Moda Operandi Founder, HBS Alum Talks Fashion Curation, Data, and Fit

6/12/12Follow @xconomy

Moda Operandi, the New York-based startup that allows shoppers to pre-order pieces from luxury runway collections, announced a $36 million Series C round late last week.

That’s from a company that had only launched its shopping service a little over a year ago. The round was led by new investor RRE Ventures, and included return backers New Enterprise Associates, New Atlantic Ventures, and Conde Nast. (Moda Operandi powers pre-ordering for the publisher’s Vogue website.) The fashion and events company IMG and LVMH, the luxury company whose brands include Louis Vutton and Marc Jacobs, also participated in the deal.

Moda Operandi was founded by Vogue contributing editor Lauren Santo Domingo and Harvard Business School grad Aslaug Magnusdottir, a former fashion consultant who had a stint at Gilt Groupe. The company got started by offering limited-time online trunk shows that gave shoppers access to runway apparel that may never make it into stores. Shoppers pay a 50 percent deposit upon ordering and the balance when they receive their apparel weeks later. The new funding will be used to expand Moda Operandi’s model to also feature in-season merchandise available immediately, and to expand its presence globally, in markets like the U.K., the Middle East, Brazil, and China, Magnusdottir explained in a conversation this week.

In 2000 Magnusdottir graduated from Harvard Business School, which puts her in a group of entrepreneurs that have been doing a lot to disrupt the fashion industry over the last few years. She had plenty to say about how Moda Operandi stands up to traditional luxury retail stores, how data impacts designers, and what untapped fashion problems can be solved by startups. Read on for an edited transcript of our conversation.

Xconomy: Your new funding will be used in part to expand your business from pre-ordering to also offer in-season shopping. Was this always an area you had in mind? Why is now a good time for that expansion?
Aslaug Magnusdottir: It’s definitely something that we always had in the back of our mind. We are building strong working relationships with a lot of the best brands around the world and a customer base around the world. It made a lot of sense to add this feature.

Our trunk show feature is really unique. We are the only one specializing in that, and it will continue to be core to our business. But our customer is a customer that also shops in season. There are very few people that only order upfront.

We’re [expanding to in-season shopping] to better serve that customer and attract other customers who are hesitant to try that pre-order model.

That will be done differently than the trunk show. There will be a much narrower selection, really based on what the best sellers are from the trunk show. We get data early on of what customers are reacting to. We are also adding select commercial pieces that we haven’t featured during the trunk shows.

X: So are you competing with traditional luxury retailers now?
AM: Certainly that comes closer to becoming directly competitive to them than what we have been doing. What differentiates it is that offering will be highly curated and will be very much driven by the data upfront.

We have amazing fashion eyes in our company, but the beauty of the trunk show is we have this data and we really know what customers are reacting to.

We will be the place to go to for a very highly curated selection. We’re only working with a subset of designers in our existing business. There will be a significant editorial content supporting this; it will be built around themes and trends, and will have different, unique ways of displaying that.

X: How does data impact your business and luxury e-commerce more broadly?
AM: The beauty of what we’re doing is we’re giving brands real data. There are companies that are tracking what are the styles that customer are liking immediately after a runway show. That data is certainly helpful, but it doesn’t have prices attached to it. It’s very easy to like something. But what are the prices people are actually going to commit to? With our model, people have to commit to it. It gives a very real picture of what is actually going to sell.

There hasn’t been a way to access that information before our business model. We do hear it is starting to influence many of the designers we are starting to work with. This will become very, very relevant information for them to use in their planning.

Department stores have done physical trunk shows. But typically that’s happened later, after production has all been locked down. There hasn’t been the ability to react to the data. Now we’re providing this information early enough that there is an ability to react to it the first time.

X: What role does curation play in e-commerce?
AM: There are the shoppers that come to a site and know exactly what they want. Many shoppers that shop runway shows are very fashion savvy. They come to shop for that item. A lot of shoppers want a little bit more guidance. When they go into a traditional physical retail store, there’s an assistant who can help them and guide them.

Online you have to do it in a different way. We have personal stylists they can call and talk to, but people also want to be able to access that information easily on that site. They learn to trust certain sites. We are curating, in terms of the designers we pick and pieces we select, our customers can know these are really the items that will be must-have items. We will provide editorial guidance in terms of how to wear them.

Many people want to have an easy online experience. It’s becoming increasingly important.

X: You had a number of technology-focused venture capital firms in this latest financing round. Are VCs warming up to investments in fashion tech startups?
AM: I think VCs in general have really started paying more attention to the fashion space in the last few years. The success of Gilt, Rue La La, and Ideeli is what kicked that off to a large extent. They have really paved the path and made it easier for fashion tech entrepreneurs to launch their business.

When I first moved to New York, for part of my job I was raising money for fashion businesses, and that was an extraordinarily difficult task at the time. When you combine fashion and tech with these huge businesses having been built, VCs are much more understanding now of the potential. But some of them have not understood the significant potential at the very high end of the industry—at the luxury portion.

If you look at the numbers, full price, luxury retail actually grew faster than discounted fashion last year. That full-price luxury customer is coming online more and more, the experiences they’re being offered are more and more suited to what they’re looking for, and more and more of the brands are coming online.

Much of the growth is going to be in full-priced online luxury. Some of the VCs understand that, some are very focused on the discounts, and it’s all about the deal.

X: What problems in the retail industry do you think remain to be solved, and how are startups tackling them?
AM: One of the problems that I would like to be solved is the sizing problem. The single biggest barrier of people shopping online is still the question of what size is right for me. There are some companies that are really trying to address that problem right now in different ways. I’m very excited to follow that even over the next few months and year to see which of those models will stand out and will help businesses like ours to make the shopping experience easier and to minimize returns.

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