Last week Shopify earnings report, the e-commerce giant announced it was laying off 20% of its employees and selling its logistics and fulfillment operations to Flexport, another example of how the pandemic has slowed the e-commerce boom and the consumer goods economy.
Shopify President Harley Finkelstein told CNBC in an interview that the company, which accounts for 10% of all e-commerce sales in the U.S., should focus on what it does best, “developing,” after going “lateral search.” Amazing software for e-commerce.”
In a memo explaining the decision to employees, Shopify CEO Toby Lütke wrote, “Side searches are always a distraction because a company needs to divide attention. Sometimes it can be worth it, especially when the side search creates conditions for the main search to be more successful.” can”.
But in a pre-taped interview for CNBC’s Small Business Playbook event last week, Finkelstein had another business in mind for Firebelly Tea, the loose-leaf tea side hustle he founded as an independent entrepreneur.
He shared a few lessons from his side hustle, and impressed upon other retail startups a big lesson: don’t let big brands chase you. Alphabetof YouTube, Meta PlatformBeing a version of your own sidequest in Instagram and TikTok’s pursuit of success. On social media, including subReddits and Pinterest niche boards are key to targeting your business demographic. Finkelstein said it would be cheaper and at the same time a more effective way to develop a new business.
“The creative economy is changing the way business success is achieved,” Finkelstein said, with the old “Field of Dreams” model — “If you build it, it will come” — no longer enough.
“You can have the perfect product, but you still won’t be successful,” he said.
But that doesn’t mean every small business owner with a great product needs to chase down MrBeast or Emma Chamberlain for product endorsements. Social media micro-influencers may only have a community of “a few thousand,” Finkelstein said, but their relationships with those followers are deep and result in high engagement, so he advises small business owners to consider the entire market. internet personalities.
“If you’re selling kitchenware or silverware and you want to find a big influencer rather than looking for the most subscribers on YouTube, look for smaller channels that have a lot of interest,” says Finkelstein. “It takes more time, but they’re the people to follow, it’s cheaper, and you can see a higher return on investment.”
Finkelstein and his co-founder David Segal started Firebelly during the pandemic, and he says he would take the same approach if he were starting the brand today: identifying “small but busy” micro-determiners rather than going after the biggest tea and coffee influencers. influencers who build online communities. One way to track this is to see how often these micro-influencers respond to tweets and comments, as well as the frequency of their posts on the platforms.
“Those are the things that work best for us,” he said. “You think about finding some alpha, some arbitrage opportunity in a sub-Reddit or Discord group that your competitors are all ignoring, and that changes your whole business.”
That’s not to say he downplayed the importance of great influencers and platforms. He cited the TikTok hashtag “TikTok made me buy,” which has garnered 50 billion impressions. But Finkelstein also stressed that with the US government threatening to ban the Chinese-owned social media giant, entrepreneurs should focus on a comprehensive sales strategy.
“If TikTok or Instagram no longer exists in the way that Myspace doesn’t, the brands that will build the most impactful companies will be channel agnostic,” he said.
And it goes beyond the internet. Finkelstein said the growth rate has returned to 2018-2019 levels after the pandemic boom pushed five years of e-commerce growth forward by a year, and the lingering difference is a higher base. But the end of the boom repeats a cautionary tale that retailers experienced in earlier eras, when the traditional mall experience of the 1980s and 1990s became less popular and less relevant than brands with their own flagship stories and pop-up experiences. “The same lesson applies. You should try to be wherever consumers are,” he said, “online, offline, social media and everywhere in between.”
“Today, you may have a customer who wants to shop in a store, online or at a farmer’s market, you have to sell all the surface area and reduce the friction on those surfaces,” Finkelstein said of how Shopify thinks about itself today. more like a retail operating system than an e-commerce company.
To find out where your customers are, business owners should go back to the most basic option in the book: “Just ask them,” he said.
Whether it’s Instagram, TikTok, or Spotify, Shopify’s artist merchandising partnership, Finkelstein said entrepreneurs should take advantage of the “hyper-real response” that’s available.
“Ask them what they want to see more of and what they want to see less of is the easiest and cheapest way of marketing,” he said.
Even as he cautioned that a great product is no longer enough for success, he stressed that as consumers become more careful with their dollars, it’s as important as ever to be recognized as No. 1 in your brand name. “We’re seeing more intent to buy,” Finkelstein said. “More than five pairs of sweatpants, it’s one pair of the best quality,” he said.