Tailored tech: Chris Morton harnessed the online travel model for fashion purchases
Five years ago Chris Morton was a young venture capitalist sharing a London flat with two twenty-something female professionals who had a penchant for pricey online fashion sites. His domestic set-up, coupled with working on the initial public offering of online luxury retailer Yoox, started Mr Morton thinking about the ecommerce revolution. He thought it was going wrong.
“Shopping online – particularly for clothes and accessories – was morphing into an increasingly fragmented, impersonal and inefficient process,” he says. “It soon struck me that there was an opportunity to create individualised sites for every shopper, based predominantly on data.”
The more he saw companies touting themselves as game changers, the more he too wanted to “build my own start-up that offered a bespoke shopping experience”.
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He is speaking in the UK offices of Lyst, the company he then set up in 2010, which is located in the building that used to house the White Cube gallery on Hoxton Square, a few steps from Silicon Roundabout. This is the hub of the technology scene in London, which has become an incubator for innovative, world-leading fashion ecommerce companies, including Net-a-Porter, Asos and Farfetch.
While Lyst’s largest market by far is in the US, Mr Morton says London remains the tech industry’s digital fashion powerhouse. Lyst has a New York office, but he is staying put in London. “In the online world, there’s not much that London does best, but when it comes to fashion-focused ecommerce the UK players are streets ahead – partly due to the ideas and talent, but also because no British bricks-and-mortar department stores or retailers have made their mark online in the same way as US contemporaries have,” says Mr Morton.
“Silicon Valley may be the epicentre of the web, but many of the biggest power players – and investors – often fail to really understand fashion either.”
Mr Morton focused his initial research on the search technology used by popular travel sites, and the way travel companies aggregate hundreds of thousands of options to help a user find the best possible one for a trip. “It seemed like the perfect model for an online fashion business, with brand and product inventory tailored to a user’s past preferences – plus price transparency and time efficiency,” he says.
“If we harnessed the online travel model for a fashion site, we could have a one-up on physical stores that can’t physically optimise themselves when you walk through their doors.
“But a fashion purchase should never be exclusively search-based – there also has to be an element of serendipity for the shopping experience to really resonate. And that’s what I wanted to capture.”
In 2010 he quit London-based venture capital fund Balderton Capital to launch Lyst, a platform using algorithms to aggregate more than 12,000 single and multibrand fashion sites into one personalised location. While the company remains tight-lipped about profitability, it is currently increasing sales volumes at 400 per cent year-on-year and has about 2m users a month in 180 countries.
“Our name comes from the fact shoppers can ‘list’ the items they like via wish-lists, and share them publicly too. But what they really love is that they no longer have to waste time browsing multiple stores to find their preferred labels or designs,” says Mr Morton.
A fashion purchase should never be exclusively search-based – there also has to be an element of serendipity
In four years Lyst has established a valuable core customer base: 90 per cent of its customers are women in their mid-twenties to early forties who spend $500 to $1,000 a month on fashion. Lyst’s affiliate model is to redirect shoppers to the site of a brand or retailer, making a commission if a sale transpires.
But the company also has a secondary – and arguably more lucrative – means of generating revenue. Data scientists in low-key jeans and T-shirts hunched over state of the art information systems in Lyst’s offices analyse how people behave and spend online and sell the information back to retailers and brands: “We can help streamline inventory by monitoring what sizes and colours are the most popular, or what products are the most likely to be returned. We can advise companies on the peak hours shoppers peruse their sites and how to prepare for that – 6pm for example, is where we see the greatest spike on a normal working day.”
Lyst, having raised a total of $20.5m after three investment rounds from backers such as Balderton and DFJ Esprit, aspires to be a leader in harnessing some of the disruptive online and omnichannel technology emerging in retail.
It came up with a universal shopping cart for US users last year, in which a shopper can add items from several third-party retailers to their cart before checking out all the items in a single transaction via Lyst.
“Forty per cent of our traffic comes from mobile – on a handset people don’t want to be constantly redirected . . . The 21st-century customer doesn’t mind where she shops as long as it’s easy,” says Mr Morton.
The web can do phenomenal things and we haven’t even scratched the surface of what it can do within fashion ecommerce
Despite the lofty ambitions and Mr Morton’s confident assertions, he freely admits that Lyst’s progress has involved changes of direction and delays. The universal cart has yet to be deployed outside the US, and a much hyped partnership with PayPal Beacon, bluetooth-enabled in-store hardware that alerts a shopper’s smartphone with information, deals or speedier checkout options, has been shelved until the infrastructure of bricks and mortar retailers can “catch up”.
While Lyst’s business model insulates it from handling inventory or delivery and overhead costs, any service shortcomings from retail partners will inevitably reflect badly on it. If user ratings for a retail partner drop below a certain benchmark they do not stay on the platform.
An overhaul of the Lyst home page took place last month after criticism – including from British Vogue – that the site was confusing. “Ultimately, we are more of a tech than a fashion company and some customers struggled to get their head around the service we were offering because of the way we were presenting it,” Mr Morton says. “We hadn’t focused on critical things for the consumer, like our appearance. We’re hiring an editor in chief and have recognised we need a home page that can really tell the story.”
Mr Morton seems unfazed by this about-turn makeover. Entrepreneurs must evolve with sector trends and the demands of the consumer, and this was just the latest change of tack, he explains. “When we launched we thought we needed to base ourselves around social following, where people could share what they were buying with one another.”
In 2010 Lyst’s initial model centred on following and imitating the purchases of friends. “But we soon learnt that consumers aren’t clones, they’re more like tribes. And we also realised people love following brands.” The business model changed.
With an increase in users, an expanding staff and booming sales, Mr Morton says he truly believes Lyst could change the way people approach online shopping for clothes.
“The web can do phenomenal things and we haven’t even scratched the surface of what it can do within fashion ecommerce. User experiences should no longer be constrained by ideas – and the previous limitations – of retailing operations in the physical space,” he says.
Further reading: Question time with Chris Morton
Biggest deal? “As a venture capital investor, I passed on a few young start-ups that later became multibillion-dollar companies. Those sorts of decisions stay with you for a while, but I learnt a lot from watching those businesses grow. I was lucky to be involved in some of the billion-dollar companies we backed, but strange as it sounds my ‘biggest deals’ were the ones where I didn’t invest.”
Best mentor? “I’ve been involved with start-ups for my entire career and one of the things I love most . . . is the culture of helping and supporting. I’ve been helped so much by the wider community. So rather than name a single person, I think the sharing principle underpinning start-up culture has been my best mentor.”
Biggest mistake? “When I left my job in venture capital at the end of 2009, I had an idea for a business and not much else. So on my first day at Lyst, the first thing I did was start my search for a co-founder. I needed to find someone who had very different, but complementary, skills to my own, and who I would want to spend virtually every waking moment with. Pretty soon it became apparent that finding this person was not going to be easy.
“I’d got things the wrong way round: the real challenge in starting a business is not the idea – it’s finding the best people to help you turn that idea into a reality. So my biggest mistake was quitting my job before I’d found the right person – who turned out to be Sebastjan Trepca, my co-founder and our chief technology officer.”
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