Retail is hard. You’ll hear this everywhere and there’s a very simple reason: in order to make a profit, you have to buy as low as possible, acquire customers as cheaply as possible and sell as high as possible. But in real life it’s so much harder than just writing it on Medium.com. So here are a few notes on retail and how to tackle it from a growth hacker’s perspective.
First, we can sort businesses into two categories :
- Intent businesses: these are one-off businesses where you acquire customers for less than what they bring in and try to scale the acquisition channel as much as possible.
- Community businesses: these are companies seeking to build a habit in the user’s mind. Hence it’s not so much about selling something but about federating users around a brand.
Community and Intent
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Traditionally, retailers, whether online or offline, were intent businesses. All that mattered was 1) selling as much as possible to decrease stock and 2) acquiring customers cheaply in order to maintain a good margin.
And then it didn’t work anymore
This pattern worked for years. But it doesn’t anymore. E-commerce is incredibly hard. Brick-and-mortar retail is almost dead, largely reserved for premium, high margin brands. The reason is very simple: acquiring someone is getting more and more expensive.
It’s actually rather easy to figure out why: because launching a new venture is getting easier and easier, there’s a lot more competition. Whatever you’re selling, it costs less to launch the business; but you have to really fight for your targeted users’ attention spans. Welcome to the end of the “build it and they will come” era.
Does that mean starting a new company is for lunatics only? Not at all. It’s just that you don’t fight for a sale anymore, you fight for a user. And the great thing with a user is that they can come back often. So you have to look at the acquisition cost in a totally different way.
In traditional retail, customer acquisition happens at the same time as the transaction, which means that the profit per customer is cut off by the acquisition every single time. Of course, acquisition cost is a mix of paid acquisition and organic acquisition (brand awareness, referral, etc.). But still, the model is transactional: you acquire a user to make a sale. Thus, profit per user could be seen as follows:
profit per user = Σ(average basket — average acquisition cost - cost of goods sold)
Enter the community businesses
How are community businesses different? Well, instead of the transactional approach (acquiring a customer to sell right away), you gather users around your brand and then you sell them things. It’s a two-step process: 1) you acquire the customer and make them sign up and 2) you sell. Which means you acquire the user ONCE and then you can sell as many times as you want. In other words, profit per user can be seen like this:
profit per user = average acquisition cost + Σ(average basket — cost of goods sold)
This is the big switch: the acquisition cost shouldn’t be seen as a variable cost but as a fixed cost. This enables you to spend much, much more on acquisition and to be competitive in a crowded market. Of course, brands have been trying to do that for a long time, for example through loyalty programs.
But the big difference here is that the registration is not an option that just lets you buy at moderately discounted prices. Registration is like joining a club: it’s the only way to gain access to the products and you’re not merely purchasing stuff anymore, you’re part of a community that sets you apart.
Not a lot of businesses have done this so far. Costco is probably the first example that comes to mind, making the member account mandatory to shop. Actually, this kind of user experience has more to do with an online experience. Facebook, Snap, Instagram all require a signup before accessing the product, essentially requiring social interaction to be part of it. Their design, gamification techniques, etc. are applicable offline too!
This is probably the future of retail: making it a social experience, something that sets you apart from your peers. It’s not about a product anymore, it’s about a “why”, the values of your brand. You don’t have customers anymore, you have users. With them, you fight for a cause. You feed your army, whether it be with free stuff (content, events, parties…) or paid products (physical goods, premium content, training programs…). What matters is having committed users.
A few ideas on how to do it
Good news, a lot of best practices exist. Here are the main ones you can draw inspiration from but, obviously, each business is an opportunity to discover new ideas. Just like with any business, success comes with a lot of experiments, tests and continuous improvements:
Designing a Growth Strategy
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Building a waiting list. The first thing you want is to make your users feel special. And nothing is better than organizing your own scarcity to achieve this. Remember, you’re not looking for sales anymore, you’re looking for people who want to join your club. So the first step is a signup. But don’t sell your club off just like that!
Signing up should be a valuable experience in its own. The first thing is to collect a proprietary touchpoint. A proprietary touchpoint is data you can use to contact your users without going through a third-party. In most cases, this would be an email address or a phone number (depending on whether you’re targeting the European/US markets or Asian markets or whether you’re more of a desktop or mobile experience — btw, I strongly advise going for the latter ;)).
Then you can play a bit with scarcity. For instance, why not have a viral system built into your signup? You could imagine plenty of incentives: being co-opted (giving people the power to invite their friends to a closed platform is something that generally works well), inviting friends to get fast-track access, etc. One tool to do just that is KickoffLabs, as described in this step-by-step tutorial:
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Crafting quality content. Since you don’t have customers but users, you have to feed them content. If you want people to share your values and share your brand, you need to give them a few points to remember. Content can take a lot of different forms. It could be text of course, but also videos, images, events, etc.
And you can re-use content multiple times. One event can be recorded and even streamed live on Facebook with Switcher Studio. It can then provide material for an article on your Medium, slides on your SlideShare and a few pictures on your Instagram ;) At any rate, it’s crucial to maximize the ROI of your content.
Finally, never forget that content is a way to get your users to commit. Let them take pictures for you and repost them, invite their friends to your events, etc. Content should be everywhere: inside your products, inside your communications… everything is a good opportunity to communicate. Content can even be the excuse to sell things. Just look at The Socialite Family, a French website selling beautiful furniture for your home. They’re blog that happens to sell things, not the other way around.
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Notifications, notifications, notifications. Creating a sense of belonging for users and crafting quality content is not enough: you have to remind your user base of your existence. Even if your brand is very, very strong, you can’t expect users to remember you by themselves. After all, you asked for a proprietary touchpoint — it would be a mistake not to use it!
Notifications can take many different forms: newsletters, text messages, Facebook bots, Facebook posts, Instagram pictures… The common mistake is to use just one of these channels. What’s important is to encircle your users: send an email, then retarget your user base in a custom Facebook audience while you post a related picture on Instagram, for instance!
Still, everyone sends newsletters and promotional offers, right? Yes, but the opportunity is to use the content you crafted. It’s not about force-feeding discounted items nobody wants, it’s about providing value to your users. The golden rule is actually pretty simple: 80% value, 20% sales.
So the good news is RETAIL IS NOT DEAD!
There are plenty of opportunities to make this switch and head towards more community-oriented businesses. Obviously, it can be scary. But remember: the leading e-commerce website won’t let you shop unless you’re signed up. They started as a small platform to sell books. Now, because they own their users, they have one of the biggest market caps in the world:
WHY U NO CLICK ON THE RED HEART? It will bring you love and prosperity ❤