Editor’s note: Tim Chang leads the consumer investing team at Mayfield. Massdrop, Poshmark and Kiwi Crate are Mayfield investments.
In late summer, Mayfield and CRV co-hosted a dinner for entrepreneurs at e-commerce 2.0 companies, including Brit& Co, Dolls Kill, Dropship, Indiegogo, Kiwi Crate, LeTote, Massdrop, Pebble, Peek, Poshmark, The Hunt, Tophatter, Touch of Modern, Trendalytics, Udemy and Urban Remedy. These executives discussed the factors making e-commerce cool again for investors and founders, focusing on how evolving technology and business platforms (primarily through mobile devices, and social media) are changing the rules for the 6 C’s: content, curation, customization, community, crowdsourcing and crowdfunding.
New conceptions of mobile and web-based commerce are pushing companies beyond the usual “treadmill of marketing spend versus inventory buildup versus thin margins” that has previously plagued startups engaged in the art of the consumer-facing sale. As mobile becomes more of a balm for e-commerce’s traditional woes, here are a few things that entrepreneurs should consider for their budding businesses.
Size Matters In Mobile
Android continues to expand its reach as a mobile app platform for entrepreneurs to prioritize thanks to the ease of discovery on the Google Play Store compared to the crowded iOS App Store; an increasing preference for Android phones by young users – especially women and girls – as their first smartphone of choice; and the larger screen real estate available on most Android phones versus iPhone (until the release of the 6s).
Larger screen sizes mean an ability for startups to display up to four additional objects in their apps, and, in one case, at Poshmark, a 22 percent higher conversion on Android. For startups specifically targeting young women for their next-gen commerce apps, this even raises the question of launching on Android first before iOS – a huge change in thinking compared to even a year ago.
Most startups these days tend to adopt the mantra of “mobile-first,” even eschewing web versions of their service. But, the entrepreneurs who spoke at our event threw a spotlight on the need to have complementary web and mobile experiences. The web should serve as the primary means for discovery, sign-up and onboarding, credit card entry and deep browsing. And the mobile app can serve as the key piece for repeat engagement, social transactions, and snack-style, daily check-ins to see what new updates may have occurred in a chat or comment thread, discussion, bid, or active transaction.
Mobile Workforce Apps
Many of today’s top e-commerce 2.0 apps are product and service marketplaces, which offer irresistible convenience and instant gratification for consumers with on-demand and impulse buying ability. However, the key to success for these kinds of businesses is realizing that the true initial customer is really on the supply side. Businesses should ensure that workers or sellers are delighted so that they are happy, successful and consequently giving consistently great service to the demand side.
What this requires of the marketplace platform is a different mobile app experience catered to the supply or “worker/seller” side. Allow vendors to manage the workflow of their businesses entirely in-app (from marketing, content updates, community outreach, promotions/offers, inventory management, customer support and communications, billing and payment collection, to service/product sales fulfillment). While this functionality would normally be found primarily in the web interface, the nature of services and sales in this mobile era now means that many workers have to run their businesses on the fly and in real-time, with the mobile app as their primary interface to complete the real-time transaction.
The Museum of the Mobile Image
Given the visual and design-oriented nature of commerce 2.0 experiences, every next-gen commerce startup is effectively in the business of gorgeous imagery, whether they want to be or not. Photos, especially in sites catering to women’s fashion, can play a critical role in conversion.
Entrepreneurs such as Bobby Farahi of Dolls Kill found that having models wear clothes and accessories instead of simply displaying the item made a huge difference beyond just the quality of the photo itself. Brit Morin, founder of Brit & Co., pointed out that they even invested in a team of in-house professional photographers and stylists to showcase their items.
The emphasis on a visually compelling app experience doesn’t necessarily mean that entrepreneurs should invest in video content, however. The costs associated with creating good video content often outweigh the potential benefits from a good video segment, entrepreneurs noted. Businesses are better off with a compelling photo (even if taken by an amateur), which is low-friction enough to capture attention out of the firehose of the feed, and propel the journey from viewing to purchase, execs said.
The Changing Logistics Landscape
The changes in the mobile marketplace, wrought by the proliferation of these e-commerce 2.0 startups is also creating a large market opportunity for companies looking to provide analytics, virtualized infrastructure and logistics, and other enabling platform the new generation of “micro-entrepreneurs.” Startups like Dropship, Boxbee and Shyp mark the entrance of virtualized warehouse and “micro 3PL,” and companies like Trendalytics hope to provide data-based early warning signals of consumer sentiment, shifts in market taste, and potentially even real-time signals for commerce 2.0 entrepreneurs to identify personas and the likely long-term-value of incoming users.
A Never-Ending Story
Beyond the mechanics of business and tools of the trade, there’s one thing that every entrepreneur emphasized at dinner, and that’s the centrality of storytelling to the commercial journey. Companies are telling their tall tale from pre-purchase, to buying decision, and especially to the post-purchase experience (where commerce companies have the most room to innovate). Entrepreneurs agreed that the most important element — which is in a vendor’s control — is that of laying out the narrative behind the items and creating social mechanics to rope customers into participating and sharing their own stories through the products.
Examples include Maker videos explaining their Indiegogo campaign, as well as fan videos helping to spread the word and build the movement. Examples ranged from DollsKill’s “Be a Doll” campaign, which solicited submissions from actual teenage users to serve as the model for the merchandise they wear, and show off their own style and look; to Stitch Fix’s experience of women trying on items in the office so that co-workers could weigh in on their choices in real-time and in person.
Massdrop also provided insight around the power of harnessing existing product enthusiasts who already geek out as community leaders in niche product forums and vertical social networks. By creating polls for the top products that enthusiasts already fetishize, Massdrop can pre-aggregate demand from influential customers in a very natural way and then negotiating favorable prices directly with manufacturers.
New Business Models and Mechanics Abound
All of the entrepreneurs in the group believed that there is still ample room for innovation around commerce business models, despite the historically thin margins, expected discount rates, and the need for growing inventory and paid marketing in e-commerce. Innovative twists include the notion of renting versus owning, as we shift into the era of the “sharing economy” and “collaborative consumption”, in which the value of “on-demand access” often outweighs “ownership” — exemplified by rental clothing startup Le Tote.
Walmart, Brit & Co and Kiwi Crate are also pushing the envelope in blending the offline versus online experience, demonstrating that successful online businesses often add an offline/retail dimension, and vice versa. Kiwi Crate began life as an online-only subscription commerce offering, but now its creativity kits are selling well in retailers like Target, with the resulting kid-created projects shared back online.
Walmart Labs looks to bring aspects of its offline business online, while also using online and mobile experiences to drive further value into visiting their retail locations. With the rise of real-time on-demand local delivery networks like Google Shopping Express, there could be more reason than ever for big box retailers in your neighborhood to thrive alongside Amazon.com.
Crowdsourcing can add leverage to the content production and curation aspects of a commerce business, and startups are leveraging game mechanics and exploring aspects of single versus multiplayer, real-time versus asynchronous, and competitive versus collaborative “play” in shopping. Finally, entrepreneurs talked about the value of “personalized fashion concierge in the cloud” for markets like men’s fashion, and we’re expecting to see more assisted commerce experiences driven by on-demand and “do it for me” convenience.
Overall, the entrepreneurs all agreed that by leveraging multiple screens, new kinds of community/commerce experiences, beautiful photos, crowdsourced participation, and on-demand marketplace mechanics, today’s commerce 2.0 startups can tap into stories and heighten the emotional connection with users.
The goal is to make the buying experience more delightful, accessible, aspirational, gratifying and meaningful. If startups achieve this, they can maintain pricing power and even charge a premium, instead of the usual marketing barrage of constant discounts, promotions, and margin-squeezing offers.