Customer Retention: A How-to Guide

0:00For us, we've chosen the word responsibility, and you'll see that on our site, we actually never use the word sustainability anywhere, primarily because we felt like it was our responsibility to really be thoughtful about how we talk about how we talk about it's going to be a little bit of what's your head to think so much more. Hello and welcome to Shopify on location. I'm Shuang Eser Shan coming to you from our space in downtown San Francisco. When you think about San Francisco, what comes to mind? Tech, nature, maybe great sourdough? You're probably not thinking about fashion, but Jessica Lee is.

0:40She co-founded Modern Citizen back in 2014. Today, she sells clothing that's both luxurious and versatile that can transition from the office to dinner and each stop in between. A huge part of her company's success is customer loyalty. In fact, half of Modern Citizen's sales last year came from returning shoppers. Jessica is here now to talk about what it's like to run a fashion business in tech-heavy San Francisco and what is next for the brand. Jessica, welcome to the show. Thank you so much for being here. Thanks for having me. So why isn't San Francisco known for fashion? After all, brands like Gap and Levi's are actually based here.

1:23Yeah, totally. So, you know, obviously, as you mentioned in the introduction, San Francisco is very much a technology city and synonymous with technology, but it is also synonymous with just great brands across the board. So Gap that you just mentioned, Levi's, both were businesses that were founded here, big retail giants. It's actually how I started my career, working at Gap Inc., learning all about kind of like the business of fashion and the retail business. So I don't know why, actually, it's not really like mentioned as much. I think it just has a long history. San Francisco is also, I think, as a city kind of known as sort of like a maverick city, you know, a place where you can kind of do things your own way.

1:56You know, obviously on the West Coast, I think that has that general spirit. So, yeah, hopefully people will know more about San Francisco and fashion and its synonymousness after this podcast. For a lot of people who want to break into the fashion industry, they might have looked at your old position as perhaps a dream job. But you wanted to leave that stability and create something new because you noticed that there was something missing. What was missing in the fashion scene back in 2014? Yeah. So at that time, I was mentioned as I worked at Gap Inc. in strategy. And a lot of my job was working on M &A, what we would call mergers and acquisitions, you know, looking at other companies that Gap Inc.

2:33as a conglomerate could acquire. And a lot of the brands that we were looking at at that time were, I would call it, e-commerce 2.0, when people were really talking about D2C as being kind of like the next big wave in fashion. And what was interesting to me about that time was, you know, a lot of people were talking about channel shift and shifting from retail stores to online. But for me, what was more interesting about that time period was not necessarily just about shifting of channels, but it was a lot more about just an entrant of many new brands to the space. And as a millennial, an elder millennial, it was really, I think, about the turnover of like, you know, the brands that we grew up with in the mall, having new entrants come in to compete and really hope to kind of define a generation of consumers.

3:10So that's what I thought was like very interesting about that time period. You know, these D2C brands, of course, were being built online primarily first because of platforms like Shopify and sort of the way that that lowered the barriers to entry to create something new. But I think what was, again, interesting about them wasn't necessarily just the fact that they were being sold online. It was really more the fact that they were new and that they had channels like the online channel through platforms like Shopify to be able to tell their story in a very direct way, in a way that was very specific and like kind of like unique to the kind of customer that they were specifically targeting.

3:39So you really could go very deep with a specific community. That was what was really interesting about that time. When we started Modern Citizen, my business partner Lizzie and I both really felt like there was white space in the market to really speak to a consumer of like young professional women. Basically a community of young professional women who were primarily dressing for work. 90 % of the occasions that they're dressing for, you know, is for work because they're at work for the vast majority of the week. But weren't really interested in shopping traditional workwear brands.

4:08so thinking about probably in like a past life you know going to an interview and buying a suit for the interview just felt very dated it's just not the way that people dress for work now it's a lot more nine to nine you kind of like dress for the morning and you wear the same outfit throughout the day to the all the different places that you need to go so we felt like it made sense to kind of offer her something where she could feel comfortable and powerful in it for a work occasion but also be able to have it transition you know to all those other things Both of us also came from retail as well, too.

4:34So obviously I worked at Gap Inc prior. My business partner had worked at ModCloth. And she and I both felt like, you know, there was opportunity to deliver a sort of like more luxury designer aesthetic, but to do so at a price point that most people could actually afford. And so that was something that we also felt very passionate about from day one. Yeah, I guess like the other part that was very interesting is that Lizzie used to be a customer who found out about Modern Citizen. Our founding story. And then you were like, let's build this with me. I think that was something that, you know, when I started Modern Citizen, I didn't necessarily set out to do.

5:05But then meeting Lizzie, it was so like apparent, like why? That would be a good idea, not only because of like, you know, all the things that she brought to the table, but also just like the idea of partnership and building something like this. That's been such a central part of building Modern Citizen is that partnership. You know, entrepreneurship can be very lonely. It's really, really lonely to kind of like be able to have to make all those decisions, especially through really tough times like COVID, etc. And so it's something that now, again, looking back in hindsight, I'm super grateful for that relationship and the way that we ended up building the business together.

5:33I think that's also like a hat tip to San Francisco because it is a community filled with people who are willing to leave a job, take a risk, join someone on their startup journey versus maybe in other cities there's less people inclined to do so in a sense. Yeah, absolutely. And you see fewer examples of co-founders. Honestly, even the term co-founders, I had never really actually heard that even until I moved to San Francisco because it wasn't something that necessarily was on our radar. You think about like traditional business titles and roles and co-founder is like not something that necessarily comes up, I think, in a lot of other places.

6:04So there's just this concept of a co-founder, this concept of like, you know, being really thoughtful about who you choose as your co-founder and being very clear eyes going into that process. I think, you know, because we are, again, surrounded by the culture of technology and startups, there was a lot of like literature and like, you know, conversation out there about like how to choose the right co-founder, how to really ask yourselves the right questions, how important that relationship is. And it's really emphasized as like almost being more important than your marriage, because it is a marriage, it's like a business marriage.

6:29So I think that was another thing that we really benefited from is that like we were able to go into that process very clear eyes and really thinking about some of those like really critical questions ahead of time versus just kind of falling into something together. Especially because Lizzie and I didn't know each other prior to starting this before. So there was that like really shared, you know, sort of set of things that we could kind of like really discuss and build into kind of the relationship that we've had. So why did Lizzie make the perfect partner? Well, you know, at the time that I had started my own business, she really joined the business very early on, like within the first year.

6:58I was really doing everything myself, everything from sourcing the product to designing the website. I was teaching myself, you know, front end development because at the time Shopify didn't have theme story. So I was learning how to build a theme from scratch. And, you know, I would describe fashion as an industry or like as a business, as a compound art. You have to be very good at not only the creative sides of the business, but also the operational sides, inventory management, you know, customer service, shipping operations, so many different aspects. And I definitely didn't have experience in all of those places.

7:26And so when Lizzie and I met, you know, I think she at the time was like very open and looking to join something very early and to really be part of building something from the ground up. And her and I skill sets really were very complementary. I think that actually has also been a pretty integral part of our partnership, too, is that like, you know, from the very beginning, we really kind of divided the business, all the functions of the business that are required in fashion sort of in half. And we're able to allow each other to kind of lead and own in our own ways, not having kind of like overlapping skill sets.

7:51That's something that they talk a little bit about with picking the right co-founders is just making sure you're not kind of like overlapping in too many areas. And I think we overlap in just the right amount of areas in terms of, you know, not only our shared vision for kind of what we're building, but our values. Even as we run the business, you know, being scrappy, you know, being very thoughtful about like how we're going to operate the business. You know, we had a very large set of shared values and then allowed ourselves to kind of like be able to operate with some freedom and independence as well.

8:16The ideal van diagram. Yes. Taking some of that Bay Area tech energy, which is user experience, you actually integrated that very early on in Modern Citizen, where you had pop-ups in companies, and then you got people, real working professionals, to try your clothes, to give feedback to the design and fit. So tell us why that was so important. Yeah, so I think in those early days, you know, this was before we had a marketing budget for Paid Social. It was also really about refining the brand, too. So we did these, what we called pop-ins.

8:56we would go to offices like you know google facebook sephora which also is you know again the benefit i think of being in a city like san francisco where all these great brands have headquarter offices we had friends who worked at these offices too that kind of helped us usher into those businesses and got to get one-on-one feedback directly from customers who were actually purchasing the product so it wasn't even just like they were trying things on to give feedback they were actually shopping the product in real life

9:22that really helped inform so much of like the way that we developed the assortment it really made us think about like what categories were really important for us to sell how to price them what the feedback would be from customers you know as they tried those things on and like really seeing it in the context of like the work occasion being in those offices and seeing what women were wearing how they were wearing it you know what i mean like what seemed to give people a lot of energy in terms of how you know they were dressed at work that was something that was like really pivotal in the very beginning and the best way that we could have gotten feedback.

9:48I think the other benefit of being in San Francisco was you had access to a lot of tools, services, apps of other startups, which you got to be early users of. Tell us what kind of services were you using and testing in the early days? Yeah. So we were so lucky in that. Like I just mentioned, we had so many friends who worked at Facebook or like Meta now, places where we got to be really early beta testers of so many different things, whether that's like Instagram shops, you know, obviously Shopify also was like based in Canada, but they had an office here. And so like we had other people kind of reach out to us when we first replatformed, we chose Shopify for a reason because it had to like, you know, a lot of people knew about it.

10:26You know, we were really early to a lot of different SaaS providers and things like that. So I think that that's something that probably being outside of a city like San Francisco, you may not have heard of a lot of these tools, you know, as direct to consumer rose in like the early 2010s, so many tools also rose alongside it to kind of help those entrepreneurs build those businesses. And many of them were founded here. So it was really awesome to be able to kind of like be in that ecosystem because we just heard about everything first. And one of those apps, I believe, was Klaviyo, where you got to build up your own audience slash channel through email marketing and CMS.

10:58Talk to us about testing that in the early days as well. So Klaviyo is actually an email marketing software that's based out of Boston. But the founder very early on came out to visit some of their first customers. And a lot of their first customers were based in San Francisco. So we got to kind of be part of that tour. And now obviously Klaviyo has gone on to become this huge SaaS provider and service for email marketing. And it's still a platform that we use today. And so again, we feel really lucky that just, you know, our tools from day one really set us up for success and allowed us to kind of scale and grow very quickly because a lot of the innovation and what was happening in that space, again, like SaaS providers, you know, providing technologies for retail, again, really originated here.

11:32So you gathered a strong customer base to begin with, with those pop-ins at different offices. And then you also got to use a lot of new innovative tools and to perfect the online experience. How did you then move to talking to a bigger market and what kind of marketing efforts allowed you to reach more people beyond the community that was here locally? This kind of goes back to fashion, I think, sort of as an industry and a category. It's a really fragmented industry, probably one of the most fragmented in consumer goods. And I think the reason for that is because fashion is inherently personal.

12:08It's something that, you know, people put on their bodies to sort of represent who they are. And to a certain extent, it's not just, you know, representing your taste level and your aesthetic, but it's also your values in a lot of ways. And so for that reason, there are so many brands that cater to kind of so many different types of people. So for us, we knew from day one that as a brand, we really needed to stand out. And I think that's why we've invested so much time and energy into kind of like our brand, branding, brand positioning, the way we talk about the business, the way we show up in our creative and all those different elements, because that's something that for us allowed us to kind of break through the mold early on.

12:39Even being a small business, again, from San Francisco, outside of some of like the satellite cities for fashion, we were picked up by press, you know, featured in like a number of different publications when we first launched and really got that sort of immediate sort of like boost of authenticity. I think because people recognize like the amount of effort and thoughtfulness that kind of went into developing the brand and sort of what it stood for rather than it just being something that was like very regional. Actually, our largest consumer base right now is in New York. So Manhattan and Brooklyn kind of make up a very large percentage of our online sales alone.

13:06So, you know, it's something that we feel like the brand itself resonates with a lot of consumers in more metropolitan cities that probably share a lot of similar, you know, ways of living and kind of like ethos in terms of what brands they want to represent and they want to support. So I think that's like the first step is that for us, you know, in the very beginning, we had very little money. So it wasn't necessarily like a large budget that really allowed us to kind of grow very quickly. It 100 % was word of mouth. for the first three to four years. A lot of it stemming from some of those pop-ins and like really like people talking to their colleagues and like friends about like what we were building and then getting a lot of great organic press.

13:38I love the press coverage because I believe very early on, Glamour Magazine called Modern Citizen the next big fashion direct-to-consumer brand. How do you go about managing those relationships? And I guess like what advice do you have for founders who wish to be covered by really well-known media? outlets. Yeah. So I think, you know, we got very lucky in that particular placement. Actually, the woman who wrote that article, Priya Rao, she's now the editor-in-chief of Business of Beauty, one of the business of fashion verticals. And so she's like a great example, I think, of somebody who like as a writer at the time, like I think really connected to our story.

14:13She and I really connected personally. And so that was something that we just really feel like grateful and like lucky that we were able to connect with her previously kind of like through a PR firm that we had worked with. I think that, you know, again, early on, even in just like a discovery call. You know, we really just presented our story as authentically as we could, talked about why we created the business, like what we were excited about in terms of what we were doing. And I think, you know, at the end of the day, because my business partner, Lizzie, and I are the customer that we're creating for, there's a lot of authenticity in that.

14:38So we really speak from a place of, you know, a lot of consideration when we think about what we put out there. And it seemed to resonate. And it sounds like you also keep in touch with the different writers that have written about your brand, you know, about their career progression. So there is definitely that nurturing of relationship happening as well. Yeah, absolutely. I think we think about that with everything that's an extension of what we do is always wanting to kind of build community, do it again in an authentic way. Like, you know, we think about that in all of our marketing channels.

15:05So for example, you know, influencer is a big type of marketing that a lot of like fashion brands can do. You know, we think about it in a very intimate kind of like community driven way. Like for us, our influencer program is really almost like a VIP program. It's people that we've developed longstanding relationships with. We don't feel any pressure to work with a number of different influencers all at the same time. I think for us, we're very selective in terms of who we work with because we see those partners as an extension of our team, honestly, in terms of presenting the product to the end customer.

15:32They do it in new and exciting ways, like different perspectives that we obviously couldn't bring to the product on our own. But that's something that for us is really important is making sure that those relationships are really real and built off of something that's tangible and not necessarily just transactional. Because in a way, they're also continuing the story of Modern Citizen and showing it in the real world, like how they are dressing themselves. Yeah, absolutely. And so I think for us, it's very much a quality over quantity approach in terms of kind of like, again, who we work with, how we work with them.

16:01We really want to make sure that they also have some agency in terms of how they're talking about the business. You know, we don't feed them, you know, a script or anything like that in order to kind of like talk about the brand. It's we've only really ever worked with people who I think organically really understood what we were trying to do. And then like we were able to even, you know, give more color behind the scenes about kind of like how things come together. Very excited to chat more about your storytelling and also other marketing efforts. I'm joined by Jessica Lee, co-founder and CEO of Modern Citizen.

16:28I hope you're enjoying our conversation. And if you haven't already, please give Shopify Masters a subscribe or follow wherever you are listening. And let us know what you think of this episode with a review. Thank you. So one part of Modern Citizen's story I love to touch on is the style, where it's not just apparent in your clothing and accessories. It is apparent in your online store as well as social channels. So what kind of philosophy did you instill in the early days to make sure that the style is apparent in all touch points that you see? Yeah, absolutely. So I think like we talked about before, you know, in order to kind of break through in a category like fashion that's as crowded as it is, there has to be a lot of cohesiveness in the way that you kind of develop your story and the way you tell your story.

17:17And that comes across in every touch point. That's the words on the page. You know, that's the graphic design. That's the actual designs of the garments themselves. It's the color palette. It's the design of our logo. It's everything. And even in the naming of the business, you know, Modern Citizen intentionally was named to be sort of a reflection of our customer. It's a modern woman, citizen of the world. And so that was something that we wanted at the forefront in terms of her shopping experience with us.

17:44I think for both my business partner and myself, again, you know, we know that the design of the clothes is obviously very important in terms of the customer trusting us as a destination for where she would shop. All the other elements are important in creating trust, too. And that's kind of delivering a very consistent experience across the site, a very beautiful experience and something that we take a lot of consideration around. I would say that's especially true of our copy. So a great example of that. We talk a lot about our sort of like, you know, what you would call your corporate social responsibility initiatives on our website.

18:11And we don't call them our sustainability initiatives. I think that that's something in the industry that is like a pretty popular sort of like topic right now in terms of how people talk about those efforts. For us, we've chosen the word responsibility. And you'll see that on our site, we actually never use the word sustainability anywhere, primarily because we felt like it was our responsibility to really be thoughtful about how we talked about those topics. They're very nuanced topics in terms of like how it works, like, you know, within a business that still has to sell clothes. So for us, like we took that on as like a challenge and always are very thoughtful about sort of every single thing that we put out there in terms of how we're talking to the customer.

18:42You know, we really believe that she can understand even the most kind of complex of topics as it relates to kind of how the business operates. And we never want to dumb it down for her. So I think that for us, like we see that as every opportunity, like we want to make sure that we're always putting our best foot forward. And I think that conscious decision really translates, right? People who are shopping with Modern Citizen, they are also returning, which I think any company's loyalty and retention team will love to reach the level that you have where last year half of the sales came from returning customers.

19:13What advice do you have for maintaining loyalty to a brand? You know, I think the number one thing is consistency, for sure. Just consistency and knowing sort of who you are as a business, who you are as a brand, what you offer, really understanding what she loves. One of the things that we do that I think for us as like a team internally is like one of our favorite things to do every year is an annual customer survey. So we started doing that about five years ago when we asked customers in a pretty comprehensive survey, usually anywhere between like 40 to 50 questions and a lot of free responses for people to give us feedback about their experience with us.

19:44And that covers everything from broader things like how they're feeling about the macroeconomic environment, shopping in general, and kind of, you know, sort of trying to take a pulse on where the mood of the moment is, but also really getting a sense for her in terms of her relationship with us. What is she like from us? What is she expecting from us? What would she like to see us do? And that also we ask questions about the brand, about our creative, you know, about every aspect of what we put out there so that we make sure that we're kind of always in conversation with her about it. It's interesting because I used to work for a company where it's all about, let's just discount.

20:14Let's just throw promotions at our customer base. And hopefully that is enough for retention. But it sounds like you are more taking the route of open dialogue and doing what you've done since day one, which is give us your feedback. Yeah, absolutely. And I think for us, it's also inherent in kind of like the values of the brand as well, too. The way we talk about the business is that our pieces are intended to be investment fashion. We certainly, you know, understand that we're not necessarily like the cheapest price point in the market, but we're a very thoughtful, intentional price point for the quality of product that we're offering.