Billion Dollar Startups - And The Companies We Work For

In the trade journals, we seldom hear about the success of a store like, say, Pottery Barn. Instead, we hear about the new businesses that break through - we're told that they are "the future", and if we don't keep up, our business model is "dead".

So this article about billion dollar valuation startups is relevant to e-commerce (give it a read, click here).

There are a few companies that are e-commerce related that broke through to a billion or more in valuation. Tell me what you see.

Here's RetailMeNot:

Next up is Groupon:

Third is Gilt:

Fourth is Zulily:

And finally, Fab.com:

None of these businesses are Cuddledown of Maine, are they?

With the exception of Fab, who seems to be pivoting in all sorts of chaotic directions, the companies that "won" either sold your products at dramatic discounts, or sold their products at markdown.

Is it any wonder that this is all you ever hear about? Discounts. Deals. 

Notice, of course, that the article suggests that the odds of earning a billion dollar valuation are about 1 in 1,500. So yes, you hear all this discounting nonsense, but if you were to start your own business seeking VC funding, the odds of getting to a billion dollar valuation are close to zero.

Close to zero.

Meanwhile, few (if any) people ever talk about a business like Chasing Fire-Flies ... largely bootstrapped on profit until selling to HSN for tens of millions of dollars ... selling proprietary merchandise at full price. That's not fun to talk about, is it? Heck, they're catalogers. 

Catalogers!! That stuff is dead. Unless somebody cut you an eight figure check.

So - discount yourself to death, have at it, it's fun, people talk about it, and you can really ring the sales meter. And if you're starting from scratch today, you've got virtually no chance of winning the lottery. But again, people will talk about you - ENGAGEMENT! Based on what we read, you'd rather have engagement than profit. And if you win the lottery, you REALLY win the lottery!

Or you can build a solid business, take 4-7 years doing it, get to $40,000,000 in annual sales and $4,000,000 in annual profit, and sell for eight figures.

The latter doesn't seem like failure, does it? Sure, you may not succeed, but your odds of success will be better than 1 in 1,500.

Digital Real Estate - Chasing Fire-Flies

Here, we visit catalog brand Chasing Fire-Flies. These folks clearly have a creative bent to their presentation technique.

I know, I know, there's going to be dozens of you who tell me this is ugly, who tell me that this looks like something from 1999. Have at it. Ugly is not correlated with selling, is it?

What matters most is if the presentation style results in somebody buying the merchandise.

So that's the presentation style on the home page. What do you think the presentation style look like on my Samsung Galaxy Note II? Let's take a look:

What do you observe?

Well, as always in a mobile environment, compromises have to be made. Here, the compromises are creative in nature.

Again, in my Merchandise Forensics work, the more you remove imagery and product opportunities from the experience, the more you reduce sales.

You know, on Twitter a few weeks ago, folks were telling me that they simply cannot convert on a mobile device like they can on their home page. I kept hearing about how traffic is being seriously cannibalized, but sales are declining because conversion rates are in the tank.

We're all going to have to think carefully about our mobile experience. The only reason we are in business is to sell something. When we compromise the sales experience, we put ourselves on a path toward being out of business. And with mobile comprising more and more of the brand experience, we have a challenge we have to figure out.

Need Merchandise Forensics work completed? Contact me (kevinh@minethatdata.com) for your own, customized, Merchandise Forensics project - it's the #1 project I work on in 2013.

Digital Real Estate - Gap

Here's a recent screen shot of the home page of Gap, on my PC.

Yes, you'll see discounts splattered all over the home page - everybody is doing it, as if discounting was more important than the product being sold.

But you have merchandising choices - hidden across the top of the page - the customer can navigate from one merchandise category to another. And the creative team made sure that all sister brands can be shipped (upper left).

Ok, now let's take a look at the mobile version of the website, via my Samsung Galaxy Note II.

Notice that compromises have to be made, and Gap chose to compromise on merchandise. The 35% offer is still there, the 50% off select styles fall sale offer is still there. Find a store gets more real estate. Winter warmers? Gone. Fall for dresses? Gone (and yes, I get it, you can scroll through and get to merchandise and get to fall for dresses - but that's different than the home page experience).

My Merchandise Forensics work increasingly shows that if you don't feature merchandise, you don't sell merchandise.

And honestly, folks, the only reason we're in business is to sell merchandise.

But mobile is requiring us to make major compromises. Across the board, we're compromising the merchandising assortment for other aspects of business.

2 Of The 4 Spots Have Been Reserved - Beta Modeling Project

Just an FYI - the deadline for accepting the four open slots for the beta test of the catalog + email + paid search contact strategy is Wednesday night at 11:59pm PST.

Two of the four slots have been reserved ... two remain!  Click here for details.

Yes, Even Amazon Runs Discounts/Promotions

I used to argue that Amazon didn't have a need to run discounts or promotions. Take a peek:

Digital Real Estate

Sometimes, you have to put things into perspective, in order to make a point.

This is a screen shot of Craigslist, on my PC.

As you can see, there's an awful lot to click on, isn't there?

Now, I get it, your website doesn't look like Craigslist. Your website is professional, polished, beautiful (and maybe converts at a far lower rate than it could, but that's a topic for another day).

Let's take a look at what the same website looks like on my Android phone.

Here we go:

Oh.

Some will argue that "the customer wins" when you simplify presentation and choices. I've analyzed an awful lot of data in the past twenty-five years - there's one consistent theme - the more you present, the more you sell.

In catalog marketing, the costs are prohibitive, causing one to eventually reduce pages to increase profit.

In digital, the costs are essentially zero. When you reduce choices, you reduce how much a customer spends.

Tomorrow, we'll look at Gap - comparing the website to the mobile experience. The shift in customer behavior to mobile requires a different presentation mindset, something we haven't had to worry about for a half generation. My Merchandise Forensics work suggests we have not figured out how to generate demand in a mobile environment.

Major New Project Beta - Email + Search + Catalog Optimal Contact Model

As always, you get the first crack at new project betas, and at a lower price than when the product is rolled out - that's the benefit of following along here - you get a lower price for being a loyal follower, and because the product is being fleshed out!

Here's what I am hearing - this is going to cause me to develop a new product for you.

• "My vendor develops models for catalogs. We have targeting strategies for email. And we don't do much with paid search other than keyword optimization. Our attribution vendor showed us how all our channels fit together. But none of that information goes into determining the optimal number of catalogs to mail, and the optimal number of emails to send. For instance, if we cut our paid search budget in half, what should happen to our catalog and email targeting strategies? Nobody is answering that question for me. How should the email contact strategy change when we add a catalog to the contact strategy only for best customers? If social is actively involved in my conversions, does this mean I can cut catalogs out of the stream? If mobile is now responsible for 15% of my orders, does this mean I should actively increase my email contact strategy? Again, nobody operationalizes this for me. I need scores in the database that make my decisions easy for me. Please help!"

So I'll answer that question for you - I'll help!!

The new modeling product will do the following:

1. Determine the optimal number of catalogs to send, annually - dependent upon how many emails you choose to deliver.
2. Determine the optimal number of emails to deliver, weekly - dependent upon how many catalogs you choose to send.
3. Change the number of catalogs and emails to send as you change your paid search investment. In other words, if you cut your paid search budget by 30%, the result may mean a reduction in catalogs sent by 20% and an increase in emails delivered by 50%.
4. The outcome is two scoring models (catalog, email) - and a paid search budgeting input variable that determines how many catalogs / emails to optimally send in the scoring models. You get the scoring equations to implement with your database vendor.
5. If you want other ad channels included, we'll figure out what the appropriate charge is.

In other words, we're taking attribution to a new level - attribution/matchback work should not influence your total budget, attribution work should, at a customer level, dynamically change (in real time, weekly, etc.) how many catalogs and emails a customer should receive.

Interested? You should be!

My beta offers are time-limited, and cost 2/3 of the full project price.

I will accept offers for this project through midnight Pacific time on November 6. In other words, you have a bit more than two days to make a decision. I will also limit the offer to four clients - no more. So you've got to hurry, folks!

Interested: Email me (kevinh@minethatdata.com) immediately to get your place.

Data Requirements: Click here, please.

Pricing: 2/3 of a typical modeling project (please compare pricing to Clario and your typical database vendor ... they seriously overcharge you compared to what you get in this beta project):

• $1 to $9,999,999 annual sales = $6,700 (normal price = $10,000).
• $10,000,000 to $29,999,999 annual sales = $13,400 (normal price = $20,000).
• $30,000,000 to $59,999,999 annual sales = $18,300 (normal price = $27,500).
• $60,000,000 to $99,999,999 annual sales = $23,300 (normal price = $35,000).
• $100,000,000 to $999,999,999 annual sales = $30,000 (normal price = $45,000).
• $1,000,000,000 or greater annual sales = $36,700 (normal price = $55,000).

Again - this is time limited, and quantity limited - limited because this is at a beta stage, and is not a fully fleshed out project (but it will be by the start of 2014).

• Beta offer ends midnight Pacific Time Wednesday.
• No more than four offers accepted.

Your favorite vendor isn't likely to do anything like this - show me somebody that determines the optimal mix of catalogs and emails after factoring in the size of the paid search budget - so let's get busy!

P.S.: If you are in the UK, this would be a great time to "jump in" - it looks like I will be speaking at a conference in late February, so we can get your project done in time to discuss results in person!