Lessons from OWN IT: how to scale an ecommerce and retail business
High competition, logistics, customer retention, and maintaining satisfaction are the everyday challenges of running an ecommerce business.
As an entrepreneur, how do you navigate these challenges, carve a niche for your brand, and scale your ecommerce business efficiently?
During OWN IT, Klaviyo’s 3-day virtual ecommerce summit, Nik Sharma, CEO of Sharma Brands, and Moiz Ali, founder of Native, spoke with Kyle Cooke, CEO and founder of Loverboy, in a special-edition episode of their podcast Limited Supply about what it takes to build and grow an alcoholic beverage business that’s disrupting industry standards.
Setting the context for Loverboy’s rebellious strategy, Cooke explained, “selling alcohol is challenging because of the legally binding 3-tier system where the supplier needs a wholesaler to get the product to a retailer. So, even if there’s consumer demand, it doesn’t mean wholesalers understand your business.”
Even if there’s consumer demand, it doesn’t mean wholesalers understand your business.
Unlike other alcohol brands, which funnel money into advertising, Cooke believed that by building a strong foundation and continuing to demonstrate consumer demand for the Loverboy product, he would slowly but surely win over wholesalers and retailers—and, eventually, online consumers.
Cooke shared some interesting insights from his journey scaling Loverboy, a bootstrapped brand, to $40M in sales as he sets his bets on quadrupling this year.
What is scaling in ecommerce?
Scaling in ecommerce refers to expanding an online retail business to manage higher sales and demand. It involves optimizing operations, technology, and content marketing to ensure efficient growth while maintaining customer satisfaction.
This often requires investments in infrastructure and resources to support increased business activity and market reach.
8 strategies for scaling your ecommerce business
Scaling your ecommerce business is a critical step toward achieving long-term success and profitability. Based on Loverboy’s journey, here are 8 tried and tested strategies for scaling up in the ecommerce space:
1. Nail your product-market fit
To build a successful brand, you need to have a product that meets an existing market need along with a brand story that’s honest, transparent, and reflective of your brand’s personality.
Launching an influencer-backed brand takes more than having a huge follower list. The reality show, Summer House, gave Loverboy an air of authenticity and a much-needed edge in the undifferentiated alcohol market.
Cooke explained how he carved a niche for Loverboy. “When we started, every alcohol brand looked the same,” he recalled. “Even hard seltzers, which were a new product, were all in white cans with no story. The liquid was almost the same, going from one brand to another.”
Identifying an opportunity to create a brand with a story—one that isn’t pigeonholed into a single category—Cooke sought to create a beverage that was fun to drink but also offered nutrition benefits. “I wanted our sparkling ready-to-serve (RTS) drink to be a lifestyle brand—a zero-sugar, premium beverage formulation in a can that appealed to women,” he explained.
I wanted [Loverboy] to be a lifestyle brand.
2. Build proof of concept
Before you look to raise funding, build a solid foundation and invest in a minimum viable product to get it to a point of relative success.
Cooke, for example, self-funded when he was ready to launch. “I’d advise anyone, don’t spin your wheels trying to send around a pitch deck initially,” he said. “Whatever you’re building needs to be more tangible before you do that.”
After a year, Cooke set out to raise $1M. “We were oversubscribed, so I actually had to stop at $1.25M when we soft-launched in New York in 2019 before the other markets, just to make sure we had proof of concept,” he explained.
Building proof of concept is also a way to identify and address potential risks and challenges early on, while saving you time and resources and preventing potential failures in the long run.
3. Establish a DTC presence for your brand
While there are a variety of different ecommerce business models, one advantage of establishing a DTC product line is that it means your brand is where the people are—online.
Cooke explained this from an alcohol industry perspective: “The only way to do true DTC in alcohol is to sell wine. We needed our products to be classified as wine products to jump over the wholesale and retail requirements.”
“If your brand is taxed and distributed as beer, you have 4x the number of retailers in the US that can sell your product,” Cooke continued. “When we [added our spritz cocktails to the Loverboy product line] and were able to classify them as wines, we were able to sell DTC in 45 states.”
DTC also allowed the brand to expand their presence with an online store to drive ecommerce sales. “As a small company, aiming to be where the customer was meant that we needed to be in their homes,” Cooke explained. “People are willing to pay a premium for convenience, particularly if it’s a brand they know they want.”
People are willing to pay a premium for convenience, particularly if it’s a brand they know they want.
4. Define your audiences through segmentation
A well-planned sales funnel guides potential customers through a structured customer journey, optimizing their experience from awareness to purchase.
Audience segmentation is a vital part of that equation, and Loverboy does it well. “Sometimes we’re a little too reliant on our existing customer base because we’ve segmented so effectively and know the various kinds of sequential email campaigns and flows we want to put out,” Cooke said.
During peak periods, the process begins with using content advantageously and teasing what’s to come. “We might send hints about what’s going to be dropped on Black Friday or Cyber Monday, or we might create our own hype event and launch early with a Pink Thursday or Pink Tuesday,” Cooke said.
Using a systematic approach to driving customer engagement—one that nurtures relationships and boosts conversion rates—enables ecommerce businesses to achieve scalable growth.
5. Make it easy for customers to find you
Cooke had the understanding that his role as an original cast member on Bravo’s Summer House provided him an audience that would allow him to effectively launch Loverboy and garner immediate brand awareness from being featured on the series—it was what came next that proved to be a challenge.
“Initially, when people saw Loverboy on the show, it was almost painful because 99.9% of people couldn’t find or buy it,” Cooke recalled. “I decided that our landing page would capture emails from the get-go because while I might not be able to sell to you now, I’m going to sell to you down the road.”
Our landing page would capture emails from the get-go because while I might not be able to sell to you now, I’m going to sell to you down the road.
“Customers would see the brand on Summer House, google it, and the first thing they’d be hit with on our website was a pop-up to capture their email,” Cooke explained. “I wanted to ensure that I was capturing the information of people interested in Loverboy, encouraging them to follow me, sign up for text messages, email, and our newsletters.”
Capturing this information proved useful for the brand. In one example, Cooke said, Loverboy used email marketing and text to let everyone know within a 48-hour period about a meet and greet at a Harris Teeter.
“In the middle of a workday, we had a line out the door just by using our email list, which at this point is 300K strong,” Cooke explained. “Within our most segmented audiences, we’re looking at 70% open rates.”
By the time Loverboy got around to launching their direct-to-consumer (DTC) product, “we already had a solid email list, and we were texting as well, so it all went hand in hand,” Cooke added.
6. Invest in customer retention
Your job as a marketer is not done once you acquire a customer. In fact, it’s just started. You need to have strategies in place to nurture that new customer for the long term and encourage them to return regularly.
Here are a few channels to consider for your retention marketing strategy:
- Email: Email is one of the most cost-efficient channels. Use segmented campaigns and automations to deliver relevant messaging to every customer on your list.
- Social media: A strong social presence creates trust and brand awareness, and is also a great way to identify your top consumers.
- Push notifications: Because they target customers who’ve taken the extra step of downloading your brand’s mobile app, push notifications keep your loyal customers engaged and interested in your online business offerings.
- Retargeting ads: Retargeting ads are a great medium for reaching customers who have already shown interest in your ecommerce brand, reminding them of your offerings, and encouraging them to make a purchase.
But remember: An excellent product has to be at the heart of your retention strategy.
“You may get the early adopters to try your product, but beyond that, the product has to speak for itself,” Cooke pointed out. “If your friend’s drinking Loverboy, it’s a conversation starter, but if you take a sip and don’t like the taste, nothing else matters. You’ll never break out of your original audience, and you won’t get them to make repeat purchases.”
You may get the early adopters to try your product, but beyond that, the product has to speak for itself.
7. Prioritize profitability at every stage
“Everyone thinks venture capital is the holy grail. The truth is, it’s profitability,” Cooke said.
Profitability increases your company’s value, demonstrating that the business model is viable and there is a solid customer base willing to pay for your products or services.
In 2020, Loverboy was a 5-person company with a 25% net profit. They qualified for an SBA loan, and their cashflow cycles got extended thanks to the pandemic and supply chain issues.
“The loan allowed us to tide over that period,” Cooke explained. “We had zoomed past the Series A sweet spot before the summer of 2022 when everything went downhill for venture capital. Apart from using the loan to address supply chain challenges and plugging in cash flow gaps during peak pandemic, we resisted the urge to spend.”
A company that relies on funding without focusing on profitability may not be able to sustain its operations or funding rounds, resulting in failure to meet investor expectations and a difficult environment for raising future funds.
“We have not touched our funding money,” Cooke added.
8. Leverage micro-influencers smartly
Finding the right influencer to achieve maximum ROI depends on the product-influencer fit.
“Many people are willing to say ‘yes’ to every brand that wants to pay them, so if you’re looking to give your brand a quick boost on social media, you have to be careful,” Cooke cautioned. “I would encourage brands to go after micro-influencers rather than paying someone $10-20K and hoping it improves conversions.”
Many people are willing to say ‘yes’ to every brand that wants to pay them, so if you’re looking to give your brand a quick boost on social media, you have to be careful.
The best-case scenario: identifying an influencer who genuinely loves your product and decides to buy it, so their endorsement is not a paid ad. Consumers care more when they can tell an influencer is an actual consumer of your product, and they incorporate it into their life authentically.
Scaling ecommerce sustainably
In the dynamic landscape of ecommerce, strategic scaling is paramount. A key part of scaling your business is attracting new customers, but you should also aim to retarget those who’ve found your store but are yet to convert.
Fostering sustained growth requires reaching the right customers, optimizing user experience, and embracing innovative marketing efforts.
Through these multifaceted approaches, your ecommerce business can confidently navigate expansion, solidify your market presence, and take your business growth to the next level.
How to scale an ecommerce business FAQs
What are the main ecommerce business models?
Here are some of the most popular ecommerce business models:
1. Business-to-consumer (B2C): Businesses sell products or services directly to individual consumers.
2. Business-to-business (B2B): Businesses sell products or services to other businesses.
3. Consumer-to-consumer (C2C): Individuals sell products or services to fellow consumers on online marketplaces.
4. Direct-to-consumer (DTC): Manufacturers sell products directly to consumers, bypassing traditional retail channels.
5. Subscription model: Customers pay regular fees for access to products or services.
6. Marketplace model: Online platforms connect sellers and buyers, facilitating transactions.
7. Dropshipping: Retailers sell products without holding inventory; suppliers ship directly to customers.
8. White labeling: Companies sell generic products produced by one manufacturer under their own brand.
How to know when to scale your ecommerce business?
It might be time to scale your ecommerce business if:
– Demand for your products and services consistently outpaces supply, resulting in stock-outs, delayed deliveries, or overwhelmed customer support.
– Key metrics like conversion rates, website traffic, and order volume consistently show growth and your current resources can’t meet demand efficiently.
What is the best strategy to scale an ecommerce website?
While there’s no one-size-fits-all strategy, focus on optimization in the following areas:
1. Product: Without a great product, customer acquisition is useless because you won’t be able to retain customers. Consider diversifying into new product lines and optimizing your pricing to cater to a broader target audience.
2. User experience: Focus on site speed, mobile responsiveness, and intuitive navigation to ensure the best customer experience on your ecommerce store.
3. Sales channels: Increase your reach by making your products or services available on other platforms, like the Amazon Marketplace or eBay.
4. Digital marketing: Employ targeted online advertising, SEO, and marketing campaigns on your social media platforms to drive traffic and conversions.
5. Tech stack: Invest in robust back-end infrastructure to ensure seamless order processing and customer support for sustainable growth.