What do breathable underwear, convertible high-heel shoes, and magnetic baby gear have in common? They are all products from companies being advised by Trendseeder, one of New York’s hottest accelerators for early-stage fashion, beauty and wellness retailers.
We hung out with CEO Avani Patel and President Matt Jung at Trendseeder HQ to chat about their unique approach to growing a business and the exciting evolution of retail. Along the way, we discussed the nuance of product-market fit, the retail apocalypse and what it takes to truly build a great retail brand.
Dynamic Yield: Let’s start provocatively. What is one piece of conventional wisdom in retail marketing that is incorrect?
Trendseeder: The idea that top-line growth is the most important metric. We are absolutely against the obsession with trying to fuel top-line growth and scale at all costs.
The key is to build a strong brand and business foundationally and then scale appropriately. Scaling smart is not just about pursuing exponential increases in revenue. We favor a strong customer following and a clear path to profitability over pure growth metrics.
Dynamic Yield: So if overall revenue growth isn’t the most important metric, what is?
Trendseeder: Gross margin.
Ultimately, favorable gross margins are indicative of that clear path to probability and growth potential, often more so than current growth.
Dynamic Yield: Besides gross margin, what are the main factors you look for when deciding whether or not to back a start-up?
Trendseeder: It starts with the classic product-market fit. Is your product something consumers really want and find unique? The two of us can’t sit here and tell you who the next big designer is going to be so we have to look at how strong consumer affinity is for a product.
Sometimes, great products aren’t doing as well as they should be due to inefficiencies in process or missed marketing and partnerships opportunities. But so long as the product resonates with consumers, this is an area where we can step in and add a lot of value.
Another key factor we look for is subtle competitive advantages and points of differentiation. We find that a lot of great start-ups have one unique twist that helps them really stand out in the marketplace. This often comes from a hyper-specific innovation in design, branding or operations.
Dynamic Yield: Can you give an example of a company that has a subtle competitive advantage in addition to product-market fit?
Trendseeder: Naadam Cashmere is a perfect example of this. On the surface, they look pretty similar to numerous other cashmere retailers but they have a supply chain that ventures into the Mongolian desert. How cool is that?
Dynamic Yield: You guys have helped several retail startups grow significantly Besides a great product, what is the key to scaling an e-commerce company 10+X?
Trendseeder: Of course this varies greatly depending on the brand. But you would be amazed at the power of simply tightening up your brand story. People will buy from a brand that they believe in.
Even if the brand story is engaging, a lot of times small companies simply lack large-scale awareness. This can be solved with an infusion of capital to invest in marketing or by forming more meaningful industry relationships. Simply growing their network is vital for a lot of entrepreneurs and brands can take the proverbial next step.
Dynamic Yield: Our research has shown that 60% of traffic to retail websites is coming from mobile. Should retail start-ups consider mobile as the primary medium for online commerce?
Trendseeder: For the smaller retailers we work with, a “mobile-first” strategy is still out on the horizon. But we know smartphones are definitely involved in the buying process. It’s vital to understand that even if a purchase doesn’t happen on a smartphone, often the search and awareness stages of the purchase funnel are occurring on the go.
It is essential not to view the smartphone as a threat to in-store shopping but as a means of enhancing the experience you provide in-store and across channels.
Dynamic Yield: Just this week, both Business Insider and The Atlantic have said that we are in the midst of the retail apocalypse. Is retail truly undergoing an existential crisis?
Trendseeder: Apocalypse may be an overstated term but it is clear that the old way of doing business in retail simply doesn’t work anymore. In many respects, fashion and retail are pretty archaic industries and there is so much opportunity to deliver better customer experiences.
Retailers are going to have to adapt to the new normal. And that could be a great thing.