How e-commerce companies can brave the new retail environment

E-commerce companies were once considered nearly invincible as they grew unfettered and saw record profits. But of late, they’re braving a new market shaped by three major trends: stunted online shopping growth, the impact of the latest iOS privacy updates on social media customer acquisition strategies (leading to higher costs) and macroeconomic uncertainty.

While these factors are largely out of retailers’ control, we’re seeing a few emerging companies that have adapted by entrenching with existing customers and building their organic brand.

In this post, we’ll dig deeper into the key trends and their impact on e-commerce, as well as with several tactics companies can implement to continue to thrive in this new retail climate.

The new retail challenge

First, e-commerce growth as a percentage of total worldwide sales has not continued to persist as strongly as expected post-pandemic. Statista reports that e-commerce stood at 12.9% of total U.S. retail sales in Q4 of 2021, down from 13.6% in the previous year. It’s likely that a few quarters of growth was pulled forward and is now reverting back to the original course, albeit still elevated.

Most brands will find it tough to spur growth via customer acquisition in 2022.

At the same time, customer acquisition costs have risen due to recent iOS updates as Apple continues to implement and ramp up privacy features. Devices running the new OS have limited third-party tracking capabilities that platforms like Facebook (or Instagram) depend on.

No longer having access to the level of broad audience targeting and optimization capabilities previously available, brands are seeing a drop in performance and higher total acquisition costs, leading many to shift spend away from these platforms.

Finally, there’s a new threat rapidly approaching and clouding the e-commerce landscape: macroeconomic uncertainty with a potential drop in discretionary spending. This is already evident in the lackluster earnings from major retailers such as Target and Walmart, where we’re seeing the mix of non-discretionary revenue accelerate due to inflation while discretionary item sales slow down.

What can be done to combat these threats? There are two primary courses of action e-commerce companies should focus on: (1) entrench — getting existing customers to stay longer and spend more, and (2) build a stronger brand — reducing reliance on social to organically drive better customer acquisition and conversion rates.

Entrench existing customers

The first step is to reduce churn and increase average order value (AOV). This helps brands protect conversion and hit forecasts while balancing profitable acquisitions as conversions drop due to larger industry changes (e.g., increasing acquisition costs and supply chain issues).

Formalwear-focused Queenly makes first acquisition after posting rapid early-2022 growth

Queenly, a startup building a garment marketplace aimed at dressing women for formal events, announced this morning that it has purchased Mi Padrino, a company built to serve the quinceañera market.

The two companies’ overlap is obvious: Quinceañeras, events where girls celebrate their 15th birthday with a large event and ornate garb, is an event varietal that Queenly’s product supports. The deal caught our eye not for a lack of synergy, then, but more due to the relative youth of Queenly itself.

TechCrunch has wondered whether the present market downturn would lead to startup-on-startup M&A activity. The Queenly deal is one datapoint that supports that particular thesis.

And Queenly is a startup that several of us at TechCrunch have had our eyes on since its days as part of Y Combinator and through its 2021 fundraising events. So when it reached out with news that it had, despite its relatively modest corporate age, bought something, we got on the phone. Let’s talk about it.

Queenly’s growth

TechCrunch caught up with Queenly CEO Trisha Bantigue this week to discuss the deal and the status of her formalwear-focused startup. (If her name sounds familiar, recall that Bantigue came on the Equity podcast to chat about remote accelerators in early 2021 and wrote an essay about the mental health impacts of building a startup for Fortune in 2022.) What we wanted to find out was simple: How is the company performing, and why is it buying another startup so early in its life?

On the performance front, things appear to be going well at the company. Because Queenly is inherently tied to the IRL market, as COVID wanes in consumers’ minds and formal-dress events creep back onto our calendars, you might expect that it is posting rapid growth in recent quarters. Correct. Per Bantigue, Queenly’s business has effectively doubled from Q4 2021 to Q1 2022, and again from Q1 2022 to the second quarter of this year.

That growth does not all stem from the company’s original business. Over time, Queenly has expanded its model beyond user garment resale. It also works with smaller brick-and-mortar prom and formalwear stores that lack a digital presence and has deals with some clothing brands to sell directly through its website. Resale remains about 75% of Queenly transactions, according to Bantigue, with a further 15% coming from small-business partners and a final 10% from designers themselves.

The Mi Padrino deal

Bantigue said Queenly initially linked to Mi Padrino via an investor. During an early call, Bantigue learned that it was for sale. Although she didn’t expect to buy another company so early in her startup’s life, she ran a diligence process and, after months of research and hammering out the deal, Queenly’s work to acquire the smaller company wrapped around two weeks ago.

Terms were not disclosed, but in this case, we’re not too mad about it. Why? Because what Queenly bought was not a large, operating business; Mi Padrino had contracted to a diminutive scale in personnel terms by the time that it sold. And Queenly is only keeping Mi Padrino’s dress-focused business, leaving the rest of what its acquisition provided behind it. (DJ and photographer recommendations are useful, but don’t neatly land inside of what Queenly does.)

So what is really being sold? Brand, content, and history, it appears. The Mi Padrino brand is better known in Hispanic circles than Queenly, the latter company explained, and it has a library of content that could help bring more customers to its new corporate parent. Queenly gets a deeper hook into a large formalwear market, potentially helping it keep up its growth cadence — the majority of Mi Padrino’s revenue was sourced from its dress-related business, Bantigue said.

Beyond the transaction, Queenly is working on a community aspect to its business that it likened to Sephora’s, as well as a brand ambassador program for the upcoming school year. Finally, co-founder and CTO Kathy Zhou is building a reverse image search so that users can bring an image of a dress that they love to Queenly, which will then be able to help them find and buy it.

The clothing resale market is large and growing. And despite some troubles at Rent the Runway, it is clearly a place where technology will have a long-term home. Let’s see how fast Queenly can grow in the back half of 2022 and whether that shakes loose more capital.

Black Founders Matter presses VCs to pledge commitment to diversity

As a child, Marceau Michel always asked for a quarter.

He knew if he kept asking for a quarter, he’d have a dollar one day. Then he’d be well on his way to having two — a slow but purposeful build toward amassing his own little fortune.

Today, at the helm of the Black Founders Matter venture fund, Michel has kept that mentality. The fund announced today the formation of the 25 by 25 Pledge, which encourages venture capitalists to commit to investing a quarter of their funds into BIPOC women founders by the year 2025. The pledge also requires VC firms to have 25% of their staff be BIPOC women, believing the increase in diversity behind the scenes will help pivot more deal flow into marginalized communities.

“This is about changing the power dynamics in venture capital,” Michel told TechCrunch. “You have to start at who is left behind and bring them to the starting line.”

Michel was inspired to start the pledge after realizing his own investments leaned toward Black male founders. That led him to focus on investing in Black women, and added five companies to round out his portfolio of 10. His new initiative hopes to encourage VCs to prioritize investing with diversity in mind as a way to improve the industry’s harrowing fundraising stats.

White women receive a marginal portion of total venture capital funding, but the amounts minority women get are far more diminutive. Last year, women raised just 2% of the record $330 billion in venture capital. Of that 2%, less than 0.50% went to Black women, approximately 0.51% went to Latina founders, an estimated 0.71% went to Asian women, and a mere 0.004% went to Indigenous founders, according to Crunchbase data.

“If a fund does not want to do this pledge … the question is why.” Marceau Michel, founder of Black Founders Matter

“If more funds said, ‘I only want to see deals led by women,’ then we’d see more women being invested in,” Michel said. “Black, Indigenous and women of color make up most of the women on Earth. Asking for 25% [of investment volume] is not too much. I just see it as the start.”

The pledge is available on the Black Founders Matter website for those wanting to sign.

The impact of a pledge

The 25 by 25 Pledge has a precedent: the 15 Percent Pledge, launched in 2020 by fashion designer Aurora James.

The 15 Percent Pledge encourages retailers to dedicate at least 15% of their shelf space to Black-owned businesses. So far, it has received commitments from 28 retailers, including Sephora and Nordstrom. The pledge, now a nonprofit, also created a database of 1,200 Black companies to help companies find and build relationships with Black founders. To date, the 15 Percent Pledge says it helped Black-owned businesses generate $10 billion in revenue and aims to beget $1.4 trillion in wealth for Black entrepreneurs by 2030.

New bank, who dis? Lifestyle-focused neobank Cogni pivots to web3

Digital banking startup Cogni is joining the ranks of companies hopping on the crypto bandwagon. The mobile-based platform, founded in 2016 out of Barclays’ accelerator program (which is operated by Techstars), launched with the intent to offer personalized banking products suited to the lifestyles of those in the 18-to-35 crowd, CEO and founder Archie Ravishankar told TechCrunch.

Now, Cogni has raised a $23 million funding round led by Hanwha Asset Management and CaplinFO with a new mandate — bringing web2 and web3 services together on one platform, Ravishankar said.  Solana Ventures, FTX Ventures, Ship Capital, Thirty Five Ventures, ROK Capital, Bluewatch Ventures, and Alsara Investment Group also participated in the fundraise.

The company last raised a $1.7 million seed round in November 2018 before it officially launched, and subsequently raised a $5 million seed extension round last year, according to Ravishankar.

“When we first started, crypto was not part of our agenda, because we really wanted to build a financial platform that suited people’s lifestyles. When crypto and blockchain became people’s lifestyle in 2021, that’s when we decided that it’s a lot more attractive to build on web3 than web2,” Ravishankar said.

Cogni founder and CEO Archie Ravishankar

Cogni founder and CEO Archie Ravishankar

The company currently offers core banking services such as deposit accounts for free to its customers through a borrowed bank charter, like many other neobanks including Chime. It also offers two lifestyle-oriented products — discounted digital gift cards to popular brands such as Adidas and Sephora that it sources through an aggregator and a feature that calculates a person’s carbon emissions based on their transactions. Ravishankar said the company serves “tens of thousands” of customers in the United States, though he declined to share a specific figure.

The first crypto-related product it plans to launch is a multi-chain wallet, which Ravishankar estimates will be released in approximately two to three months’ time. The Cogni platform will also offer its users access to an exchange to trade their cryptocurrency through a partnership; Ravishankar said it has narrowed down the contenders for this offering to two major exchanges, but did not share which ones it is considering.

He noted that the company has not yet decided if the wallet will be non-custodial, meaning users would hold and be able to access their own cryptocurrencies to transact directly. For reference, major crypto exchanges such as Coinbase offer both types of wallets, though the Coinbase default product is a custodial wallet wherein users can trade crypto based on its price movements but cannot directly access the currency they own.

After launching the wallet, Cogni plans to offer DeFi savings account on the Solana blockchain with the goal of offering higher yields than traditional savings accounts, a typical feature of DeFi products in their current state. While the company hasn’t officially chosen a partner for this product, it is considering working with its DeFi-focused strategic investor Ship Capital, according to Ravishankar.

In Ravishankar’s view, Cogni’s pivot to web3 still fits within the company’s original goal to build a bank that aims to capture discretionary spend by young consumers. Cogni will use its basic banking services as an onboarding platform for customers and then build more “social and lifestyle services” related to crypto and web3 in the long-term, he noted.

Both the neobank market and the field of web3-focused banking services are highly competitive. Cogni’s pivot to web3 is likely a bid to stand out among the ranks of digital bank competitors each offering its own interface and set of niche products tailored to specific demographics, while ultimately performing the same core functions as traditional banks.

Crypto-focused neobank Cogni's user interface

Lifestyle-focused neobank Cogni’s mobile interface Image Credits: Cogni

On the crypto side, there are plenty of independent providers of DeFi savings accounts, standalone crypto exchanges and custodial and non-custodial wallets on the market today. Ravishankar believes Cogni will be able to stand out by offering all of the above on one platform that also offers traditional banking services. He also pointed to Cogni’s user-friendly interface and focus on customer service as potential advantages in this crowded field.

Most Americans “are looking for a plug-and-play solution from the existing system into web3,” Ravishankar said. “They don’t want to download multiple applications or get to know the jargon,” he continued, explaining that a simple, easy-to-use solution is likely to be more desirable for users.

Cogni has 24 employees in New York and San Francisco today, with another eight across Europe, according to Ravishankar. The company had ~18 employees when it raised its seed round in 2018 and then downsized during the pandemic before growing again to its current size, Ravishankar said. It is focused on making new hires with a background in web3, both on the product and engineering teams, and is also beefing up its compliance team to gear up for the new product launches, he added.

What Glossier got wrong

In recent weeks, Glossier has laid off about 80 employees (or a third of its corporate workforce), most of whom were on its tech team.

Although the company focused on technology when it was really a beauty business, it is not hard to see these layoffs in the light of the public market tech meltdown.

Many venture-backed companies believe they are tech companies — indeed, they were born that way — when in fact they are not. Leaders at these companies need to learn the business they are actually in, what makes those companies good, and direct their technical efforts towards those ends.

The fundamental disconnect: Software-enabled businesses don’t necessarily monetize the same way that software-based businesses do.

Technology companies get the richest valuations and are endowed with the highest multiples of any sector. Pursuing those higher multiples means going to great lengths to show, both operationally and financially, that you “look” like a tech company.

For a firm like Glossier, looking like a tech company is the difference between having a price-to-sales ratio of 5.44, like Estée Lauder, or 31.6, like MongoDB. Glossier founder and CEO Emily Weiss knows it, and her investors do, too.

Tech companies are highly valued for a reason: when they work, they have high growth rates and very high margins. Companies therefore often make product decisions to achieve a tech business profile — like investing in engineering or eschewing margin-hitting operations.

Hunter Walk, for example, pointed out that pursuing software margins may be one reason social media companies avoid the cost center of human moderation.

The difficulty with these types of decisions is that you will direct your technical talent at the wrong problems.

But the narration changes once you go public. The markets work by taking companies, categorizing them, and then evaluating them on well-known metrics. You don’t get to decide what kind of company you are.

You might market yourself as a tech company, and you may very well use technology, but if the public markets decide you’re a beauty company then, well, you’re a beauty company (at least for valuation purposes) until you prove otherwise.

Lucky is bringing brands, retailers together with its take on product merchandising

Shifting consumer buying behaviors means brands can’t only rely on selling via one channel anymore.

For e-commerce and traditional retailers looking at new ways to connect and engage with consumers, Lucky believes its approach enables them to work together to not only achieve that goal, but give consumers a better shopping experience.

The 1-year-old company was founded by Sneh Parmar, who has a background in consumer purchasing behavior, and Nafis Azad, whose background is in software UX and product development.

Parmar was buying a certain brand of charcoal toothpaste online and waiting a week to receive the package. While telling friends about it, they told him he could actually find it at Target.

“That’s when the lightbulb went off — why am I buying online and paying for shipping when I can walk two blocks to Target?” he added. “Nafis and I began trying to understand the relationship between retailers and brands, who are still competing against each other.”

They aimed to create something on top of retailers’ infrastructure so there is full transparency of inventory at a retail store, essentially optimizing the concept of “big box” for everyone, “to be wherever the customer is and providing a hybrid shopping experience,” Parmar said.

Now a team of six, Lucky’s first product is a plug-and-play API, also available on the Shopify App store, that integrates in minutes with major retailers — it is already working with Nordstrom and Sephora — so that e-commerce companies can gain inventory visibility of store shelves and offer local fulfillment options. For example, when someone orders a product online, Lucky will see if it is available from a local retailer and give the customer an option to either ship it or pick it up at the store.

As noted, Lucky is also using data to bridge the gap between brands and retailers, providing data-driven insights into real-time inventory distribution, discovery and how to merchandise brands in-store.

The company is already working with 10 brands, including men’s cosmetic/skincare company Stryx, where Lucky is integrated into over 10 of its SKUs.

After Parmar and Azad launched a beta pilot in the fourth quarter of last year, they saw a 10% engagement rate from consumers using Lucky. They wanted to scale via national distribution, and after securing partnerships with Nordstrom and Sephora, now have access to thousands of brands to be Lucky’s customers, but to get that scale would need to raise capital.

Lucky recently closed on $3 million in a seed round led by Unusual Ventures, with participation from Plug and Play Ventures and a group of angel investors like Alloy’s Sara Du, Pixlee’s Kyle Wong, Cremo’s Kyle Schroeder and NBA player Wesley Matthews.

The new funding will enable Lucky to build up its team on the engineering, product and sales sides, Azad said. The company is looking to boost headcount to 10 in the next two quarters and to bring on around seven new retailers by the end of the year. It’s also planning for some new features, including a better store locator and inventory tools and expanding fulfillment options.

Meanwhile, Rachel Star, principal at Unusual Ventures, understood what Lucky was aiming to do, having herself worked for Nordstrom on the corporate side. She noted that retail traffic has been down for about five years now, and the opportunity to bring people into a store, whether they ordered an item online, or wandered in, provides a meaningful brand touch.

“When you think about eight years ago, when direct-to-consumer brands really got started, it was a one-to-one relationship with consumers, but scaling became a challenge, so many opened retail stores,” Star added. “Stores like Nordstrom and Sephora act as aggregation points already, so when brands partner with retailers to get network density, it gives those retailers traffic. Even when returning something, people often buy something new. It’s a very cool combination where needs from both sides can be met.”

Azad mentioned Ulta placing products into Target as a way of gaining density, and when I saw that men’s skincare brand Lumin, which was exclusively DTC, launched last month in Target and Walmart, I asked general manager Kevin O’Connell why Lumin felt having a physical presence in stores was also warranted.

He explained that having items in a brick-and-mortar store “made a lot of sense” for the company’s growth strategy, though he said the company was not slowing down its online business. Lumin surveyed customers and found that it was convenient for them to buy products while they were already out shopping.

“We’ve been tracking our steady year over year growth over the past two years and have spent a lot of time analyzing data that showed customers in the market for men’s skincare products are most frequently making these purchases at larger retailers, specifically Target and Walmart,” O’Connell added. “And of course, partnering with well-known names like Target and Walmart provides a valuable opportunity for us to further build our brand and expand its reach to new customers that are active in-store shoppers who may have previously been unaware of your online presence.”

Productsup raises $70M to help retailers navigate sales strategies in the choppy world of e-commerce

To many people, e-commerce is synonymous with shopping on Amazon, but the reality is that a retailer has the option to use a bundle of different channels to sell and market products, and many do. Today, a startup called Productsup, which has built a platform that helps retailers navigate that landscape, is announcing $70 million in funding — a growth round that underscores both the opportunity for building more e-commerce business management tools, but also Productsup’s own traction in the market, where it already counts more than 900 brands among its customers, including the likes of IKEA, Sephora, Beiersdorf, Redbubble, and ALDI.

European firm Bregal Milestone is leading the round for Berlin-based Productsup, with previous backer Nordwind Capital also participating. The company has been around since 2010 and seems to have disclosed less than $24 million raised in that time, according to PitchBook data, while Crunchbase puts the total at $20 million.

Vincent Peters, the CEO (the three co-founders are Johannis Hatt, Kai Seefeldt, and chief innovation officer Marcel Hollerbach), told TechCrunch that the valuation was not being disclosed with this round, but given how little it’s raised in the last 12 years, that is a strong sign that the company has been growing well on its own steam.

Now, the plan is to take on some funding to accelerate that with more investments into R&D and product development, more global deals, and M&A to bring in more functionality and to enter new markets. Peters points out, citing figures from Constellation Research, that its total addressable market for providing e-commerce channel management services is $11.4 billion.

“We’d previously been working on technology only used by a few people, but since then the P2C category has taken flight and we have caused a serious shift within the market. As more people are waking up to our message, it is time to turbo-charge the growth,” Peters said in an emailed interview. “Our strong numbers back us up in this case as they have proven the cadence is picking up, people are talking and customers are adopting our strategy – and we’ve had fantastic results. The early stages were all about proving our technology worked and it was adaptable, and now the market is waking up.”

“With technology advancements like the metaverse on the horizon, these are exciting times for the commerce world,” said Hollerbach in a statement. “We are about to enter a new era of innovation, so it’s our priority to ensure companies are equipped to manage the proliferation of shopping channels and experiences to become the disruptors — not the disrupted.”

The world of e-commerce is definitely complex and fragmented — you need no more proof than the very existence of thousands of e-commerce businesses, not just retailers but platforms for selling and tools to help sell better. But that also means there are a number of companies providing services in the same category as Productsup.

A Google search of the company’s name plus the word competitor says it all. The results include other companies with the tagline “We’re their #1 competitor” linking to rivals: there are so many rivals that they’re gaming how to come at the top of the search results for those doing comparative shopping for e-commerce solutions.

Peters tells me that his company’s approach is different, and better, because it’s moving away from the idea of a point solution and has built a platform to manage different aspects of e-commerce marketing and sales from a single place.

“Most companies in our space offer piecemeal solutions. We’re the only provider who can enable companies to realise their global potential,” he told me in an email. Productsup, he said, enables them to manage this at scale and covering different use cases like feed management, seller and vendor onboarding, product content syndicatio. “We enable companies to implement this globally instead of having to worry about individual channels or regions.” Those regional and channel siloes are indeed one of the biggest pain points in digital commerce in general, and one reason why marketplaces like Amazon gain so much ground, since they are in themselves one-stop shops.

All of that is definitely in keeping with how a lot of SaaS platform players are positioning their solutions today (moving away from point solutions is a big theme, for example, in cybersecurity; and in workplace productivity), but it’s also a crowded space. Companies like Shopware, another German player that also raised a big round earlier this year, and even Salesforce play aggressively in this space.

While the Covid-19 pandemic undoubtedly gave a major boost to the world of e-commerce, what has been left in the wake of that (hopefully!) subsiding — and in any case making some gradual returns away from social distancing and the rest — is “commerce anarchy” in Peters’ words. In other words, even more choices for consumers, and more complexity for those trying to sell to them.

“Firstly, companies are caught in a state of flux, faced with commerce anarchy that the pandemic has accelerated,” he said. “Nowadays, brands, retailers and online platforms don’t know if consumers are on TikTok, Facebook, Instagram or a combination of all three. Additionally, post pandemic, in store shopping has returned, bringing local inventory ads back to the forefront for companies trying to reach shoppers. The number of channels that organisations need to meet customers is growing in both complexity and volume. In order to succeed in this ever-changing landscape, retailers need a solution that can manage these channels seamlessly.” And that will include whatever new platforms are around the corner, as there inevitably are.

Add to this, he said, are other issues that extend beyond the simple process of being able to find and buy something online. “Consumers have become increasingly concerned with issues such as sustainability, ethical processes, and are changing buying patterns to reflect this,” he said. “Brands that cannot cater to this will suffer.”

The company says that ARR grew by over 60% in the last twelve months, gross revenue retention rate of 90% and a net revenue retention rate of 120% — although it’s not disclosing actual figures.

“Our decision to partner with Productsup was based on its long-term, sustainable trajectory as a mission-critical enterprise-grade commerce solution,” said Cyrus Shey, managing partner of Bregal Milestone, in a statement. “Whereas alternative vendors mostly offer point solutions, Productsup uniquely addresses the needs of the evolving commerce market for a single view of all product information value chains and offers seamless, end-to-end product data control – across all global channels and in real-time.”

Cake adds newest ingredient to sexual wellness recipe: Entrance into Target

Following a successful launch into Walmart stores last year, sexual wellness startup Cake is expanding its mainstream presence into Target.

The move is buoyed by a $2.5 million bridge round to bring its total funding to date to $8.3 million. Los Angeles-based Cake raised $4 million in funding last year when it made its national retail launch into Walmart.

New investors into the company this time around include Bullish and Kendra Jackson, while Lerer Hippeau, which led the $4 million seed round, is back again with additional seed investors, including Sugar Capital, Brand Foundry Ventures, Selva Ventures, Silas Capital, Gabby Slome, Brian Bordainick and Kate Wallman.

Cake co-founders Hunter Morris and Mitch Orkis met while working together at another brand and bonded over what they saw was an unaddressed opportunity for sexual wellness products.

“We are definitely excited to bring newness to this space and different products so that people have a new way to think about sexual wellness,” Morris told TechCrunch.

It indeed struck a chord with consumers, and between February 2021 and February 2022, Cake saw over 500% in revenue growth. It is also seeing 40% of its customers make repeat purchases. Most of the company’s products, nearly 20, are available via Cake’s direct-to-consumer store.

The company offers lubricants, condoms, massagers and enhancers, and between Walmart and Target, Cake products are now in more than 5,000 stores. Four of its products are in Walmart, including a men’s self-play toy called “Stroker” and three lubricants and lotions.

Cake, Hello Cake

Image Credits: Cake

Target also has four products, the Stroker and the “So-low Lotion,” similar to Walmart, but then two new products, the “Vibrating Stroker” and the “Little Sucker.”

With the launch, Cake has implemented a color-coded experience, so products intended for certain uses are now all the same color, though the company also wants to encourage consumers to mix and match.

Cake is not the first of these types of products to go into Target, but Orkis says the company brings knowledge and education of the space to its products, which is unique.

“We are going to be as fun-loving as possible because people learn best when they aren’t embarrassed or ashamed,” he added. “Our brand tone is very much ‘We are learning ourselves and trying the best we can, so help us learn, tell us what your concerns are, and we will figure them out together in a safe and beautiful space.’”

The new funding gives Cake some cushion to address inventory needs, marketing, further build out its team and to add new partners. They plan to double down on its retail efforts as it works to build an omnichannel presence that treats sex care as common as skin care, Orkis said.

Intimate health is gaining ground. Last month, The New York Times reported that Sephora added two new brands in this space to its list of offerings, joining others, like Bloomingdales and Nordstrom. Morris believes the more kinds of products that get into stores, the better for everyone.

“Any change is incredible for us and the brand, and any rise in tides affects us all,” he added.

11 ways to make personalized shopping more effective and profitable

Since customer-centric digital strategies are now the norm for successful brands, the current focus should be on ways to use new tools and tech to differentiate your brand experience from the competition.

This is not so different from how brick-and-mortar shops operate: Customers walk in and are immersed in specific branding techniques, marketing strategies, and options for connection and personalized interaction.

This is a tried-and-true formula for in-person shopping, so why shouldn’t it be translated to digital storefronts as well? Let’s look at some of the ways that brands can leverage emerging tech to create a powerful, profitable personalization experience.

There are endless statistics about how important it is for consumers to feel like they are getting an individualized experience. Salesforce found that 70% of consumers are far more loyal to brands that understand their needs, and 84% say that they’re more likely to shop with brands that make them feel like a person rather than a number. Additionally, 91% say they’d prefer to shop with brands that offer relevant, personal recommendations.

Harness the power of the dopamine effect

Data-driven personalization allows you to sell more and sell more often. Why? First, it allows you to anticipate what customers want and deliver it at just the right moment. Second, it helps you leverage what experts call “the dopamine effect.”

In the simplest terms, dopamine is a neurotransmitter that drives us toward pleasurable experiences (like shopping or eating rich foods). When we do these things, we get a chemical reward that connects the activity with a positive feeling.

Consider the extreme popularity of Walmart, Spotify, Netflix and Amazon. Part of the appeal is that they conveniently offer vast options, but that’s only part of the story. What these brands understand is that businesses need to create that rewarding dopamine hit that we all crave. That’s the hook that keeps us coming back.

There is no longer a question of whether or not you should offer personalized digital experiences. Anything less is a death knell to your brand’s long-term success.

They achieve this through personalization. You can create a unique account, answer quick and easy questions about your tastes, and immediately get exciting recommendations. They continue to refine your profile by learning your browsing habits and matching you to new things that pique your interest. You might not like every pick, but you get that jolt of excitement that comes with something new and interesting to you.

Harnessing the power of this “dopamine effect” is a skill that must be trained. Companies can no longer follow a generic “copy/paste” formula and expect consumers to care. Not only do brands need to personalize the content, but they also need to personalize marketing tactics like timing and communication frequency.

7 KPIs to help gauge personalization campaign success

To ensure that you’re getting the most from your personalization efforts, use data collection tools to measure and track relevant key performance indicators such as:

  • Average ticket spend (or average order value)
  • Digital campaign ROI
  • Sentiment analysis
  • Customer loyalty

MrBeast’s ‘Real Life Squid Game’ and the price of viral stunts

First, everyone was talking about “Squid Game,” the Korean psychological thriller that became Netflix’s biggest series launch ever, with 142 million viewers. Now, everyone’s talking about YouTuber MrBeast’s recreation of the show’s titular fight-to-the-death, which racked up 142 million views in eight days. (Don’t worry, no one was killed).

Jimmy Donaldson (MrBeast), the 23-year-old who was just named YouTube’s Top U.S. Creator for the second year in a row, built sets and made costumes for 456 competitors, making the video look as close to the Netflix show as possible. And, like the popular series, the last player standing would win a life-changing cash prize — in Donaldson’s case, competitors had the chance to win $456,000.

There are a number of reasons why Donaldson’s “Squid Game” is almost as popular as “Squid Game” itself, at least by the number of views. For one thing, YouTube is free, and Netflix isn’t.

But Donaldson’s virality comes at a cost. His 25-minute video required a whopping $3.5 million to make, he said on Twitter. For comparison, the nine-episode series cost Netflix a total of $21.4 million, averaging out to about $2.4 million per hour-long installment.

Even the most popular YouTube creators like Donaldson can’t measure up to the resources that a publicly-traded, global company like Netflix has. So for creators who make shocking, stunt-based videos like Donaldson, it’s getting harder to do something unprecedented, like recreating “Squid Game.”

If you haven’t had nine hours to spare since the September release of “Squid Game,” here’s the premise: if you’re so deep in debt that you’ll never get out, why not fight to the death for the chance to win unfathomable wealth? This is director Hwang Dong-hyuk’s response to South Korea’s debt crisis, but international viewers can relate — the U.S. has $1.73 trillion in student debt, increasing by more than 91% over the last ten years. If you’re someone who fears that one bad dental visit could deplete your life savings, it’s not hard to relate to these characters’ desperation for quick cash.

In “Squid Game,” it turns out that a ring of wealthy elites created the games for their own entertainment — why not pay poor people to fight to the death if they agree to the terms of the game?

But in a far less extreme way, MrBeast’s videos do the same thing. He gives out large sums of money to ordinary people, entertains millions of viewers with his brand of performative philanthropy, and then reaps the financial benefit of their attention.

Predictably, MrBeast’s “Squid Game” video lacked the emotional resonance and suspense that made the Netflix show so compelling — since there is nothing at risk for the participants, the stakes feel about as high as a daytime rerun of “Wheel of Fortune.” But Donaldson has pioneered — and perfected — this style of YouTube content: do something outrageously absurd, and people will watch because, on YouTube, time watched is money. However, the cost to capture users’ attention when pursuing this model requires an increasingly heftier investment over time.

As the creator economy grows, some YouTubers’ budgets are growing, too. But with the precarious nature of this work, falling into the red could be dangerous. While Netflix’s “Squid Game” has made at least $891.1 million so far (almost 42 times the size of its budget), Donaldson might not recoup his own “Squid Game” investment.

Going big until you can’t go bigger

In Donaldson’s video “How I Gave Away $1,000,000,” the creator explains how he got started making this sort of content when Quidd, a digital collectibles app, offered him a $10,000 brand deal for a video. He filmed a video giving the $10,000 to a homeless person, and then Quidd kept paying him to make more videos, so it snowballed from there.

Today some of his most popular videos include even larger investments like “I Ate A $70,000 Golden Pizza,” “Last To Leave Circle Wins $500,000” and “Donating $100,000 To Streamers With 0 Viewers.”

In September, MrBeast told the creator-focused YouTube channel Colin and Samir that he spends $4 million every month to make his videos, and while some outperform his expectations, other videos don’t. He said that his video “I Sold My House For $1” cost over $1 million to make, but he recouped less than half a million from ad revenue, and sponsorship money didn’t make up the difference. But as long as some videos do better than he expected, a slightly-less-viral video here and there won’t kill him.

“Once you know how to make a video go viral, it’s just about how to get as many out as possible,” he told Bloomberg last year. “You can practically make unlimited money.”

Forbes estimated that Donaldson made $24 million on YouTube between June 2019 and June 2020 (YouTube isn’t his only income source – he also runs a ghost kitchen called MrBeast Burger, streams on Twitch, and collaborates with a number of brands). But he said in an interview with fellow viral star Logan Paul that he puts most of his income directly back into his videos.

“If I make three or four million dollars a month, I just spend it on videos the next month,” Donaldson said. “We literally have like, razor-thin margins, and just reinvest it all.”

The problem with this clickbait model is that viewers become desensitized to these high-budget YouTube videos, which requires creators to keep upping the ante.

The comedian Demi Adejuyigbe also encountered this issue with his yearly videos in which he dances to “September” by Earth, Wind, & Fire.

In his first viral video in 2016, he simply danced in his bedroom wearing a homemade shirt that read “SEPT 21” on the front and “THAT’S TODAY” on the back. The following year, he got some fancy balloons, then in 2018, he enlisted a children’s choir, and in 2019, he hired a mariachi band — you get where this is going. This year, he decided he wasn’t going to make any more videos, because it’s too time-consuming and challenging to keep going bigger and better every year — so he went all out one last time and ended up raising over $1 million for charity from fans. But these “September” videos aren’t Adejuyigbe’s bread and butter. Going viral might have helped him get noticed in Hollywood, though. In between plotting each year’s “September” videos, he earned writing credits on shows like “The Good Place” and “The Late Late Show with James Corden.”

A fashion and beauty creator, Safiya Nygaard, is another example. She first developed a following as a video producer at BuzzFeed, but left to invest in her own channel and retain more independence. Nygaard differentiated herself in the beauty space by doing “bad makeup experiments,” like “Melting All My Nude Lipsticks Together” or “Mixing All My Foundations Together.” Over a year, this escalated to “Melting Every Candle From Bath & Body Works Together” and “Melting Every Lipstick From Sephora Together.” For the latter video, she used over 600 lipsticks — and with Sephora lipstick prices ranging from around $10 to $50, Nygaard’s bill was so expensive that she filmed the Sephora cashier calling her bank to verify the purchase.

But once you buy every lipstick at Sephora, you can’t really push further. Now, Nygaard updates her YouTube channel with almost 10 million subscribers only once or twice a month, though she started posting on Instagram Reels and TikTok every few days. Sometimes, even a TikTok might require a pricey purchase — in one popular TikTok, Nygaard styles Balenciaga’s $1,350 toe-heels. Still, that’s a small purchase compared to 117 Bath and Body Works candles, or 600 Sephora lipsticks.

Creators like Nygaard and Adejuyigbe have been able to pivot away from this high-cost, sometimes-low-reward content. But Donaldson’s high-budget videos are his lifeblood. He can’t stop making more and more extreme content if he wants his channel to remain at the top of the YouTube food chain

Funding the creator economy

When startups need cash to fund the growth of their business, they turn to venture capital. Now, some firms are looking at viral creators as an investment opportunity in a time when video creation costs are growing. Venture capital firm SignalFire says that creators are the fastest-growing small businesses, and some firms like Sam Lessin’s Slow Ventures take that idea to the next level. Slow Ventures recently invested $1.7 million in the future of YouTuber Marina Mogliko, whose channel is called Silicon Valley Girl — they will get 5% of her earnings as a creator for the next thirty years.

Investing in literal people might seem sketchy, but assuming everyone involved has good intentions, is offering artists a financial cushion really the worst thing in the world? This is essentially what happens in Hollywood already. A production company might buy a script, hire talent and market a film, only for it to be a flop at the box office.

But creators — literal people — aren’t startups. And what happens when you keep trying to out-do yourself? You burn out.

It’s possible that the cushion of venture funding could take some financial burden off of creators, but the pressure to appease stakeholders could also add more stress.

YouTube CEO Susan Wojcicki acknowledged the growing issue of burnout in a letter to creators in 2019.

“I’ve heard some creators say they feel like they can’t take a break from filming because they’re concerned their channel will suffer,” Wojcicki wrote. “If you need to take some time off, your fans will understand. After all, they tune into your channel because of you.”

YouTube’s product team found that creators only garner more views once they come back from breaks. But Drake McWhorter told CNN at the time that he didn’t think this was true.

“YouTube is a treadmill,” McWhorter said. “If you stop for a second, you’re dead.”

It’s easier than ever to go viral online, but that doesn’t always mean it’s easy to capture viewers’ attention in the long term — and to make a living on the internet, you need an audience. Now that MrBeast is making YouTube videos with Hollywood-sized budgets, yet still making a “razor-thin” profit, we have to ask who’s winning in the creator economy. At the end of the day, the success of “Real Life Squid Game” may be better news for YouTube, or even Netflix, than it is for Donaldson.