16 October 2017
Can you build an outstanding ecommerce startup these days? Many see this market dominated by giants like Amazon. But there is still room for a meteoric rise. Subscription-based eсommerce Dollar Shave Club is a great example of such a rapid rise and billion-dollar acquisition. It showed the potential entrepreneurs and investors alike the illustrious parts of the industry that can and should be disrupted.
We all know that up until very recently, it was a tough job raising capital for ecommerce startups as the conventional wisdom showed that the risk-to-reward was too high for venture capitalists to invest. But with a great idea, leadership and top-notch app execution you can strike gold.
Getting acquired by Unilever to continue rapid growth
Unilever acquired Dollar Shave Club for a billion US dollars. And that is an astounding accomplishment as they paid more than 5 times the revenue that this ecommerce company can bring in this year. So if such sales can happen, then it seems that the ecommerce sector is back in the saddle!
Of course, this seems like an overestimation on the part of Unilever, but such a high premium is based on the Club's brand image and top-notch customer skills. Without these points, any other ecommerce company can expect to be bought for no more than one to two times the annual revenue.
Considering that this ecommerce niche is highly competitive, the company’s feat of achieving $150 MLN sales in 2015 before the support by Unilever seems astounding. Gillette's high-tech blades and competition from Harry's and other similar ecommerce startups can do much damage but not with a mastermind marketer at the realm.
Such giants as Unilever and Proctor & Gamble are great at the old-school marketing that is mostly offline. But the tides have been changing for quite a while and they need an influx of new blood to boost direct-to-consumer marketing and brand awareness efforts. And namely, for this reason, acquisition of such upstarts is required. For the Dollar Shave Club, this opens up new opportunities to excel having a security of a large corporate financial cushion and well-established connections.
Key focus areas for ecommerce success
The company’s good fortunes have a lot to do with finding the balance between the old sales model and opportunities of the tech world. It may seem strange that having been founded in 2011, the company chose an archaic subscription model at its core. The idea is that shoppers sign up online and pay a monthly fee of a few dollars to get a monthly shipment of razors and accessories directly to their mailbox.
To put it simply, to create a successful ecommerce model like the one of Dollar Shave Club, you need to understand and be able to realize the points below:
Figuring out these issues is far from easy. But by finding the right target and creating a low churn business model with high recurring revenue, you can ensure a stable and flourishing business that is competitive even with the big guys.
Tech team as a must in ecommerce
Great ideas and leadership are essential, but for an ecommerce startup to succeed the “e-” part is key. Dollar Shave Club become prominent thanks to its tech team as well. Right now it employs over 40 engineers both in-house and offshore. And they develop the company’s software in its entirety. We believe that it's namely those developers who should get much credit for high customers’ satisfaction levels, great UX, and immense growth.
People may wonder why Dollar Shave Club requires engineers and custom software to support their business. There are two key areas where development is a must for a growing ecommerce startup:
Vital role of CRM
From the start Dollar Shave Club like most ecommerce startups did not rely fully on developing their own solutions. They relied on the large scale e-commerce platform Magento for all of their web-based activity. It is wise to use such ready-to-go solutions up until they meet most of your needs. Zoho CRM is the other solution that can be integrated which is great for smaller scale operations. Softermii has been supporting and customizing CRM solutions for many online commerce companies.
As for the Dollar Shave Club, the stumbling point was that Magento did not fully support the subscription based model and billing in particular. This made engineers create a separate billing product that of course, caused glitches in the system. To avoid that you need a strong tech team that can take full control and set up a unique technology stack. The company’s internal team had to create an ecommerce platform that uniquely suits your business model. But having an in-house team has its costs, and unless you can raise the tremendous amounts of financing, the only other option is to have an off-shore team. Outsourcing your engineering to professionals is more cost-effective and can take as little as 3 to 6 months to get a new custom ecommerce platform up and running.
Custom made mobile app that fits the bill
Dollar Shave Club is unlike traditional razor retailers as Gillette. It doesn’t have brick-and-mortar stores, and its customers use mostly website and Android and iOS mobile apps to make purchases. And the mobile part has been growing more important with many under 35 customers using their mobile phone apps as a prime tool to make digital purchases.
Mobile app in its essence is a storefront for the product offerings they have, and striving to meet the highest standards of excellence in mobile development defines Dollar Shave Club as a company. The key means to drive nearly 50% of traffic to the mobile app was achieved through running a set of offline TV ad campaigns. But if your site supports only a desktop version or you so not offer a mobile app both for Android and iOS, then you’re just wasting money and getting bad reviews.
When Softermii started working for Dollar Shave Club, there was a significant boost in conversion rates. The goal was to create an Android app and A/B test it to ensure performance improvements across all devices. Once the test commenced and all necessary improvements were made, Dollar Shave Club Android app had reached mobile conversion rates of over 125% on Samsung Galaxy Note and Google Nexus.
We wouldn't be surprised if large enterprises continued to show interest in such successful ecommerce startups like Dollar Shave Club. This lets them get a required balanced in their brand portfolios and successfully extend services to the digital sector. If you aim at creating an ecommerce company of similar qualities, you have to account for three things: sound profits, clear-cut brand story, and amazing tech support.
To sum it up, Dollar Shave Club's success as an ecommerce company is an important point for all future startups and investors alike. After reading this article, you can see the key issues you need to account for to get up and going selling things online. For corporate giants, such meteoric rise of small companies also shows that the industry is far from stagnant and they can gain access to all of their digital data and analysis at the right price. And proper CRM, mobile and web apps created and supported by development teams remains one of the most important ways of gathering such data and boosting sales.
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