eCommerce has made it easier than ever for entrepreneurs to reach national and even global audiences. That's why so many Shark Tank candidates have chosen to focus there first. After 10 seasons, hundreds of companies have come through the tank and, collectively, they've taught us a lot about what it takes to succeed.
Here are five top Shark Tank eCommerce lessons that can help you to grow your business...
1. Consider a DTC-First Approach
Historically, you couldn't scale a brand without the help of big retailers like Walmart, Best Buy, and Kroger. With those big retail relationships, though, came some serious costs including inventory carrying costs, retailer and distributor margins, slotting allowances, sales teams, and more. Today the picture is very different - many of the brands that show up on Shark Tank have achieved large-scale results by relying on Direct-to-Consumer (DTC) alone.
Tower Paddleboards is a great example. Founder Stephan Aarstol, who was already an eCommerce veteran when he started this business, decided that a DTC model would allow him to offer exceptional value not found in other stores. "We sell products for about half of what you get at retail," Aarstol said. So far, the results show that it's working - before Shark Tank, the company had sold about $100,000 of product. Since then, it's made more than $30 million!
Bombas is another brilliant example of DTC-first and one of Shark Tank's biggest successes ever. The company's experience with Shark Tank and investor Daymond John caused them to de-prioritize traditional retail in favor of their own direct strategy. “We had early ambitions of and thoughts of going into retail,” co-founder David Heath said. ”[Daymond John] actually convinced us that really, e-commerce and direct-to-consumer is kind of the future.” This path has led to wild success - as of 2017, the company was on-track to deliver $50 million in sales.
2. Know (And Use) Your Numbers
Nothing will torpedo a Shark Tank presentation faster than a founder's fumbling with basic business statistics. Per Shark Kevin O'Leary “You have to know your numbers. How big is the market? How fast is it growing? How many competitors are there? What’s the breakeven analysis?”
The founders of Solemates, Monica Ferguson and Becca Brown, both came in already understanding the importance of a good business case. They worked together at Goldman Sachs before coming into the tank with their invention which makes walking in high heels an easier and safer task. Although they faced challenges to their valuation by several of the sharks, the partners had strong command of their revenue, margins, and distribution stats. They ended up winning a deal with Robert Herjavec for a $500k equity investment at a $2.5M valuation.
The good news for eCommerce companies is that you have access to all the data you need and then some. The trick is knowing how to use that data effectively to drive action. To make all of your data digestible, consolidated dashboards like Databox can be a huge help. They combine information from multiple sources (Shopify, Facebook, Google Analytics, Quickbooks, etc.) into dynamic reports that your entire organization can easily interpret.
3. Focus on Your Acquisition Cost / Lifetime Value
Not too many companies get to appear twice on Shark Tank - Echo Valley Meats is one of the rare exceptions. In Season 4, founder Dave Alwan lost the deal because, in large part, he didn't know his "customer acquisition cost." Things went downhill from there but fortunately, he got a second chance. In Season 6, the founder came back to the show with a much better handle on his stats and won $150k equity investment by Mark Cuban.
While your eCommerce business will require you to track a lot of different stats, Customer Acquisition Cost (CAC) and Customer Lifetime Value (CLV) should be at the very top of your list. The first is a measure of your marketing efficiency while the second largely speaks to your ability to retain loyal buyers.
- A good CAC means that your media spend is efficient (usually measured using cost per click) and that your site is delivering strong purchase conversion rates.
- A good CLV means that you're getting a high average order value (AOV) and that your product quality and marketing are also earning you repeat sales.
- Benchmarks for what's right on your business will depend on margins and other factors but, of course, your CLV needs to significantly exceed your CAC - if not, you won't be profitable long-term.
Getting to accurate CAC / CLV numbers is not an easy task. It will require that you have strong measurement across all of your media vehicles and that you're tracking customer trial and repeat by acquisition source (for example, Facebook vs. Google Ads). Once you're able to measure these effectively, though, you'll have a much better idea on where to focus and how your changes will impacting results.
4. Use Social Media to Win Sales
Social media isn't just for awareness anymore - increasingly, it's being used for "bottom of the funnel" activities. According to a recent eMarketer article, 59% of companies surveyed now claim they use social media for "promotions" - contest, coupons, discounts, etc. This is more than twice the 2018 number (29%)!
Grace and Lace, from Shark Tank Season 5, is a great example of a company that's driven their business on the foundation of a great social media strategy. When the company founders entered the tank, they claimed that 90% of their over $800k in sales come from their DTC site and that they had yet to spend their first marketing dollar at the time! In addition to over 34k highly-engaged Facebook followers, the company's frilly socks had also benefited from being a top pin on Pinterest.
Entrepreneurs tend to be resourceful with a high "figure it out factor." Usually this is a strength but it can be a barrier if the entrepreneur invests precious time in trying to muddle through a task that could be more easily and quickly solved with the help of an expert coach or partner. If the entrepreneur fails to ask for help, she or he will eventually become the bottleneck to growth.
We've been fortunate to have had the opportunity to coach several Shark Tank alumni and some entrepreneurs who are likely to become contestants in upcoming seasons. That's why we were delighted to get this shout out from Mr. Wonderful himself, Kevin O'Leary:
We can help you to efficiently grow your eCommerce sales on your own DTC site, on Amazon.com, on Walmart.com, and at other top retailer sites. We've worked with companies of all sizes from "pre-revenue" all the way up to big brands like Samsung, Pampers, and Campbell's.
If you'd like to discuss how we can help you, please schedule a free consultation today!