The beginning of Harbour’s story will be familiar to many startup founders. “I’m really creative,” she tells Fast Company, “I grew up reading Vogue and Elle and I was feeling stifled.” Indeed, the work environment at her former employer was so oppressive, “I had a CD on my desk to use as a rearview mirror,” says Harbour, to ensure no one would sneak up behind her and catch her daydreaming.

Foundation Garments

Though her father suggested she might be better served working for herself, Harbour had recently graduated from college, gotten married, and purchased a home. Entrepreneurship would mean not only pulling the plug on a steady paycheck, but pulling up stakes to relocate from Columbus to the college town of Athens.

She did it anyway. “We sold our house, got a loan, and slept on air mattresses for a year in rented spare rooms,” she recalls. “The only goal was we hoped it would take off,” she confesses, after being warned by her father’s accountant that many small businesses fail to thrive. The Bureau of Labor Statistics estimates only half survive past the five-year mark.

Trying Social On For Size

Harbour opened the doors of The Red Dress in 2005, a traditional brick-and-mortar boutique in downtown Athens. While success was not immediate, the trendy togs Harbour stocked resonated with the college crowd. Soon Harbour was ready to open a second location. She and her husband, Josh, double-teamed the two shops, while Harbour began dabbling with selling items on eBay from her home. Neither venture took off, and the second shop was shuttered.

“I knew I wanted to get back on the web,” says Harbour, so she dipped a toe into the nascent world of social media. “You have to remember that Facebook came out a year after I graduated,” she points out. Though she wasn’t a part of the social network as a student, her husband’s college email address was an entree into the possibility of connecting with a broader customer base.

So she set up The Red Dress on Facebook. And they shut her down. Three times. Harbour explained she was too early to the party. In the days before brands had dedicated pages, the social network was busily bringing down the hammer on businesses. But the ban lifted in 2007, and Harbour got busy. Soon The Red Dress Boutique had a presence on Twitter. Pinterest, Instagram and Wanelo followed. For a shop that relied strictly on word of mouth instead of costly advertising, social provided the boost that helped Harbour weather the recession while other retailers were forced to close their doors.

The whole package is working. Revenue has grown from $63,000 in 2010 to $7.1 million last year, with online sales making up 93% of that total. The warehouse space has swelled in the last 18 months from 3,500 to 45,000 square feet.

I’ll Take the Bag and the Shoes, Too

Social drummed up so much interest, Harbour felt ready to take another big leap into e-commerce. Like her initial launch, the timing was tricky. “Josh was in law school and I was pregnant,” she recalls, laughing. “We never knew it would get this big, but you just have to do it.”

Taking cues from what was working across social media, Harbour’s tactic was to shoot the clothes outdoors, on models culled from the streets of Athens. “I didn’t want to just do outfits on a white background,” she says. “I do a lot of the photography myself,” says Harbour, who’s teamed up with some of the models to make sure the shots are as creative as possible.

Recruiting student models to wear outfits styled with accessories allows shoppers a way to see how something could be worn in real life, says Harbour, which is crucial to converting a browser into a buyer. “It’s all about engaging,” she adds. After the sales are scrutinized, Harbour goes back to see which items didn’t get snapped up immediately. She’ll analyze the photo and try shooting again. The second try often does the trick and helps move the goods without having to mark them down, she says. “Department stores just don’t have that capability.” By the end of 2010, the shop and its e-commerce cohort brought in $63,000 in revenue.

More Items, More Strategies

Not only was Harbour tweeting about new styles, she also pinned a plethora of inspiring quotes and shared images of herself with her son and snaps of her home’s changing decor. “Social media doesn’t sleep,” she observes.

Along the way, Harbour has landed on a strategy that took The Red Dress into the big leagues. Tapping all the feedback she received regularly from devotees, Harbour began sharing snapshots of items she was perusing during her buying trips. Immediately, the response was overwhelming, giving Harbour a mainline into what her customers actually wanted to buy online and in stores.

Everyone’s Buying

In retail, this information is gold. Traditionally, buyers are working three to six months in advance, making educated guesses on garments and accessories based on past sales of similar items. Harbour’s approach, now a full-fledged program called Buy for the Boutique, allows her to make decisions in minutes.

This is unlike e-tailer Modcloth’s Be The Buyer, which Harbour observes has items up to be voted on over the course of 30 days. “You lose the frenzy,” she says, “[our customer] wants the new and the next, they don’t want to wait.” The trend-conscious Red Dress shopper can have a garment in two to three weeks, she says, not to mention getting the warm, fuzzy feeling from being a fashionista with influence. There’s a VIP page, too, where loyal shoppers can speak directly with her every time she goes to market.

This concept of customer engagement and empowerment has been invoked by some of retail’s heaviest hitters. Hiroshi Mikitani, CEO of Rakuten, a global leader in e-commerce, writes: “The most efficient communication process possible is between the two parties [merchant and customer] themselves–without intermediaries.” And CEO “merchant prince” Mickey Drexler is well-known for responding directly to customer complaints at J.Crew.

Harbour’s not content to rely on tweets and pins alone. “I did a lot of research on customer service,” she says. She’s extended the conversation to tackle customer complaints herself (in addition to the two or three dedicated staffers that handle questions) and makes sure that negative comments don’t get deleted. It’s important that others see The Red Dress responds and tries to help, she says.

Finishing Touches

Like the right statement necklace or killer heels, Harbour is convinced that her hand-written thank you notes to customers and surprise free merchandise completes the experience of shopping at The Red Dress. “At Amazon, the stuff is just thrown in the box with an invoice,” she says. Whether her customer is a 19-year-old student or a working young mother, she wants to recognize that shopping is self-gifting and should be treated accordingly.

As for Harbour, she’s not planning on coasting. She’s finalizing details on a private label collection currently, and new website is in the works, along with updates to the mainframe. Although another brick-and-mortar location isn’t part of the strategy, another warehouse, “isn’t out of the realm of possibility.”

Jeff Bezos is still probably sleeping just fine at night. And, more and more, so is Diana Harbour.

[Images courtesy of The Red Dress]