In our new series, we’re talking to our VCs and investors to hear their insights and market predictions for fintech, ecommerce and tech in 2023.
We spoke to Jarno Vanhatapio, Founder of NA-KD.com and Nelly.com, to hear what we can expect within the ecommerce sector this year.
NA-KD.com is a disruptive online fashion retailer that became one of Europe’s fastest-growing companies by its fifth year. Along with NA-KD.com, Jarno has founded other successful startups, including Nelly.com, Scandinavia’s largest online fashion store.
Here, Jarno shares what ecommerce companies can do to make 2023 a successful year, from marketing spend and changes to social media to securing financing and focusing on their product.
“It’s not viable to spend the amount of marketing budget that companies were able to before,” says Jarno. “With many companies focusing on managing expenses and streamlining their finances, marketing budgets will likely take a cut.”
“You need to get those direct sales and be really accurate about where you spend your marketing budget – which is on new customers,” suggests Jarno. However, by front-loading your customer acquisition, you’re relying on lifetime value to generate revenue, which means you can’t afford to ignore retention either.
“It’s been a luxury to be able to spend marketing budget on existing customers,” says Jarno. “You need to really up the game on retaining existing customers without spending money.” This means using creative, low-cost efforts to ensure your customer cohorts are reactivated and don’t churn. You could automate your cart comms to trigger emails, add a personal touch to your content, and focus on building an engaged community around your brand.
Jarno believes that it’s ultimately your product that will drive customer loyalty and prevent churn.
“In a downward economic climate, it’s easy to cut back and make your assortment worse or your range narrower,” says Jarno. While this is a measure you can take to protect your cash, it’s also important not to sacrifice your customer proposition in the process.
“You need a high conversion rate, ROI and repeat customers,” says Jarno. He advises looking at how you can increase your frequency of purchase, basket size and conversion rate. While there’s no one size fits all approach, focusing on organic sales is vital to weathering the current climate successfully.
Finding the right financing will be the key to managing your cash flow in the coming year. “I’m a big believer in trade financing and marketing financing like Juni,” says Jarno. He advises seeing what options are on the market and what best suits your business.
Aside from looking for external financing, there are some areas within your own ecommerce company that you can consider too.
“Negotiate your DPO (Days Payable Outstanding) as it needs to be high,” says Jarno, “and make sure that your P&L doesn’t withdraw cash – it should contribute.” Having the right insights and planning will help you understand what you need to optimise and where you would benefit from financing.
The social media landscape is changing, and it’s set to shake up how ecommerce brands create content and market their products.
“Everybody’s wondering what’s happening with influencer marketing,” says Jarno. “Meta is dialling down on organic reach for influencers. From my experience, I think this is also moving towards new platforms.”
As a result, the dependency on social platforms will decrease. Brands can take the opportunity to move away from influencer marketing and instead produce their own content in-house.
“I think you will see a lot more content creation from existing ecommerce players,” predicts Jarno. “They want to capture the attention people spent on social media before and get them interested in other ways.”
As brands rely less on social media, there could also be a resurgence in the popularity of more traditional ways of marketing. You shouldn’t overlook radio adverts, podcast sponsorships and forming brand partnerships, as they can reach a broad and engaged audience if you choose the right placement. To make it worth your while creating your own content and considering, you need to consider how to distribute it without relying on social media, for example, using SEO and email marketing.
“Macroeconomics plays a certain part in ecommerce businesses failing, but they can work in your favour as well,” says Jarno. “When others are paralysed, you need to be active.”
Jarno believes that “good companies can be killed from the inside by decision-makers,” not simply by macroeconomics. “In a downward spiral, it can become easy to be self-fulfilling, and for failure to become self-inflicted.”
To make it through, Jarno thinks businesses need to take action and see where they can make positive progress. “Try to be forward-leaning because history tells us that these are the times when you can also gain market share. Many people just self-inflict so much damage to the business, but for others, it’s an opportunity.”
Businesses that don’t take any action to pivot and adapt to make the most of the current climate are likely to have a poor prognosis. What’s important is ensuring all your decision-makers are looking for ways the company can continue to grow instead of getting too cautious, pausing initiatives altogether or reducing your offering in a way that damages your product or customer base.
Taking the opportunity will require more activity to get growth and momentum. “I think this will require double the activity, and you won’t get like for like back,” says Jarno. But, if a company gets it right, they have the potential to thrive, even in a challenging climate.
Despite the changes to marketing budgets and cash flow challenges brought about by the current climate, there’s still opportunity for ecommerce businesses to succeed. Companies can turn difficulty into opportunity with the right action, priorities, and innovation to drive customer loyalty.
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