3 Things: In-Box Cross-Selling, Robo-Advisors for Crypto/Alts, Kenshoo for Creators
Happy Sunday and a very warm welcome to all the new subscribers! I’m thrilled and honored to have you as readers and truly appreciate your thoughts and feedback 🙏. Each edition of 3 Things will contain a dive into 3 rabbit holes I’ve found myself going down recently. Subscribe to get each week’s edition straight to your inbox and if you enjoy it, please share (I suck at self-promotions so can use your help)! This past week I’ve been thinking a lot about:
In-Box Cross-Selling
Robo-Advisors For Crypto/Alts
Kenshoo for Creators
1. In-Box Cross-Selling
There was zero doubt that e-commerce was growing at a steady clip, but the pandemic accelerated adoption by at least 5 years. In Q1 2021, we spent $200B in online purchases in the US, up 39% year-over-year. Shopify alone grew 96% in 2020 doing $120B in GMV and expanded it’s merchant base to over 1.7M merchants. Amazon has been working on their recommendation algorithm for 20 years and spends god knows how much money and human hours each year improving its ability to drive cross-selling, upselling, and increased basket size. Merchants who choose to sell their products on Amazon give up a piece of their revenue and some control but gain access to getting recommended to the entire Amazon customer base which provides insane growth opportunities. The problem with selling on Amazon is that as a merchant, you don’t get the data on customers who purchase your products, which means you can’t directly market to them in the future or even understand who is buying what to help with marketing and ad campaigns outside of Amazon.
The nature of Shopify (and other e-commerce platforms like Magento, BigCommerce, WooCommerce, etc) is to enable brands to create and manage independent digital storefronts and handle everything associated with selling physical products online. Merchants get to maintain their independence and control their customer experience, while also getting ALL of the data associated with customer behavior like what products they look at, what they add to cart, what they purchase, etc. You own the relationship with your customers and can do what you want when it comes to the site design, any promotions, email campaigns, and the unboxing experience. Most merchants use a variety of apps and plugins from Shopify’s App Store and work with 3rd parties called 3PLs (3rd party logistics) to handle inventory management and fulfillment. A huge opportunity exists for brands to cross-promote each other’s products to help acquire more customers, especially net new customers which is the holy grail. A few startups are tackling this from a pure digital perspective like Coop Commerce and Carro, but the box is a completely untapped opportunity. I’m continually shocked every time I get a package as to why there aren’t a ton of promotional materials in there. I mean, I still get a ton of direct mail and the unboxing experience is a way better opportunity to capture my undivided attention (and excitement as getting packages is fun). Sure, you could try to sell me more of your products that you think I might like, but that can easily be done over email. What’s more interesting is introducing me to new brands that I might like. A startup could provide an app that uses brands’ data to facilitate cross-promotion and integrate directly with the 3PLs and Shopify Fulfilment Network to create in-box cross-promotion campaigns. Brands would get in-kind opportunities to promote their products and potentially revenue share for driving new customers.
2. Robo-Advisors for Crypto/Alts
Financial planning and wealth management used to be the exclusive opportunities of the rich. In the wake of the financial crisis in 2008, some enterprising founders launched the first robo-advisors, taking the software and concepts that were already in use by the top financial advisors/managers and democratizing them. These robo-advisors offered “a self-guided online wealth management service that provides automated investment advice at low costs and low account minimums, employing portfolio management algorithms”. In 2008, Benchmark Co-founder Andy Rachleff and Dan Carroll launched kaChing (which would soon become known as Wealthfront) and in 2010, Jon Stein launched Betterment which became the two most popular robo-advisors. By 2015, more than 100 companies offered this type of service and as of 2021, there are more than $350B assets under management with robo-advisors, most of which sit with Vanguard and Schwab who piggy-backed onto the trend and were able to onboard a huge chunk of their client bases to these services.
Over the last few years, the interest in cryptocurrencies and other alternative investments like fine art (and now NFTs), wine, collectibles, and more has been on the rise, especially among Millennial investors. Whether you choose to work with a human financial advisor/wealth manager or a robo-advisor, your guidance is limited to traditional assets. I personally met with 5 different financial advisors last year and asked each the question “how do you guide clients when it comes to crypto/alt investments?” and the answer from each was “oh, we don’t touch that stuff or offer any client advisement”. Wrong answer if you’re working with a Millennial or GenZ. The time is ripe for a new robo-advisor platform that incorporates cryptocurrencies and alternative investments. The good news is that the marketplaces and exchanges where you purchase these types of assets today have modern interfaces with APIs to easily pull data and execute transactions. One other benefit to the robo-advisors like Wealthfront and Betterment is that they show you an aggregated “single pane of glass” view into your financial picture… that is as it relates to traditional assets and liabilities like mortgages. These new platforms should incorporate a much wider array of assets to give modern investors a true aggregated view of their holdings and real-time assessment of value in addition to personalized guidance on how to manage them and offering the ability to execute that guidance directly through the platform.
3. Kenshoo for Creators
2021 is proving to be the year of the creator. The “Creator Economy” is all over the news, social media, and on most investors’ minds. There are now more than 50 million people who consider themselves creators and significantly more kids today want to be YouTube stars than astronauts. The dominance of behemoth media platforms like Instagram, YouTube, TikTok, Spotify, and Apple Podcasts has enabled individuals to build massive followings by creating content in their medium of choice and becoming influencers. The problem is that by building an audience on the back of a major platform, you don’t own the relationship with your fans and are limited to monetization options provided by the platform. Plus, you are forced to pay substantial fees to said platforms which is a major factor driving a ton of creators to move off platform and try to go direct to their fans. This has given rise to dozens of companies that are putting the power back in the hands of creators, enabling them to port their audiences off-platform and interact and monetize as they choose. The first example of this was Patreon which launched back in 2013 to help musicians earn money in the form of tips and donations directly from fans. Since then, dozens of companies have cropped up trying to be the “Shopify for creators”.
Almost all of the attention in the creator space has been placed on helping people who already have sizeable audiences interact with and monetize their fans and followers. These companies offer tools to engage over text, email, video and ways to make money via gated content, 1:1 paid fan engagements, subscriptions, direct donations, merch drops, and more. While these are extremely valuable for creators who have figured out how to build large follower bases, for the vast majority of people, the challenge starts with how to create and grow an audience in the first place. To help guide aspiring creators on what content to create, how to improve it, and who to target, a platform could use AI to analyze a sample of their work and provide intelligent suggestions on how to tweak or improve, what topics to cover, and more based on market data. From there, it could continually offer trend information and market intel and provide a click-button-grow-audience type functionality similar to what Kenshoo (recently rebranded to Skai) and similar platforms offer brands on the digital marketing front. After a creator has intel on how to optimize their content, the engine would automate the omnichannel digital marketing efforts (think automated ad campaigns) helping get in front of the right people, with the right message, on the right platform, at the right time to build an audience. The beauty of a tool like this is that it has value for the top, middle class, and longtail creators so the addressable audience is gigantic and constantly growing. There are natural partnership opportunities with the largest monetization platforms as well since this would play far upstream from where they add value.
That’s all for today! If you have thoughts, comments, or want to get in touch, reply to this email or find me on Twitter at @ezelby and if you enjoyed this, please subscribe and share with a friend or two!
~ Elaine