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Sep 22, 2023
In a recent X Spaces (formerly known as Twitter Spaces), direct-to-consumer expert, Nik Sharma, chatted with OpenStore’s Co-Founder and CEO, Keith Rabois and our Head of Consumer Growth, Andrew Silard about the pressing challenges Shopify entrepreneurs face and the solutions OpenStore offers. They also detailed the ways in which we scale our portfolio of nearly 50 Shopify brands, and talked about our newest offering for Shopify entrepreneurs,, OpenStore Boost.
Towards the end, Keith and Andrew answered questions from the e-commerce community and offered insights on growing Shopify stores. You can listen to the full discussion here or skim the takeaways:below:
We estimate that 85% of Shopify businesses are generating less than $500k in revenue. Keith described how OpenStore Boost was designed to grow these businesses: “We thought it would be great if we could help accelerate some of their growth based upon tools, products, and insights we built for ourselves…We wanted to make it more accessible and more likely that people who start brands on Shopify will succeed.”
We built custom iOS apps for OpenStore Boost applicants – just for applying. “There’s advantages [to having a native app], you know, with retention…being able to have a relationship with your customers and being able to use things like push notifications…conversion rate on a native app can be really stong compared to many things on web,” Keith shared.
We’ll be announcing the first OpenStore Boost cohort publicly soon. Among the businesses that applied for OpenStore Boost, we’ll chose a few for our fall cohort. Businesses will receive new ad creatives and marketing insights from our internal teams with the goal of helping those businesses grow. Keith described the cohort as an incubator, or “[Y Combinator] for Shopify brands.”
The hope for OpenStore Boost merchants is that they will receive an OpenStore Drive or Acquisition offer after the OpenStore Boost program ends. We’re aiming to help these businesses get to the point where they’d qualify for a Drive or Acquisition offer from us. Keith explained that OpenStore Drive is a great option for founders who want to get the financial benefits of owning their business, while taking some time off. An acquisition is likely a better option for founders who want to move on from their brand, and get capital to start something new. On the potential of graduating some of these businesses, Keith said: “We’d be thrilled to continue working with the owner.”
We’re 100% developing native iOS apps for our brands in-house. Our engineering team is able to build custom apps for our brands without external tools. We’ve built more than 30 custom iOS apps so far, which can help build cutomer loyalty and drive repeat purchases.
In fact, we try to build most of our tech in-house. We recently developed gumdrop, a full-service app that connects influencers with our brands for sponsored posts. The objective of gumdrop is to remove administrative headaches for influencers and help get our products in the hands of millions of more shoppers.
86% of our products are shipped from the same third-party logistics (3PL) provider. Keith praised our 3PL provider, saying: “We have a third party that we love that we work really closely with to build very custom solutions.”
We grew our popular men’s apparel brand, Jack Archer, from $400K annualized revenue to north of $10 million. In nine months, we scaled Jack Archer by adding new products, conducting pricing tests, and building out new ad creatives. We’re also now making improvements to the brand’s supply chain.
OpenStore is developing economies of scale. Andrew explained: “As we buy more inventory, the transport costs on the inventory are lower…getting more scale and more predictability has helped a lot being able to make bigger inventory buys and save on gross margins.”
All creative for our brands is done in-house. Jack Archer had not built out any video creative before OpenStore acquired the brand. We’ve now tested more than 600 video creatives for Jack Archer. “What we’ve seen work best is that we can develop real, deep competencies in these individual [creative] channels and use some of the scale advantages that we have around being able to look at data,” Andrew shared. We can look at performance data for creative across our different brands and make optimizations across them.
Intermediate or advanced marketing operations can make a brand more attractive to us. Having a marketing infrastructure in place can help us hit the ground running when owning and/or operating a brand. But Andrew also emphasized that “every brand is its own snowflake” and that OpenStore’s portfolio of brands has “lots of diversity and uniqueness.”
For 80% of our brands, the majority of our growth is driven by Meta. Typically with Shopify, it’s difficult to attribute your business’ growth to particular channels, Andrew explained. So we built an attribution model in-house that allows us to drill down into where new customers are coming from. Our most successful driver of growth for brands is paid social ads through Meta. However, “we do see [a couple of brands] brands that are driven primarily by either affiliate [marketing] or search,” Andrew said.
We’re always looking for opportunities to expand how we distribute our products. While our focus is on online shopping, we remain opportunistic on bringing some of our products to brick-and-mortar retail stores.
In the longer term, we’re building an experience that encourages customers to buy items from more than one of our brands. Because of our economies of scale, we can ship products from different brands together.
Ultimately, we want to build the most important e-commerce site in 30 years, a “Nordstrom’s” for the modern age. Keith stressed that OpenStore’s long-term goal is to create a single online destination where shoppers can discover products from the best e-commerce brands.
Venture capital isn’t for every brand. We’re giving those brands options. “Not every business, even a well-run, very thoughtfully-run business is ideally suited for venture capital,” Keith advised. “It’s ultimately up to the CEO [to] choose the financing strategy to match your goal,” he continued. With our three offerings—Drive, Acquisition, and Boost—we’re giving Shopify entrepreneurs alternative options to venture capital that can help them get their businesses to the next stage.
Stay tuned for more e-commerce events and X Spaces from OpenStore, including OpenStore Live, our upcoming event celebrating of entrepreneurship. OpenStore Live will bring together some of the brightest minds in the Shopify ecosystem, including top entrepreneurs, DTC experts, and e-commerce leaders.
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