Traction Watch: The smart decisions leading Touch of Modern to $100M in sales

DEMO Traction will be in Boston on September 16, 2015. For more information and to register click here

The smartest companies know how to ramp up revenue quickly. Back in 2012, the e-commerce site Touch of Modern, which has daily sales on unique products, was just beginning to see growth. By 2013, they were approaching $20M in sales. By 2014, they had doubled that amount. Now, the company is on a trajectory to rack up $100M in revenue this year. The site’s annual visitor counts have also risen at the same phenomenal rate (approaching 8M this year) with pageviews(the clicks users make through a site) edging up to 300M.

 CEO and Cofounder Dennis Liu told Demo.com, that the e-commerce market has notoriously low margins, so the secret is to be incredibly frugal and to operate as efficiently as possible.

“All of our technology is built in-house and is vertically integrated including: the website, mobile apps, crm, inventory system, calendaring system, payments system, and fulfillment system, which means we can streamline processes and automate where possible,” he says, “For example, we don’t have an accounts payable team, as all of our checks to vendors are sent automatically.”

 Another example of this tight operational mindset: Liu says every new employee gets a new Apple computer with multiple monitors to improve their efficiency, but they spend “very little” on office desks because they all tend to work about the same. They use a model that separates “investments” from “costs” even though they are both expenses. Costs are tracked down to the last dollar, he says, and don’t have an associated ROI. They are happier to have a bigger budget and spend more for investments that have a higher ROI for the company.

 One of their smartest decisions was to write algorithms for how products are shipped. They can determine the best shipping box size based on the dimensions of the items, then determine which shipper offers the best rates for a given zipcode and total weight.

 The company has decided not to focus on short-term gimmicks to get people to buy one item. The main differentiators is that the site works like a discovery engine that finds unique and interesting products. Liu says many e-commerce sites have not figured out how to encourage repeat customers and tend to focus only on one-time sales. Because they are as much a curator as a retailer, Touch of Modern tends to get more loyal followers (a.k.a., repeat buyers).

 They also follow the Zappos model of low management overhead. “We tried to minimize the number of managers, especially early in the company’s history. Managers are great at large companies, but in a startup, they create a lot of operational overhead and generally aren’t as valuable as great executors,” he says.

 With revenues soaring, the pageviews going skyward, and customers coming back to discover more products, Touch of Modern seems to have the Midas touch right now.

Editor’s note: Traction Watch is a new column focused obsessively on growth, and is a companion to the DEMO Traction conference series, which brings together high-growth startups with high-potential customers. The next DEMO Traction will take place in Boston on September 16, 2015. Growth companies can apply to present, or those similarly obsessed can register here to attend.