Josh Newport: There are so many metrics that a business can keep across and that can be incredibly overwhelming.
Nathan Bush: That's a phenomenal business model.
Josh Newport: Should I hire a data Scientist who cares?
Nathan Bush: 12 months was a long time ago.
Josh Newport: Their average growth rate is 275%.
[Voiceover]: Welcome to add to Cart, the podcast that express delivers all you need to know in the fast moving world of e commerce. Every month, Nathan Bush from 12 High and an E commerce industry expert will share the news, research and insights that you need to know to keep you at the top of your game and of course, keep your customers adding to Cart.
Nathan Bush: Hello everyone and welcome to the very first episode of Add to Cart. My name is Nathan Bush, founder of e commerce consultancy 12 High and I'm really excited to bring you this podcast series where we're going to dive deeper into the most commonly asked e commerce questions and explore opportunities that you may be able to implement in your business. To kick off, we've got Josh Newport, who heads up merchant engagement for Shopify plus in the APAC region, joining me as a co host to discuss growth. On that note, we're really excited to have Shopify plus on as our inaugural sponsor and we really appreciate their support. So without any further ado, let's get into it. This week we're talking about growth. What does a good growth rate look like? What metrics should we be using to measure growth? And what are some of the common traps that we fall into around getting hung up on growth? I have Josh Newport here with me today, who as my co host, who is the merchant engagement manager for Shopify plus in the APAC region. Welcome, Josh.
Josh Newport: Hey, Bushy. How are you, mate?
Nathan Bush: Good, mate. I think my voice just broke.
Josh Newport: Oh, wonderful. Yeah. So clearly you're ready. You've done your vocal exercises this morning.
Nathan Bush: I've done my vocal exercises. All right, let's get into it. What we are here today to discuss is growth rates and I think this is a topic very close to most retailers hearts and most conferences that you go to or meetups that you will go to. One of the first questions and if it is not what your conversion rate, it's what your growth rate, there's no magic answer, right?
Josh Newport: No, there is no magic answer. I wish it was as Easy AS achieve 80% growth rate and you are on the way to success.
Nathan Bush: I think we just lost 80% of our listeners right then.
Josh Newport: Yeah, probably.
Nathan Bush: Yeah. Okay, great. So let's get into it. So I want to start just by sharing. We've just had results season for our larger retailers who are listed on the stock exchange and we've seen some really interesting results. So if we look at people like JB hi Fi, they were up 23% online and we're starting to see a lot of these retailers really highlighting their online sales growth, whereas two or three years ago it was kind of hush hush and no one wanted to give anything away.
Josh Newport: Yeah, yeah. Oh, totally.
Nathan Bush: Yeah. So they're making a point of it, which in my mind is either one, they're really proud of it and they're doing great things and it's a great way to get shareholder confidence or they're hiding some other results.
Josh Newport: Yeah, I think it's a little bit of like. It's weird to say online's hot right now. It's not. It's been here for so long. But I think from a traditional retailer perspective that maybe hasn't been as fast on the uptake around online. Maybe, you know, things take a little bit longer inside of a much larger beast that is a traditional retailer. And so, you know, hey, if online's going good, investors should be happy and we should be talking about this because everyone's frothing on online and growth rates and all those kinds of things. So for sure.
Nathan Bush: And it could be that it's not so much the retailers catching up, it could be that the investors are catching up to the value of online as well. So.
Josh Newport: Totally.
Nathan Bush: Yeah. We won't throw stones here.
Josh Newport: No.
Nathan Bush: But some of the big results that we have seen is JB hi Fi announced 23% up online. Super retail Group, which owns brands such as Supercheap, Auto, BCF and Rebel Sport, were up 25% online across the group.
Josh Newport: How does that compare to your growth rate? Bushy. When you're in charge there, mate, things picked up or they.
Nathan Bush: I'm not at liberty to say anything around that, Josh. You know, paperwork was signed.
Josh Newport: Yeah, absolutely. It's all right. I'll find out one way or another.
Nathan Bush: And Wes Pharma's up about 33%. So we've seen probably around the 20 to 40% average for the retailers that are coming out there and beating their chest a little bit about online growth. How does that from a Shopify plus perspective, where a lot of your clients are traditionally online natives and you're getting more that are more omnichannel and more traditional coming over. But how does a growth rate of 20 to 40% compare with what you're seeing in the market?
Josh Newport: Yeah, I mean, that's exactly right. Most of our customers are digital native brands. Right. They've Grown up online and now they're starting to dabble in retail. So they're looking at pop ups, they're looking at starting a retail location but none of the traditional sense of retail. And that's an entirely different conversation. But so to give you a sense, an average E commerce growth rate for brands doing a million dollars or more on plus is 126%.
Nathan Bush: Wow.
Josh Newport: And so I look at that and I go, what are these other retailers doing to be so happy about 20 to 40%. But I think there's other things to consider there. Right? Like these retailers would mention jb hi Fi, Wesfarmers, which is, you know, Kmart and Bunnings and a bunch of others as well as super retail Group. You know, they've all got a very retail footprint. They've got really, really strong brands in market, have been around for a long, long time. People know them. And therefore to get the growth, that kind of growth rate would be something serious is going on there. If they kind of get in that level of growth rate, 120% plus.
Nathan Bush: And I think it's important to point out here that we're just talking about revenue growth. We're not talking profit. We might touch on profit a little bit later, but we're just talking about revenue growth here.
Josh Newport: Yeah, pure, pure top line revenue. And you know what's interesting is that so Wesfarmers 33% growth in online Bunnings doesn't even have their E commerce offering out rolled out yet. What's going to happen when that rolls out? That's going to be interesting to sort of see.
Nathan Bush: Are they going on Shopify plus Can
Josh Newport: not say anything but no they're not. Can I say anything but no? So yeah, like when they eventually roll that E Comm offering out and that's kind of to my point earlier around, how has it taken this long for that to happen? They're a complex business. Right. There's a lot of, I mean, jeez, the SK count of that business, I, I don't even want to know what that is. Enormous.
Nathan Bush: Or the bulky item count.
Josh Newport: All the, yeah, exactly. Just this complexity they're going to have there to kind of really make that a solid customer experience. And that's probably why it's taking this time. They've likely wanted to take the time to make sure this is a really solid offering and they're not just going to show up as something that's, you know, below par and really sort of never get used. So I can, I can understand that, but that's going to be interesting. What's even crazier really quickly, this is something that I, I only learned about a couple of weeks ago is, so I mentioned average growth rate trouble 5 plus a million dollars or more was 126%. This could be a little outdated. I'm just waiting to get some fresh numbers. But for the top 20 plus merchants on our platform, their average growth rate is 275%.
Nathan Bush: So now you're just flexing.
Josh Newport: So now it is flexing some flexing some crazy muscle. But no, that, I mean that's phenomenal, right? Like these are, this is what we're kind of calling the new enterprise. These are these brands that are relatively new. They've only been around for five, six max, maybe eight or 10 years. And they're just completely obsessed by end to end customer experience. They've grown up online, they have all the right teams in place, they understand the value of building a brand. They understand about ruthless performance marketing and creating a genuine community. And these really, really massive online retailers are growing at just a rate that we just haven't seen before.
Nathan Bush: Do you have any stats around retailers on Shopify plus that have been around for five plus years? Because it's pretty easy to get stupid numbers right when you're one or two years in and you're coming off a low base.
Josh Newport: Yeah, yeah. I mean not off the top of my head and I can't really talk to specific retailers growth rates or I'll be taking out the back and that'll be the end of me. But you know, yeah, to your point, if you are a newer retailer, five, you're going to have a higher growth rate. You're new in the market, you're excited and you're fresh. And I actually kind of think partly this is kind of one of the reasons why we're starting to see again this sort of house of brands retailer pop up. Because they can have the advantage having multiple brands and they can just let that brand run its life cycle rather than trying to squeeze everything out of a single brand and force it. They're able to kind of create a brand, spin it up, let it run its natural life cycle and grow and then sort of leverage the other brands that they're starting to spin up in house under their Hauser brands and sort of utilize or take advantage of that growth rate. So yeah, I don't have specific stats on this business has been here for 10 years and this is their growth rate. But you can kind of expect unless they're doing something pretty phenomenal that the competition will be heavier for those brands that have been around longer and therefore their growth rates are probably starting to level out.
Nathan Bush: See, it's really interesting and I think the perspective that you've put forward is great. But I don't totally discount those 20 to 40% growth rates because Australia Post released some research earlier in the year, it was probably two or three months ago, and they found the average growth rate for Australian E Commerce is about 13% year on year growth. So much lower than what we saw in some of those results but minuscule compared to what you're seeing. We've got a real divide, haven't we in Australia around who's doing really well in E Commerce and who's just trying to stay afloat.
Josh Newport: Yeah, that's right. I mean as we kind of said, if the average is 13%, you look at those larger retailers that we mentioned, they're between 20 to 40% online growth and great, that's good. They've clearly beaten the average and as I said someone like a JB, 5.5% of their sales are E Com. The average for Australia in terms of E Com. Sorry, I think 10%, I think it's like 10% of all retail in Australia is online. So you know to have 94.5% of your revenue come through stores and you know, stores that have been around for a long time and have really, really strong. A strong brand and market online is also driving growth in store. So it's not purely just about I'm making more revenue online, you know, the rise of click and collect and these kinds of initiatives. I might not be seeing my direct revenue online growing in terms of dollar wise but you can sure bet that online is helping the entire growth rate for that company rise by driving customers in store as well.
Nathan Bush: Yeah, absolutely. And I think you touched on a really good point there is that we the online revenue year on year growth is often held up as the benchmark.
Josh Newport: Yeah.
Nathan Bush: If not that then conversion rate which I really have a problem with. But at online retailer this year there was a really great session by Fiona Moylan who's heads up E Commerce for Jolique, the skincare brand. Yeah. And she made a really strong point around saying that she just finds it weird that retailers obsessed with year on year performance comparisons and from her point of view she goes well who cares? 12 months was a long time ago.
Josh Newport: Yeah, yeah, yeah, yeah, yeah, yeah, that's a good point. A lot's changed in 12 months.
Nathan Bush: Yeah, exactly. And it's kind of almost a hangover from retail of yesteryear, where performance is measured on same store sales and even square foot comparisons between stores. Yeah, it's almost. Is, is the year on year measure actually worth it anymore? Because if you look at the US their quarterly results and when they release quarterly results, when Amazon or Best Buy or anyone releases quarterly results, they are heavily examined. And any shift, whether it's total retail or online, any shift there sends share prices in different directions. So they're not as concerned with year on year, they're concerned quarter to quarter.
Josh Newport: Totally. Yeah, it's absolutely right. I mean, you talk about US retailer, I think on the topic of where do growth rates or top line revenue growth, Maybe not telling the full story. A good example of this is someone like Walmart. Right? So Walmart announced this year 37% growth in online sales. If you're looking at that purely, you're going, oh Great, you're growing 37%. That sounds nice. What it doesn't sort of mention or if you don't look and compare the year before, they grew 40%. So their growth rate has slowed down year to year. But sort of more importantly than that, there's a lot of reports out there saying they're projecting losses of $1 billion in the Ecom division. And for a company that is used to printing money and last year sort of recorded $7 billion in profit, you've got some executives there starting to question, hey, is this online thing actually working? Cool. Top line revenue's going up, but we're losing a billion with a B. So that's a lot of money. And so these retailers, you're right, put under a lot more scrutiny, but you can't just look at one single metric like top line revenue to kind of really get the sense of is this business growing?
Nathan Bush: Yeah. Okay, so what else should we be looking at?
Josh Newport: Yeah, so I mean, looking at things like, you know, operating expense, you know, looking at something like you look at, let's look at bottom line, let's look at how much profit is this business making. And I don't know about you, but a lot of these brands I see getting acquired and you know, a lot of hype sort of being built up. A lot of them are losing money. Like they're doing some crazy revenue. There's some crazy acquisitions there. Like, you know, Harry's been acquired by Edgewell. So Harry's the razor brand acquired by Edgewell for 1.37 billion. They were losing money. And so you're talking about stock prices. Edgewell stock price dropped once there was announcement of the acquisition. And so there's this sort of like balance between do I just grow my revenue like crazy? Like, do I have to think about profit? Does it come at the expense of profit? And it seems to me that there's this sort of feeling in the market that, okay, these brands don't necessarily need to be doing profit immediately to be successful. You know, they can grow very, very quickly and start to think about profit later on in their piece. As long as I've got a clear plan to profitability that investors and VCs and the like are buying into and understanding.
Nathan Bush: Yeah, and I think that's a really great point because even recently we've seen DJs came out with their results and they were. Profit overall fell 42%. Profit fell. But E commerce was still up 46% which comes up.
Josh Newport: We've grown 46%. Has profit. Don't worry about it.
Nathan Bush: Exactly.
Josh Newport: Yeah, yeah, yeah.
Nathan Bush: Which headline are you going to take? Yeah, and same as Big W, their online sales are actually going fantastic. They're up 128% year on year.
Josh Newport: Wow.
Nathan Bush: But the headlines that we saw were about closing stores, right?
Josh Newport: Yeah, exactly.
Nathan Bush: So I think your point around, if E Commerce is growing all by itself and not adding to the overall profit or the overall profitability of the overall retail business, it doesn't matter how much online retail sales are up.
Josh Newport: Yeah, that's right. And ultimately like these retailers are serving customers and customers are going to be deciding how they engage with you. And so like separating, you know, talking about how good online growth is. Yes, it's, it's nice to mention, but ultimately this is a retailer and today a customer will interact with you in whatever way they want. And so looking at that total, that total revenue or total profitability is important. It's not just about, oh, online did this and store did this. Cool distinction to make, but it's more than that.
Nathan Bush: This episode of Add to Cart is brought to you by Shopify plus. Our friends over at Shopify plus power some of the world's fastest growing brands, including brands like Cheby hi Fi Koala and a brand you may have heard a bit about, Kylie Cosmetics. The average growth rate for Shopify plus customers is 126%, which is absolutely massive. In the lead up to Black Friday and Christmas and peak trading, Shopify plus have just released a really awesome holiday pre season playbook which is well worth checking out. Visit shopifyplus.holiday au. That's Shopify. Shopify+holiday au. To download the guide for free. You can also find the link in our show notes. A massive thanks to Shopify plus for being the inaugural partner of ADD to cart. Now back to the show. There was two things that stood out to me in the reports that, that I read this year. The first was with target in the U.S. i think they're doing some phenomenal things and by the way, I actually really like Walmart and I think we're on different pages here with Walmart.
Josh Newport: I think we might be okay.
Nathan Bush: That's okay. I'm a big fan of how they're taking it Amazon. But target in the US was really interesting because they had 34% E commerce growth. So not phenomenal. Solid but not great. But what they actually did is that that E Commerce growth contributed 3/4 of their overall growth but their profitability was up total 16% for the whole stores, for the whole business. And they put a lot of that down to a 90% reduction in costs for fulfillment. So they moved a lot of their fulfillment to the in store model ship from store. They really amped up their click and collect capabilities and had a less reliance on three PLs and warehousing.
Josh Newport: Smart. Yeah, very, very smart. And I think that that's kind of like a typical, like I've seen it with a few retailers it seems to be kind of a typical model that's like early years. We're growing and not just thinking so much about profitability obviously. I think every startup should understand the unit economics like in and out. That's incredibly important. You don't just want to be blind without understanding those metrics. But there's plenty of retailers out there that you probably think are doing really, really well. They're not profitable and then they're starting a few years in or even many years in it. This never ends is creating that efficiency, reducing cost of goods, reducing those. With three PLs, how do I get a better deal? How do I make this more efficient as a to then start to go to work towards that profitability. So that's fantastic that someone like Target's gone and done that. And that I think is a very, very common theme amongst retailers is in their later years when they've got a decent brand and they've got a really good base of customers now it's how do we deliver this experience in a more cost effective way?
Nathan Bush: Yep, absolutely. The other thing that I saw retailers referring to in results was around the percentage of sales that came from club or loyalty members.
Josh Newport: Right.
Nathan Bush: And I think that's a really interesting metric that's starting to become Public and starting to become valued. So super retail group, which obviously we've got some history in those numbers, are now public. And for bcf, off the top of my head, I think it was over 60% of their sales. Total sales now came from loyalty customers.
Josh Newport: Right. And do you think that's a result of a better loyalty program or, you know, more incentive to become a club member and therefore there's just more members or what do you think the driver behind that?
Nathan Bush: I think there's a few things going on there. I think there's. It's easy to bring people on as club members and the team in store are really dedicated, they understand the loyalty program and they can explain the benefits to customers. So store acquisition of loyalty customers is, number one, the best way to grow a loyalty database. Yeah. And secondly, there are tangible benefits to that loyalty club, a lot of it pricing. But if you actually go to the BCF website, you'll see a lot of content and a lot of experiences that you can only get by being a member. So I think they're doing a phenomenal job there in loyalty. And it's really showing that if you can get, you know, three out of every five customers, you've got their details and you can measure how they're spending over their lifetime.
Josh Newport: Yeah.
Nathan Bush: And what they're interested in and then start giving them that value back. That's a phenomenal business model.
Josh Newport: Oh, totally. And, you know, I think I see sometimes retailers that kind of forget about that loyalty piece or, you know, they're so focused on top of funnel and just simply getting customers into the machine or, you know, acquiring these customers that the next part of that is retaining those customers right. Over their lifetime and getting more revenue out of them over that lifetime, which is super key to a sustainable business if you've got a repeatable purchase product. And so it's like I've. I think I'm starting to see that change a little bit with some of the retailers that I've worked with in the past where it's sort of been so much about acquisition. And now they're starting to. As they mature, they're starting to go, okay, we don't just want to have this tap turned on and running into this funnel that is leaking, leaking customers at the bottom, because you're paying like the cost to acquire customers normally six or seven times more than the cost to keep them. And so you've got to make sure you've got a really strong retention program in there to incentivize these customers to keep coming Back that subscription model, if you can run it, is massive. Like if we talk about metrics for a business, if you have a repeat purchase product or the products you are selling, you expect a customer to want to keep coming back and buying. If you're not measuring your customer acquisition cost and your lifetime value and more importantly the ratio between those two, you are really, really missing out. And that's something that you should be doing.
Nathan Bush: I think so. And you've touched on a really good point there and we've kind of covered it, but it was about that. If you've got that race for acquisition, it has knock on effects, right? So if you're acquiring the right customers at a healthy profit margin versus acquiring customers to achieve growth targets at an unhealthy profit margin, which might be single figures, the knock on effects are that you've obviously got higher marketing spend to get them because they're not your core customers. You've obviously got then flow on impacts to your customer service team. You've got cash flow problems because you're trying to shift more stock and making sure that the timing is right so your cash is held up in other ways. So it has all these other flow on effects. If you're a really high volume but low margin business as opposed to positioning yourself as a high profit lower volume, it just kind of can create a loop of pain.
Josh Newport: Yes, 100%. And that's why I kind of mentioned before that lifetime value to customer acquisition ratio. If you can look at that and if you start to go, okay, I've just spent 100 bucks to acquire this customer and they're only going to make me $100 in their lifetime. I don't think your business is going to be around too long. That's going to plateau out and you're going to have to have different ways to grow unless you can effectively value add that customer over time. But that's where you like. I think a baseline for most return, repeat purchase businesses is looking like a three or four to one ratio. You know, if you're earning three times the amount in profit from acquiring a customer, I think you're in a pretty good place. You know, if you're earning much more than that, it's probably saying, hey, you might be under investing here in customer acquisition, maybe you should be, you can probably grow faster or grow more. And if you're sort of under that, it's like, are you just pouring too much into bad customer acquisition tactics and channels and should you be trying to maybe cut that spend back and look at where that leak is broken or post acquisition, what's not working there. Yeah, that's a super important thing to figure out.
Nathan Bush: So just on that customer lifetime value, because it is a scary topic for many people, because there's lots of software and lots of programs out there that promise the world around customer lifetime value about cracking it and being able to send triggers and alert you when people are about to churn or whatever it is. It actually doesn't have to be that complicated, does it, to get an idea on how you're tracking in terms of lifetime value of customer?
Josh Newport: No, like not at all. And you know, there are so many different ways to try and calculate customer lifetime value, as you kind of said, and each is more complex than the other. And you know, it does depend on your business model. But keep it really simple. Just keep it. Have a really simple metric and then the key to that is use that same metric over and over again so you can see the trend. If you start to change that over time, you're going to change your data and you're not going to be able to see the trend. If you keep the same calculation for customer lifetime value and you can do this really simply, then you know that will allow you to see a trend and that's what's most important. Not so much. I need to have the most perfect understanding of my customer lifetime value. That that is something that even the biggest retailers are still chasing and still getting wrong. So just have a nice simple metric and then keep that consistent and you should start to see the benefits from that.
Nathan Bush: So at its most basic level, if you did it on a yearly level, you could have all your revenue divided by the total number of unique customers as a starting point.
Josh Newport: Yeah, totally. Or something like, what's my average cost per sale, average order value times by how many times does this customer purchase from me on average per year? And obviously factoring in your margin there. So you're looking at it from a profit perspective, but that's going to give you a very basic understanding and then just simply looking at your acquisition costs to counter that. So you understand very basically on average, how much am I spending across these acquisition channels. You want it, you might factor in if you want to get fancy, like, you know, how much am I paying for staff for my marketing staff or agencies or those kind of things. But just keep it simple to start. You don't want to overcompensate into a
Nathan Bush: P and L then, right?
Josh Newport: Yeah, I mean that's important. You should, I think. Yeah, I think marketing with A P and L focus is very important. But you know, if you're, if you're starting out, if you don't know where to begin, keep it very simple and keep it consistent. And then you can always start to overhaul that aspect a year or so down the track. And it's going to take time to gather good data. It depends on your product. It might take a couple of years to get some really solid data in there and understand your customers truly. So that's also an important consideration to make. I'm only going to buy, I don't know, I'll buy a bottle of wine much more regularly than I'll buy a mattress or something like that. So that's important to consider as well.
Nathan Bush: Yeah, and I think that's, that's a really good point. So brands like Koala, even clients like Allbirds, yeah, they have phenomenal brands. Right. And their customers are truly passionate about them, but they're not buying product every month or even every year, potentially, if you're Koala. Right. So how do you measure if you go, actually, customer lifetime value might not be that great for us, but we have brand love and we know that as soon as that person is in the market for something that's in our realm, that we're going to be top of that list. How do you measure that?
Josh Newport: Yeah, that's absolutely right. Someone like Koala initially, when they were just doing mattresses, customer lifetime value isn't super useful for them. I'm going to buy a mattress, I might come back and buy one for a mate, but really there's not a lot of repeat purchase there once you're a single skew company. Now, as someone like Koala starts to expand their product range and we're seeing that with the sofa now, they're about to drop a whole bunch more products by the end of this year, which is super exciting. And so now the customer lifetime value metric starts to become more interesting and more valuable because now I might have someone come in to buy a sofa and now I can start to cross sell or upsell and get them to come back and buy the rest of those products to complete the house. So that's an interesting aspect. Allbirds you touched on, you'd compare Allbirds. I could have a couple of pairs of Allbirds now. Allbirds of selling socks. And I find that at his side point, very interesting because the. One of the big selling points of All Birds initially was the shoes. You don't need socks for. And now what are they doing? We're selling your socks because we need some more. We're starting to probably level out in terms of our revenue so we need to have another product there.
Nathan Bush: And how many pairs have you bought?
Josh Newport: Yeah, I bought zero. I got one pair of all birds. There's actually a store just opened up in Auckland which I haven't checked out yet but I plan to next week. But yeah, the stocks was an interesting one for me. Just sort of see that, that popping up. But yeah, like in terms of metrics, like if you're sort of single skew, I would, I would kind of argue at that point conversion rate is a more important metric. You know, it's a one off purchase typically. So you're trying to maximize that as much as possible. Things like contribution margin. How much am I making? How much is this product costing me? How much is the business making? That's an important metric. But yeah, look, that's why you start to see retailers that are, they start off with a single product. They will either be able to grow through going into different markets, done untapped customers in different markets or you'll start to see them expand that product offering in order to enable their growth. Because VCs want to continue to see growth. So if you're funded by a vc, they want to keep seeing those numbers going up. You're going to be feeling the pinch and you've got to find another way to increase that growth.
Nathan Bush: You touched on conversion rate there and I think that's a really interesting topic, especially with you coming mainly from an online perspective and my background being more omni channel perspective. I used to get really frustrated and I still do around people in omnichannel businesses talking or obsessing around conversion rate. Because for me, if I look at the role of the website, absolutely, conversion is a key one and we want to get people through that checkout. But there's a variety of reasons people can come to a website, especially when you've got 100 plus stores. So for me, if people are coming on to check store opening hours, they don't put anything in their cart, don't intend to, but they still get the information they need. That's a successful visit.
Josh Newport: Oh totally, yeah. You have to be building in those other, those other touch points into the website and tracking them. So you might say okay, I click on store hours is worth, you know, X and then a click on the phone number to call the store is worth a little bit more. And you can start to build a bit of a model around these valuable touch points on a site that you can Then sort of say, sure, our conversion rate might be 2%, 3%, but you're right, that is not the only thing that you should be obsessing over. I think that is a, I agree with you. That is a big mistake that some, some online retailers do make, especially if you do have multiple channels like stores.
Nathan Bush: I once ran an experiment where I got a research, got a research company into and I said, can you just go and stand outside about 10 of our stores? And I said, as people come out with their bags, just ask them if they looked at that product online before they came into store.
Josh Newport: I remember you doing this actually.
Nathan Bush: Yeah, it was the most manual research ever but it was to get to those assumption numbers that you're talking about to kind of go a click to visit store or a product page review is worth this. And it worked out. And I can't remember the exact numbers off the top of my head, but it was something like 6 or 7 in 10 customers that walked out of that store was looking at that product online before coming in and they were visiting our website before. So even though our E commerce numbers may have been single digit percentage to overall sales, the actual value of the website was much higher as the most powerful marketing tool that we've got across the business to drive people in store or online. Because from my point of view, I didn't care.
Josh Newport: Yeah.
Nathan Bush: As long as they were buying.
Josh Newport: Exactly. And that's at the end of the day this is all about. And as a retailer it is about sales and you know how much you're getting through the door. And I love that you went out and did that very manual research because I don't think a lot of people would go and do that. And that's very, very valuable to understand the bigger picture. So yeah, massive hats off for you to go and to implement that. What I find, did you ask the question, this has always interests me. So you asked, did you go and you know, visit this, view this product on the site? Did you also ask, did you just go and view this product in a search engine like Google? And then how many sites did you go to before deciding to come into our store?
Nathan Bush: We didn't go down that far, but I think it's a really good question. It'd be really interesting. I think I was just hell bent on proving a point.
Josh Newport: Yeah, good. Yeah, you've got some directives and you go, no, I'm going to prove this to you. Yeah, good, good on you mate.
Nathan Bush: So I think we've covered a really like we've started off here talking about growth in terms of a revenue perspective and we've also talked about profit, we've talked about customer lifetime value, we've talked around operational efficiency and we've talked about giving it to the total retail pie. If you're sitting down, if you're, if you're the owner of an E commerce business and someone said to you, what's the one metric that will tell you if your business is going well? Where would you put your money?
Josh Newport: Oh geez. That's a very nice on the spot question. Thank you.
Nathan Bush: That's lucky because I've spoon fed you everything else.
Josh Newport: Yeah, yeah, totally. Yeah. The teleprompter has been very helpful. Thank you. Jeez, I don't know. Again I'd be looking at things like if you are a peak purchase business, I would be looking at lifetime value and acquisition costs and the ratio between those two. I think for me that is just so central to any E Comm business that is has that repeat purchase model built in but I think probably broader than that. Touching on, you know, there are so many metrics that a business can keep across and that can be incredibly overwhelming. You know there's a new, you might read a blog article tomorrow about this new little known metric that the biggest brands are tracking now and you should do this and that and you know, as a smaller retailer that can be quite daunting. And so I think you really do need to pick one top line metric and whether that be lifetime value and the ratio between that and acquisition cost or whether it just be total number of new customers joined this month or whatever that means to you and your business, keep that as your North Star and your number one goal and then have maybe two or three, maybe four sub metrics that you kind of just keep an eye on and keep it simple like that. There's always going to be deeper dives you can do. At some point you're going to be hopefully hiring someone to actually mine this data for you and actually present that data in a really meaningful way once you've actually got a really good data infrastructure at your company. This is another side topic but I hear a lot of should I hire a data scientist? But yeah, do you actually have really good clean data and a good infrastructure for them to work off? Because if you don't then there's no point in hiring a data scientist that is going to be twiddling their thumbs
Nathan Bush: up or another question that's good when they ask that is go is anyone looking at your Google Analytics?
Josh Newport: Yeah. And then they go, what's Google Analytics? And I sort of like just throw the phone away. But yeah, so have one really sort of top level North Star metric that you want to keep track of and that sort of everyone on the business is aware of and like report on that. Like have, have a town hall with your team like every, every week or every two weeks and sort of share how the whole company's progressing towards this sort of, you know, top line metric. And then maybe sub teams have their own little metrics that they follow as well. If you're a larger org, like, that can be a really, really powerful way to kind of keep focus, but it has to be suited to your particular business model.
Nathan Bush: I really like that advice. I think that's really great. Have a North Star and then a couple of metrics, three or four metrics that really give an indication on what might be contributing to that without giving the full story. And if you, if you set a challenge for yourself, if you use Google Data Studio and obviously that can pull in Google Analytics, but all other sources as well. If you give yourself a challenge of how do I create a one pager that can give me a pulse check on how we're tracking right now. Doesn't have to explain everything, but I can go, are we in a good place or a bad place? And what may be contributing to it? If you can create a one pager without squinting, you've probably got the right metrics, right?
Josh Newport: Yeah, exactly. And I like that one pager. Like, I think at Shopify we have a rule where I think Toby sort of says if there's a brief that's more than three pages, I'm not reading it. Like, keep it simple, keep it succinct and to the point. And it's the same sort of with anything really. Like, if you want to get some traction internally or keep people interested. Yeah, keep that succinct. Keep it to a one pager or a single page in Data Studio for using something like that, which is a great tool. So, yeah, super good advice.
Nathan Bush: Awesome. Well, thank you, Matt. I've really enjoyed where we've gone with this. We've started off with revenue and we've gone through all these other metrics to talk about the pros and cons. And I think we've landed in a good place in that it all comes back to the customer and that it's got to be long term. We can't chase sales at a short term because it will come back and bite you in ways that aren't sustainable. And if you're just chasing those numbers to impress other people, you've really got to take the moment to go, are we doing the right thing? In the interest of our customers, our team and our investors as well. So, yeah. Thank you, mate. Really appreciate your insights and some of the examples you've given us from a Shopify point of view. No worries at all and hopefully it's been valuable to everyone.
Josh Newport: Thanks so much, mate. Appreciate it. Always happy to come on.
Nathan Bush: So there we go. Episode 1 of Add to Cart, done and dusted. Thanks again to Josh Newport for being such a fantastic guest and sharing so much of his knowledge. And thank you to Shopify plus for getting on board episode one as our very first partner. We hope you guys learn a lot today. Please give us feedback. We'd really love to hear from you. What do you want to know? What do you want to ask our guests? We've got some really exciting people coming up, so shoot me any feedback or Questions to Nathan at 12High12h I g h dot com. I'd love to hear from you. See you next time. Oh, and apparently this is the part where I meant to ask for a rating or review from you, but we're episode one. So what I'd really love instead of that is if you can just share it with your friends or colleagues, anyone who might get value from it. More feedback we can get, the better we can make it and we'll be here for a long time. Cheers, guys.
