Touch of Modern's Profitability Pivot

A story about how Touch of Modern successfully pivoted from a growth-focused strategy to profitability by understanding their customer base.

"We had to decide whether to keep on the venture-funded growth path or make the pivot to profitability. We were practically near EBITDA profitable as a company. The way we ran the company, we always looked at it as swimming with one hand close to the edge of the pool - even though we were growing, we knew if we needed to become profitable, we could.

We decided to shift from growth to profitability around mid-last year. We did deep research about our most loyal customers because in Silicon Valley, the greatest cost is marketing and growth. When pulling back on that, we needed to figure out how to make up that revenue.

What we found was remarkable - we had a really loyal user base. 10% of people who visited Touch of Modern come back every single day, which is like gaming-level metrics for an e-commerce site. About 40% come back at least once a week, and 80% come back at least once a month. People who come back daily are 10 times more likely to buy than somebody that comes back once every 3 weeks.

We discovered that category preferences were completely inverted between our most loyal customers and occasional buyers. We couldn't cut any categories because new users wanted things our loyal customers weren't interested in. Instead, we beefed up the things our loyal customers wanted.

The results were clear - 80% of our revenue comes from the top 20% of customers. After making this shift and focusing more on repeat customers and less on user acquisition, we've now been EBITDA profitable for 10 months."