Getting it wrong

By Bertie Stephens on November 12th, 2012

When you’re an entrepreneur, you get your business wrong at first. Everyone does. I realised we’d got ours wrong late last year.

I’d decided to build a platform that would group what our users wanted to buy online, so that we could take those groups to merchants and get them a discount. It’d mean lower prices for our users, real sales for merchants, and revenue from day one for us.

Remember, this was the time that Groupon was taxiing up the runway to their massive IPO, and group buying was the next big thing in commerce.

I thought I was onto something. No-one else was using user demand as the starting point for an e-commerce platform, and having a model that revolved around direct transactions with users to generate revenue gave us a more sustainable model than anything that relies on online ads for revenue.

But we couldn’t make it work.

We were a team of nine, and despite hours and hours of work, it was falling flat. Very flat. We just weren’t interesting to consumers.

The users we did have weren’t buying in the numbers we needed them to. Sellers wouldn’t upload products to meet their demands. And we had no way to scale.

It’s quite a lesson to learn, but it’s one every successful entrepreneur has learnt on the way to making something great: you won’t get it right the first time. So you have to try again.

I learnt other lessons from the experience, too, of course. I learnt just how important having a good team was – and that I was lucky enough to have one.

We were forced to re-evaluate everything we had built over the course of months and months of work. No-one panicked, no-one stopped, no-one complained.

Some staff left. Some were relieved of their duties. Ultimately, though, the core team stayed to pick through the pieces we had left that held any promise of viability.

It was November, and we needed to raise our next round of funding by March. We weren’t licked, but we only had one chance to find something – anything – we could to make those sales, then find a way to turn them into a scaleable model.

We decided we still wanted to earn revenue from direct transactions with our users.

We decided that we still wanted to build something that focussed on what users wanted, not merchants.

There are plenty of websites out there offering online ‘savings’, but at their core they are products and services offered for sale by the merchants, determined by the products they need to shift, and thus offer a discount on.

I see the deals on flash sale sites and group-buying clones and their ilk as a bit of a chimera – a saving of 70 per cent on a product you don’t really want is no saving at all, is it?

Everyone in the team was an enthusiastic early adopter of these sites, and we’ve got storage spaces full of remote-control mini helicopters, fake snow, car refrigerators and Elvis Christmas Karaoke sets reminding us just how many things we bought that we didn’t really want.

That’s great for the merchants who needed to sell the stuff, but not necessarily great for customers like us who bought them.

These sites are creating a lot of colour and movement and change in online shopping, with start-ups and established players looking for cleverer and cleverer ways to engage customers and deliver sales this way.

The thing is, they’re all focussed on just one, narrow area: using supply (or over-supply) to create low prices and generate new demand. That’s fine. A lot of commerce works that way.

But they’re passing up the opportunity the internet creates for markets to be driven the other way – for user demand to directly stimulate supply and lower prices.

We looked at what our users had taught us in our flailing first version. We learnt that our users were fundamentally patient, and willing to spend a little time waiting if it meant getting a cheaper price on the things they wanted.

We learnt that the ultimate decision to part with money for a product was a personal one, not a collective one. We learnt that merchants were willing to offer discounts on their products as a cost of acquiring sales, even if they weren’t group sales.

We built a basic platform around those lessons, one that was just enough, one where all the work was done manually. We ran a marketing campaign to drive users to this proto-site, just to see if the concept worked. We called it Operation Fireworks – and it worked.

We got a stack of site traffic. And we converted something like 60 or 70 per cent of visitors to users. As anyone in the e-commerce business will tell you, that’s huge.

And we got a good repeat buyer percentage, too: 15 per cent or so.

From nothing, we had something, and it would be the base of our new platform. We’d got there because we didn’t pretend to be good. We’d realised we weren’t, and gone out and improved.

Our March round raised over £1.5 million. We’re a team of more than 35 now.

But: this is not a good news story yet.

We spent six months re-developing our product. We’ve built a new front end to make our service simple and usable. We’ve built a sophisticated back end we can scale.

We re-launched to the public in September, into a consumer economy a long way from booming.

Soon, I’ll be able to tell you what we got wrong this time around. And all the other stuff, too. The stuff we got right because we learnt.