The secret to Faire’s success — Think global; Shop local.
Q&A with Jeff Kolovson, COO/co-founder at Faire
E-commerce continues to grow at a relentless pace — from just under $5 trillion last year to nearly $7.4T globally by 2025, according to eMarketer. In three years, one out of every four retail transactions globally will occur online, and in some countries much more.
But the same cannot be said for wholesale commerce. Despite more than $1 trillion of annual transaction volume in consumer categories alone, the wholesale market lags e-commerce significantly when it comes to technology. The core reason? Buying new wholesale product involves taking on risk that many merchants are not able to absorb. If there is a single company redefining wholesale trade for consumer products in the US and abroad, and solving this critical risk problem along the way, that company is Faire.
Faire offers mom-and-pop retail shops access to data and tools usually available to e-commerce giants, while at the same time giving brands incremental channels to sell their goods. Over the last year, the company has begun to expand its local-first approach to the rest of the world, starting with Europe.
In just five years, Faire has grown substantially. It now serves 350,000 retailers and 40,000 brands across 80 countries. Last year Faire sold more than 125 million products, generating peak sales of $10 million a day. Its most recent round of Series G funding values Faire at $12.4 billion — and the company is really just getting started.
At the recent Marketplace Conference, I (virtually) sat down for a lively conversation with COO
, one of Faire’s four founders. Jeff met his other co-founders — CEO Max Rhodes, CDO Daniele Perito, and CTO Marcelo Cortes — while working at Square on products like Caviar, Capital, and Cash App.Lightspeed has invested in Faire six times in the last three years, after leading the company’s Series B in 2018. Jeff and I have worked closely together for much of that time. Here are some highlights from that conversation:
AT: Where did the core insight for Faire come from?
JK: While Max was at Square, he spent his weeks building products for merchants and small business owners, seeing the impact they could have. On the weekends, he would go to trade shows as a small business owner. He experienced the pain points of having to take orders on clipboards, waited for checks in the mail, and had no insight into where his umbrellas were selling through. He quickly realized that independent retailers were extremely adept at curating and selling products their customers wanted to buy, as opposed to mass merchandised retailers. From this firsthand experience, Max gained the insight that building products and services for these business owners would level the playing field and help them to compete. Our collective lens into the wholesale space came through that experience.
AT: I remember your co-founder Max Rhodes telling me early on that what Faire does best is help small entrepreneurs manage risk. Can you share the logic behind that statement?
JK: Whether you’re an online retailer or brick-and-mortar, agreeing to carry a new product is really scary. You’re already operating on slim margins, and maximizing the gross profit per square foot of your store is critical. Taking on a whole bunch of new inventory that doesn’t sell can be devastating. So we asked ourselves: “How do we lessen the risk for retailers?” The answer we came up with was net-60 payment terms and free returns. Retailers only end up paying for what they actually sell. That provided the confidence to purchase products sight unseen without the anxiety of worrying whether anyone would buy them. Underwriting the risk for retailers fundamentally changed their experience.
AT: Another key differentiator is how Faire aggregates data and uses it to essentially underwrite wholesale purchases. How important is data to your success?
JK: Helping retailers make better decisions about which products to carry is critical. By applying machine learning to aggregated data, we’re able to make recommendations about what products are likely to be more popular in a particular region or for a particular kind of customer. This is data that wasn’t available a decade ago. We use it to improve the retailers’ shopping experience and make it easier for them to buy goods online.
AT: One of the canonical challenges of serving SMB customers is user acquisition. How did Faire overcome that challenge?
JK: Acquiring new customers is hard, but if you have a really compelling product there are ways to do it. One of the most clever things Square did was make every interaction with a customer a marketing impression. The branding of the device was super intentional, and even the receipts were designed with that in mind.
We’ve seen a lot of growth powered by both organic and referral traffic. Brands invite retailers to the platform because we make it super-easy for them to order from us. Retailers say, ‘Here’s some brands we think would be a great fit for Faire; we’re going to refer them to your sales team to close.’ We’ve also spent a lot of time tinkering with our referral loops to get the incentives right on both sides. The network effects are really there. It’s a better platform for brands when there are more retailers, and a better platform for retailers when there’s more selection, because it saves them time and money on the back end.
AT: We’re living in a world of supply chain disruption, in part due to the COVID pandemic. What is Faire’s experience of this disruption?
JK: The COVID journey was a bit of a roller coaster, but I think our customers ended up doing really well. The pandemic accelerated trends that were already underway in the shift from offline to online, especially for wholesale. Our retailers and brands were able to weather the storm and even find more efficient, lower cost ways to source goods and tools.
AT: In 2021, Faire went international. You’re now live in 15 of the biggest countries in Europe. How has that impacted the company?
JK: We’ve always fundamentally believed that a global marketplace is more powerful. For the first time ever, a brand in Italy can get an order from a retailer in Utah, and we handle the shipping, the taxes, and all the other cross-border issues in a frictionless way. It turns out that a brand in Bordeaux has a lot of the same motivations and values as one in Boston or Birmingham. They’re looking for distribution, retailers, or customers that resonate with their values.
The key is to hire local talent to build those experiences, because at the end of the day, it needs to feel and resonate locally. If you get the team wrong, it doesn’t matter what else you get right, because you can’t just hop over eight time zones to fix any problems.
You can watch my entire conversation with Jeff here:
Alex Taussig is a Partner at Lightspeed in Silicon Valley, a global venture capital firm with over $10B under management. He invests predominately in online marketplaces and is responsible for the Lightspeed’s investments in All Day Kitchens, Archive, Daily Harvest, Faire, Flockjay, Found, Frubana, Outschool, Zola, and more. At his prior firm, Alex was involved with foundational investments in 2U ($TWOU) and thredUP ($TDUP), among others. Alex publishes a weekly(ish) newsletter called “Drinking from the Firehose”, where he shares insights on commerce, media, technology, science, pop culture and more.
