By Debbie Hauss, Editor-in-Chief
Cloud and SaaS have been terms in our everyday conversation with retailers during the past several years. Entrepreneurial startups offering best-in-class solutions are getting gobbled up by larger players who want to be the one-stop cloud solution providers.
A convincing argument has been made for letting third parties do the hard part of creating and updating business solutions, allowing internal IT departments to focus on more unique, customer-facing activities.
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But in a twist that may create a few gray hairs for key retail solution providers, some retailers are moving back to an internal solution development strategy. During eTail West last week I spoke with Jonathan Wu, Co-Founder of Touch of Modern, who is emphatic about building “everything in-house.”
Touch of Modern is a members-only e-Commerce web site and app selling men’s fashion, lifestyle products and accessories.
“If we can operate more efficiently, we can generate more profit,” said Wu matter-of-factly. Wu calls it “Retention-centered Commerce,” which means growing through profitability. “We want to capture every piece of margin,” he explained. “Every percent counts.”
With just $17 million in funding, Touch of Modern has been able to continue to be profitable by staying lean and mean. The e-Commerce retailer employs five engineers and two data scientists; just 150 total employees. “We have small teams for everything,” said Wu.
The only third-party companies Touch of Modern currently is working with is Zendesk for customer service, Stripe for credit card processing and Tipalti for payment management.
When it comes to retail innovation, Wu cited REI, Wayfair and zulily as three companies he looks up to: REI for their success with loyalty; Wayfair’s ability to build a large, unified brand; and zulily’s quick and successful growth strategy.
If more retail brands and executives like Wu turn back to custom solution development, the largest solution providers may have to scramble to justify their more expensive offerings.
