Nicholas Carlson from Business Insider addresses the question of how to build a successful vertical and how best to connect with the customer. He is joined by Chad Dickerson (Etsy), David Nussbaum (F+W Media), Cornelius Patt (ZooPlus), Jeff Raider (Harry’s) and Stefan Winners (Hubert Burda Media).
What is the attraction to your vertical
Cornelius: The company was set up because 4 of the founders wanted to get rich as soon as possible. We picked one that was easy to emotionalise. All business to consumer models benefit from the fact that consumers are plenty. There is plenty of room to grow, basically forever.
Jeff: I started Warby Parker in business school. The reason glasses are so expensive is because there are a couple of big companies that dominate the industry.
David: I joined the company in 2008. It was a company that had existed for over a hundred years. I found that the company had incredible assets. We had enthusiasts in our database, and content that could be monetised. They key to it was the enthusiasts who were passionate about their hobby.
We thought that if you were really enthusiastic about something you needed a home. A home where you could get anything. And that resonated with the consumers.
Chad: Etsy is a platform for hyper-verticals. One of our successful sellers consists fully of baby neckties. Another makes super-hero capes for kids. It’s a marketplace of 1.1million verticals.
David: Chads retailers are our consumers.
Amazon could squash all of you, how do you survive in an amazon dominant world?
David: Amazon are partners of ours. They have told us they are not very good at marketing to verticals. So the way we can work with Amazon is that we are serving the very tip of a consumer set.
Stefan: The behaviour of amazon, how they buy stuff, we get a lot of support because the consumers want to have a more direct contact. They want to touch products. They can do that in our stores, and you can’t do that with Amazon.
Cornelius: They are big but that doesn’t necessarily make them the best.
Jeff: We would view Amazon as a retail partner and not as a competitor.
Chad: We view Amazon as a competitor in that they may choose to buy something at Amazon and they may want to buy something from etsy. But you can buy things on Etsy that you can’t buy on Amazon. We don’t use our scale to put pressure on our suppliers.
What lessons did you learn from starting another e-commerce business?
Jeff: Make sure each one of your customers has the best experience they can. We tell our customer support team that they are the most important team in the company.
How do you think about brand?
Cornelius: As a retailer we are a pipe for the customers to get the real brands. What we focus on is conversion and retention. If that translates into a brand later on it is nice. Advertising and brand building would not have worked for us.
How do you internationalise?
Stefan: In every market we are in we usually have one big German competitor and one international. If it comes to internationalisation there are lots of challenges. A lot has to do with timing. The earlier you are the less it costs. We really have to look to find smart ways into some markets. So far, it works.
Chad: Etsy has been international from the start. We built local marketing teams in the top markets. We essentially took local craft fairs online. Craft fairs have been around for thousands of years so that model really works.
Let’s talk about marketing
David: Our customers become their own marketing channel. We use Facebook and Pinterest and twitter, but our users are the best sellers.
Stefan: Two years ago we would have spent 80-90% on Google, now we have grown affiliate, we have a lot of experience with Facebook, which doesn’t convert, but it builds the brand. We spend a lot of money on TV and print. Google is becoming very expensive to make a profitable customer.
Corneliius: If we don’t do any advertising at all we still grow. Out of each customer that we have we generate new customers. Keep the customer happy and make sure the website converts most incoming traffic. It is better to boost conversion and boost loyalty.
Jeff: Marketing mix changes as you grow. We invested more in direct marketing earlier. The most effective channel is PR, because you can target really credible sources that can tell our story in a long form.