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Traction, Scale and Profit?

Online retail can often get sucked into the tech mindset that traction and scale are more important than profit. For start-ups or new ventures in established businesses, it’s investment that sees them through this early phase.

But profit is more than just proof your idea works; it’s the space and strength to survive and grow an established business. Being profitable means you can compete with a bigger rival and lead the industry, avoiding being disrupted by a new entrant.   

For Spreadshirt, the new entrant wasn’t a nimble start-up, although we’ve seen those too. The Amazon behemoth came crashing into our sector with its reputation and deep pockets. We’re a substantial size for our sector, but nowhere near as big as Amazon. Established in 2001, Spreadshirt is a €110 million, self-expression, eCommerce platform. People use Spreadshirt to create clothing and accessories with messages they want the world to see. In 2018 10 million designs were uploaded, we printed more than 5.5 million items, and had over 100,000 selling partners.

But all that doesn’t compare to the might of Amazon. What did help was being profitable. Last year we achieved the biggest profit in the company’s history (€10 million EBITDA, up 23% on the previous year).

Specifically, our profit has allowed us to do two things; compete with Amazon and invest in new technology.

Amazon has long been an internet monster, terrorising retail. A couple of years ago Merch by Amazon appeared in Europe as a direct competitor to one of Spreadshirt’s offerings. We had to decide quickly how to respond. Had we not been a profitable company, we may have been wiped out early.  As it was, we had the strength to ride out the initial impact and the space to work out how to compete. We identified delivery and specialism as two core areas.

Delivery isn’t just about speed and time slots, but reliability. That said, Amazon’s vision is to delivery inside 2 hours, which could take $1 billion share of the market in just a few years. We needed to test ourselves. We started selling via Amazon and saw exactly how our operations and delivery compared to theirs. The upshot? We improved our operations.

Customers love a specialist, but does anyone really love Amazon? It is commodity shopping, rather than somewhere you go for inspiration or the fan experience. Amazon is a very effective machine, but we found that one of the best ways to rage against the machine and demonstrate expertise, is with real people. As a specialist, you need to have real and helpful customer service; for example, by making an advisory service available before the purchase.

So being profitable gave us the strength and space to compete with a bigger rival.

Profit also gave us the space to think about where the industry is going and how we might lead, rather than follow it. We know that there are always going to be newcomers; businesses that are unhindered by the old ways of doing things. So we need to keep the focus on service improvements.

We reviewed the print-on-demand and fulfilment sections of our business. Dealing with storing product, production, shipping, last-mile delivery and then organising payments is not the sexy end of ecommerce, but it is vital to a good customer experience.

This review resulted in our investment of $10 million into new print technology, which will set us up for continued growth. It will allow us to add new categories and materials that have previously been difficult to print on. For example; embroidery for corporate goods, polyester sports clothing and UV printing on non-clothing products.

This investment also consolidates a new revenue stream. By improving our printing techniques we can expand our range of products. This means we can offer a greater service to new companies who want to use our fulfilment services.

Profitability is hard to achieve and maintain, especially in online retail. Our corner of the retail world knows that it cannot be dazzled by the lights of the tech sector. We must focus on profit in order to have the strength and space to survive disruption, lead the change and do business on our own terms.

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