A pivot that nearly killed our company
We made Sellfy with one mission in mind — empower creators to earn a living doing what they love. And as any other startup chasing growth, we made a ton of mistakes pursuing that goal down the road. The biggest of them all has to be our miscalculated pivot, which made total sense at the time, yet cost us a solid year of growth.
Intro
Since publicly launching Sellfy in 2012 we have been growing at a relatively steady pace. The growth maybe wasn’t spectacular by startup standards, but we did a solid 2–2.5x YoY revenue growth for a couple of years. Our aspirations were much higher though, and we were constantly exploring options on how to ramp up the growth and increase our revenue.
At that time our core product was an e-commerce tool that helped digital content creators, like book authors, musicians, filmmakers, to sell their premium content. You could open your store, upload products and promote them on your website, blog, Facebook, Twitter, SoundCloud, YouTube channel or any other place where you had an audience. We handled content storage, delivery, and all the e-commerce stuff so that creators could focus on product creation. This was our core thing, and we did it well.
Coming up with the “Sellfy marketplace” concept
By late 2014 we had around 200,000 uploaded products that came from thousands of creators who have signed up on our platform. We knew that many of our clients already sold their products not only on Sellfy but also on some marketplace — whether it was an ebook on Amazon, music album on BandCamp or WordPress theme on Envato. On the other hand, people coming to stores powered by Sellfy wanted to discover more similar products, not being limited to that one store which they discovered first.
It made total sense — why not create a public catalog, a marketplace and provide buyers with an ability to explore and buy great content directly from creators? The benefits were clear — it would increase seller/buyer engagement, provide more revenues for users selling on our platform and give us additional income stream as well. Win-win-win. It seemed like a solid idea, and we were dead-sure it will work!
Except that it didn’t.
What went wrong?
As this was a big task for our small team of eight, we needed to hire few more people to make this work. We had some money from our recent angel round, and this seemed like an excellent way to invest it and prove our new direction.
We spent half a year developing Sellfy marketplace, making sure everything worked as well as we wanted it to work, paying special attention to discoverability and search. When we finally launched the marketplace, we received good feedback from our users. It seemed that this would solve everything and the marketplace idea could actually work, despite all the challenges we had.
But as months went by, we didn’t see any meaningful increase in sales volume. Instead, we saw a lot of negative signals, including decreased customer engagement. It appears that our users became less active and engaged in promoting their own stores and products — they were waiting for us to bring them sales. After all, we promised them the marketplace and this is what marketplaces do.
Going from e-commerce platform to a marketplace added a lot of complexity to our service. We were no longer a simple tool to sell, and we were not fulfilling the promise of a good marketplace to sell your products either. We ended up failing both promises. In addition to that, we had a much more complex product that needed maintenance and more employees on our payroll.
As I look back, we failed because of one reason — we started to do things that were not our core competency. We were good at creating an e-commerce tool but were terrible on launching a marketplace — it’s completely different business, and we didn’t know much about it.
Getting back on track
After few months into operating Sellfy marketplace, we realized that we had made a wrong move and our growth was stalling. While analyzing the data, it was clear that we made a mistake and needed to go back to our core product. We need to re-focus again on our core experience and the things we do well.
During all this time building, launching and operating the marketplace we were not able to increase the revenue for our customers and us as a company. Because of poor engagement, our growth was flat from the point we started this pivot to the point that we reverted. It was a hard and costly lesson to learn.
As soon as we realized this mistake, we decided to go back to our core product. We needed to throw all the things that confused our users and go back to bringing them features that added value to our core product. And worst of all, let go some of the employees as we couldn't simply afford them because of failing product that didn't grow.
This approach instantly showed results — after shifting focus back we started to grow — our YoY growth was again close to 2x, and we became profitable few months down the road.
What's next?
It’s been more than a year since we gained that clarity in how we can serve our customers better. After talking to our customers, researching their needs, problems and what can we do to solve them effectively, we are soon launching Sellfy V3 — a new and improved version of our e-commerce platform that will help even more creators to earn a living selling online.
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