The last weeks Shopify The earnings report is another example of the pandemic boom in e-commerce and the consumer goods economy slowing, with the e-commerce giant announcing it was laying off 20% of its staff and selling its logistics and warehouse operations. executing commands at Flexport.
Shopify President Harley Finkelstein said in an interview with CNBC that after undertaking a “side quest”, the company – which accounts for 10% of all e-commerce sales in the United States – needed to focus on what she does best, “which is building amazing software for e-commerce.
Shopify CEO Tobi Lütke had written in a memo to employees explaining the decisions that “side quests are always distracting because the business needs to focus. Sometimes it can be worth it, especially when engaging the side quest creates the conditions in which the main quest can become more successful.
But Finkelstein also had another business on his mind last week in an interview that was pre-recorded for CNBC’s Small Business Playbook event, the loose tea side hustle, Firebelly Tea, which he co-founded as a independent contractor.
He shared some lessons he’s learned first-hand running his side business and impressed a big lesson on other retail startups: don’t allow big-name influencers to be chased on Alphabetis YouTube, Meta platform‘s Instagram and TikTok to become a version of your own side quest in the pursuit of success. Spend time learning about micro-influencers on social media, including those on sub-reddits and pinterest boards that drive engagement in key niches for your business demographics. Finkelstein said it would be cheaper and likely a more efficient way to grow a new business.
The creator economy is changing how business success is generated, Finkelstein said, with the old “Field of Dreams” model — “If you build it, they will come” — no longer good enough.
“You can have a great product and not be successful,” he said.
But that doesn’t mean every small business owner with a great product should sue MrBeast or Emma Chamberlain for product recommendations. Social media micro-influencers may have a community numbering only “a few thousand,” Finkelstein said, but their relationship with those followers runs deep and results in high engagement, which is why he advises small business owners companies to look at the whole market. internet personalities.
“If you’re selling cookware or silverware and want to find a big influencer, rather than looking for the most subscribers on YouTube, look for smaller channels that have big engagement,” Finkelstein said. “It takes longer, but they’re the people to go to, cheaper, and you can see a higher return on investment.”
Finkelstein and his co-founder David Segal launched Firebelly during the pandemic and if he launched the brand today, he said he would take the same approach: not go after the biggest tea and coffee influencers but identify micro-influencers creating online communities. One way to track this is to see how often these micro-influencers respond to tweets and comments, as well as how often they post on platforms.
“Those are the things that have worked best for us,” he said. “It bothers you to find alpha, an arbitrage opportunity on a Reddit or Discord subreddit that all of your competitors are ignoring, and it changes your entire business.”
That’s not to say he downplayed the importance of big influencers and platforms. He cited the TikTok hashtag “TikTok Made Me Buy It” which has 50 billion impressions. But Finkelstein also pointed out that at a time when the US government is threatening to ban the Chinese social media giant, entrepreneurs should focus on an omnichannel sales strategy.
“If TikTok or Instagram no longer exist in a way that Myspace doesn’t, the brands that will build the most impressive businesses will be channel-agnostic,” he said.
And it goes beyond the Internet. After a pandemic boom that knocked back five years of e-commerce growth in one year, the growth rate is back to 2018-19 levels, Finkelstein said, with the lasting difference being a much higher benchmark. But the end of the boom reiterates a cautionary tale that retailers experienced in earlier eras, such as when the traditional mall experience of the 1980s and 1990s became less popular and less relevant than brands with their own flagship stories and experiences. fleeting. “The same lesson applies. You have to try to be everywhere the consumers are,” he said, “online, offline, on social media and everywhere in between,” he added.
“You can have a customer today who wants to buy in a store or online or at a farmers market, you need to sell across the surface and reducing friction in those surfaces is important,” Finkelstein said, adding that Shopify thinks himself today. more of a retail operating system than an e-commerce business in particular.
To find out where your customers are, business owners need to go back to the most basic option in the book: “Just ask them,” he said.
Whether they’re engaging on Instagram or TikTok, or Spotify, where Shopify has an artist merchandise partnership, Finkelstein said entrepreneurs need to take advantage of the “hyper-real response” that’s available.
“Asking what they want to see more and more of is the easiest and cheapest way to market,” he said.
Although he warned that a great product is no longer enough to be successful, he stressed that as consumers become more discerning with their money, it is more important than ever to be known as the #1 in your brand niche. “We’re seeing a lot more buying intentionality,” Finkelstein said. “Rather than five pairs of sweatpants, this is the highest quality pair,” he said.
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