Touch of Modern, an online flash sale retailer, shifted its focus in 2015 from acquiring new customers to retaining existing customers in order to become profitable. The company invested heavily in its mobile app to encourage repeat purchases from loyal mobile users who generate most of its sales. It has optimized the app experience and implemented features like Apple Pay, video content, and push notifications of new sales. Touch of Modern also aims to reduce fulfillment costs by managing logistics in-house rather than outsourcing.

1. 4/10/2016 To reach profitability, Touch of Modern shifts focus to customer retention
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April 5, 2016, 2:44 PM
To reach profitability, Touch of Modern
shifts focus to customer retention
BY STEFANY ZAROBAN Associate Director of Research
Fresh off an estimated $100 million year and big investments in customer
acquisition in 2015, the web­only flash­sale retailer is focusing on building
loyalty and encouraging repeat purchases from mobile app users.
Finding and converting new customers is key for any startup web merchant looking to build a business and drive fast
growth. Keeping that business running in the long term, however, requires turning a profit—and key to turning a profit
is keeping customers loyal and coming back to buy and buy again.
That’s why web­only flash­sale merchant Touch of Modern Inc., No. 473 in the Internet Retailer 2015 Top 500 Guide,
was engrossed in the later part of 2015 and into 2016 on customer retention as opposed to acquisition, says CEO and
co­founder Jerry Hum.
“In the past it was a focus on growth at all costs,” Hum tells Internet Retailer. “Now, our focus is on profitability,
efficiency and the real nuts and bolts of running a business. We were not profitable in 2015 but we’re focused on the
road to it.”
Aided by $17 million in venture capital funding, Touch of Modern has grown at a rapid pace since its founding in May
2012. The merchant brought in an estimated $100 million in sales in 2015—up 233.3% from $30 million in 2014.
Among its many marketing efforts, Touch of Modern has invested heavily in mobile search ads to encourage shoppers
to download its app.
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2. 4/10/2016 To reach profitability, Touch of Modern shifts focus to customer retention
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Key in 2015 and this year, Hum says, are tweaks to that mobile app—the prime arena to drive sales from existing
customers, as app users are by far the most loyal. More than two­thirds of the merchant’s sales come from mobile,
and most of those stem from its apps.
The merchant, whose Android app is ranked No. 87 among shopping apps by e­commerce measurement firm
SimilarWeb (rankings factor in number of downloads and number of active users to the app), has integrated Apple
Pay into its iOS app for faster checkout. It also includes video on many product pages, and its filtering tools allow for
quick product searches by price and category.
Touch of Modern is also able to notify app users of new daily sales via push notifications. Countdown clocks on
product and category pages of the app display the amount of time remaining for each flash sale.
As it strives for profitability, Touch of Modern also banks on the efficiency of its fulfillment operations. The merchant
manages fulfillment in­house at a company­owned facility in the San Francisco area, and in­house developers built its
order management and fulfillment software systems, Hum says. This allows Touch of Modern to keep fulfillment costs
low.
“With outside vendors, you pay $3 to $5 to fulfill a box,” Hum says. “For us, it’s $1 a package in terms of labor costs. A
lot of companies use third­party fulfillment vendors, and that’s great for them because it’s a low initial cost, but at scale
it makes sense to bring that in­house. It’s tough and expensive to switch.”
Touch of Modern is one of the fastest­growing retailers in the upcoming 2016 edition of the Internet Retailer Top 500
Guide, due out next week.
TOPICS: e­commerce and profitability, fulfillment costs, mobile app refresh, Top 500 Guide, Touch of Modern mobile strategy

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