Modcloth's CASE STUDY

When Susan Gregg Koger and Eric Koger launched ModCloth in 2002, they had a single vision in mind — to transform the ecommerce landscape with an eclectic mix of unique, vintage-inspired fashion. From an initial budget comprising mainly of college savings and plenty of grit, they created a brand that not only resonates with fashion-forward individuals but also stands out in a saturated market. Today, ModCloth is a leading online fashion and decor retailer, known for its unique blend of indie-inspired women’s clothing, shoes, handbags, and accessories. The Journey from Dorm Room to Digital Powerhouse We marvel at how this company sprouted from humble beginnings. By 2006, thanks to their strong online presence and a burgeoning community, ModCloth saw its revenue skyrocket, according to The New York Times (source). With their innovative approach to ecommerce — directly engaging customers in the design process, their "Be the Buyer" program allowed customers to vote on which designs got produced — ModCloth set a new standard for customer-centric business models. What sets ModCloth apart? The company offers much more than just clothing. It sells an inclusive experience, one that champions body positivity and offers apparel in a wide range of sizes. According to Statista, 68% of American women fall into the plus-size category, yet only 17% of clothing made is in these sizes. ModCloth saw an untapped market and decided to cater to it, setting itself apart from competitors who are slower to adopt size inclusivity. Customer-Centric Innovation The "Be the Buyer" program is a hallmark of ModCloth’s innovation. Customers vote on potential designs to help decide what the company should sell next. This approach taps directly into community collaboration, giving customers a sense of involvement and loyalty that traditional retail struggles to match. According to a survey by Collective Bias, 70% of consumers say they place trust in the feedback provided by peers (source). ModCloth nails this, leveraging its community to drive product development and customer loyalty. Business Model: Curated and Customer-Centric Primarily operating on an e-commerce model, ModCloth sources products from hundreds of independent designers, maintaining a vast yet curated inventory. With 1.2 million Pinterest followers, 1 million on Instagram, and 3 million unique monthly visitors to their site, their digital footprint is impressive. Moreover, ModCloth’s revenue model involves the direct sale of these items at retail prices after purchasing them at wholesale, supplemented with shipping fees and exclusive in-app sales promotions. ModCloth’s subscription service, "ModCloth Stylist Surprise," offered mystery items tailored to customers' preferences, blending surprise with personalized curation — a business pattern known as mass customization. This aligns perfectly with the industry’s shift towards personalized retail experiences, tailored to individual tastes and preferences. Impact and Social Responsibility For ModCloth, it’s not just about selling clothes. Their mission is deeply rooted in empowering women and putting them at the heart of fashion. ModCloth appeals to the emotional and functional needs of its customers: offering quality and variety, while triggering nostalgia and a sense of belonging through their vintage-inspired designs. This commitment extends to their business practices. ModCloth collaborates with small brands and independent designers, creating a mutually beneficial ecosystem. It's a meaningful approach that supports creativity and entrepreneurship while offering a diverse product range. The Harvard Business Review suggests that partnerships like these, which align with a company’s mission, can lead to sustainable growth (HBR Editors, 2022). Revenue Streams and Financial Health ModCloth diversified its revenue streams through shipping fees and in-app purchases. Crucially, about 40% of sales come from their private label products, which allows for better margins and brand control. According to a report from NPD Group, brands that offer private labels often see higher customer loyalty because consumers associate these products directly with the retail brand (source). While financial specifics are tightly held, the company’s acquisition by Walmart through Jet.com in 2017 was a pivotal moment. It provided ModCloth access to greater resources, allowing for improved logistics, better inventory management, and enhanced customer service. As of 2021, ModCloth once again stands independently through a private equity group acquisition, reinforcing its unique position in the ecommerce fashion sector. Challenges and Future Outlook While ModCloth’s journey is remarkable, it hasn't been without challenges. The retail fashion market is immensely competitive, and maintaining a unique yet diversified product line requires constant innovation. However, by leveraging their strong community base and focusing intensely on customer feedback, ModCloth has managed to stay ahead. A report from MarketResearch.com confirms that companies succeeding in customer experience outperform those who don't by nearly 80% (source). Looking forward, ModCloth aims to deepen its community engagement, expand its product lines even further, and enhance its technological capabilities for more personalized shopping experiences. Conclusion ModCloth illustrates a path of success that's deeply intertwined with community engagement, keen attention to market shifts, and staying true to a core mission. Their story not only underscores the importance of a customer-centric approach but also highlights the potential of niche markets in a highly competitive landscape. As the company continues to evolve, we will undoubtedly keep an eye on how it reinvents and reshapes the fashion business through digital innovation and community commitment. In essence, ModCloth indeed lives up to its mission — to empower and inspire women all over the world.