part, the company has thrived by staying true to its dorm-room origins. Even now, its most important organizing principle—and product—is Gregg Koger’s sense of style. “My entire closet is ModCloth,” she says. “I am the customer.”

In fact, Gregg Koger is so confident that her sensibilities are fully in line with those of the people who buy her clothes, she has increasingly given customers a say in the kinds of products she sells. In 2009, for instance, ModCloth launched a program called “Be the Buyer,” which invites customers to view designers’ samples and vote on which will become part of the collection. To date, 664 items have been picked from 3,271 samples, and the chosen fashions sell twice as well as others on the site.

In 2011, ModCloth took this two-way-street approach a step further, introducing “Make the Cut,” an ongoing contest in which armchair designers are invited to submit sketches for garments. Those whose designs are chosen receive a token cash payment (roughly $500), along with the rush of seeing their name on a label. So far, the contest has netted 24 designs and has further strengthened the bond between Gregg Koger and her customers.

Building on its role as a creator, rather than a mere purveyor of fashion, ModCloth last year launched its own private label brand. Inclusion, again, has been a keystone of the enterprise. The company presents ideas to shoppers, then incorporates customers’ input into the final product. It has even invited people to weigh in on new colors and lengths for one of its best-selling dresses, which would seem, at the very least, to violate the if-it-ain’t-broke principle.

For Gregg Koger, though, such a move makes sense. “Why should we sit in a room and guess what colors they want?” she says. “My customers have great ideas and a great sense of fashion. We should get people involved rather than just guess what they are going to like and buy.” In fact, she says, there is not a single aspect of the creative process where consumer input is not welcome—right down to the naming of fashion lines.

While Gregg Koger believes that this level of engagement allows her clothes to better reflect the tastes and interests of her customers, there’s no denying that the approach also fosters brand loyalty, which has been the driving force behind the company’s success. “ModCloth customers feel they have a stake in the business,” says Anne Brouwer, a senior partner at retail consultants McMillan Doolittle. “They feel as if it is a friend.”

Still, even with ModCloth there are limits to democratic ideals. After all, the firm was built on the quirky sensibilities of its founder, which still inform every move it makes. Gregg Koger’s influence in such matters, in fact, extends well beyond the commercial realm. “Susan curates my wardrobe,” says Eric, who now serves as company CEO. “Everything in my closet is Susan-approved.”

Cristina Rouvalis, a Pittsburgh-based writer, is fairly certain her bulging wardrobe will never lead to a multimillion-dollar fashion empire.

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