Sadly, there are no guarantees. Or proven formulas.
But there are patterns.
Over the years, Metric has audited the digital marketing strategy of thousands of ecommerce brands. We also executed performance marketing campaigns for hundreds of startups, and consulted private equity and venture capital firms on due diligence and digital marketing execution for potential startup investing.
And today we’d like to share what we’ve gleaned from our experience. Whether you’re an upstart retail brand hoping to make waves, or a financier looking to invest and/or acquire one of those companies, here are several indications to look for.
Our friend Taylor Sicard, Co-Founder of Brand Value Growth, not only consults with ecommerce brands, but also builds, scales, grows and improves ecommerce businesses. He stopped by our office recently and offered a helpful insight around this issue:
“In a world where it’s never been easier to start a retail store, it’s never been more difficult to acquire a customer. As the number of new stores increases, the number of potential customers decreases. That’s where domain expertise is a strong acquisition strategy. Young ecommerce brands that do one thing exceptionally well, rather than acting like a general store, deliver a unique value proposition that causes customers to go to them versus anybody else.”
Mack Weldon is a perfect case study for this indicator. With their smart design and premium high performance fabrics, the startup used their deep domain expertise to create what they called smart underwear for smart guys. They reinvented and updated menswear essentials. Making sure men never have to venture to the department store ever again. (See how we improved their purchases by 1,346%)
As you evaluate a retail company, either yours or one you might want to invest in, consider where it lies within the historical context of the larger industry. If it’s on the rise, that’s naturally more encouraging than a stagnating one. But a bigger opportunity is if the retail brand exists in an industry that hasn’t even been discovered yet. Because if the market is nonexistent, that might be a positive indicator. It means a brand is catching on before the trend happens.
Steve Case, the legendary founder of America Online, has a brilliant mantra for this very issue:
“Don’t build companies, build industries.”
Steve’s decades of experience pioneering the internet in the nineties taught him that one way to identify entrepreneurs or companies that will change the world is by finding startups that are trying to create an entire industry, rather than just build a company. That ambition, he writes in The Startup Playbook, is the foundation of lasting, iconic, platform companies.
If a retail brand uses keywords that are difficult to find, or garner significant competition, it’s not a good sign. Because even if that company does have germane expertise, they’ll likely get crushed by the competition. Consider an upstart retail company selling a commodity like bath tissue. They may have a great product, but they’re also up against gigantic companies that make billions of dollars a year who will outbid them on keywords.
In short, being special is not enough. The real question is, how are you going to get in front of enough customers without the luxury of a massive budget?
CreepyCo, first launched in 2015, is a collectibles company with a very specific niche: Pop culture centered collectibles. Metric Digital took them on as a client earlier this year, and it was thrilling to us to see that they know who they are, and what their target likes.
But as a smaller and newer company, they clearly don’t have tens of millions in advertising spend like some of the larger apparel and merchandise retailers.
And so, they learned how to differentiate through other means. Metric account managers Ashley Moey and Steve Geick explained that CreepyCo’s consistent product release schedule brings newness to their marketing, which rewards customers for engaging. They train their users to visit their site more regularly, specifically around Halloween and other franchise licensing based events.
CreepyCo also brings significant talent on the design side. Which enables them to stay low budget without acting low budget. Their ad creative is polished, and their marketing doesn’t skimp on aesthetics. Ultimately, all of these factors allow them to convert website visitors and re-engage past customers at a high rate. We’re not calling them a unicorn, but any ecommerce company who knows how to generate revenue from a niche audience and a small budget is one to watch.
The market for any successful ecommerce brand must be the right size with a demographic that it appeals to. But at the same time, let’s not overlook the importance of a brand having a secondary outside market that it also appeals to. Companies want to set themselves up to be as broad as possible, since that will create a bigger audience down the road.
Now, that’s not to say hyper niche products are bad. The danger is, brands can quickly become a single purchase experience. Even if there is a strong value proposition for their product, the looming growth question is, what’s next? Can they upsell with a complimentary item?
Seth Godin, the most popular marketing author in history, reminds us on his award winning blog:
“A company’s job is not to find customers for their products, but to find products for their customers. In a world where it’s too easy to focus on the one shot, sustainable retail brands are focusing on long term relationships and customer lifetime value.”
Ultimately, an ecommerce company should build a product trajectory that takes their customers on a buying journey. One that not only adds value to their lives in multiple ways, but also increases their lifetime value to their company.
Don’t narrow your own trajectory. Thinking beyond just products, is there an entire industry you can redefine and own? What has never been redefined? Otherwise you’re branding yourself into a corner. Which is profitable in the short term, but limiting down the road. Because the longer you’re around, the harder it is to dissociate from a certain vertical. The harder it is to change your brand.
If you only sell moisture wicking hats, for example, you’re trapped in the accessory game. Whereas if you are more strategic and release a variety of products under the umbrella of science based performance apparel and equipment, then your brand casts a wider and more sustainable net. Every company has their lead off product, but they need to set themselves up for the opportunity to iterate from that.
Does your ecommerce company have all of these indicators working in its favor? If so, we believe it will be destined for success.
That retail brand will have the greatest probability of evolving into whatever its larger vision is.