DELIVERING IDEAS TO EMPOWER TODAY’S BUSINESS OWNER
This is Kevin O’Leary, chairman of O-Shares, CNBC contributor and small business investor. I’m here to share some useful tips and advice to empower the Spectrum Business community.
THE DIGITAL PIVOT
You know before the pandemic started in my portfolio of over 50 investments in small private companies, it kind of looked like this in terms of sales distribution: 50% was in retail, 40% went through Amazon, and 10% we did online directly to our customers. That’s sort of what it looked like for many businesses in America, probably like yours too. Then, all of a sudden in a 48-hour period, retail gets shut down. I mean that’s just unthinkable, but it happened. So, what happens after that? 50% of our sales just disappears? It happened to you too. Well that made us for a while unprofitable. We can’t lose half our business. The margins in the retail business are around 50% because you’re paying a distributor. You obviously have to pay the retailer too. Let me give you an example.
I’ve got a business called Love Pop Greeting Cards. It’s in the greeting card business. They’re three dimensional cards. It’s a very emotional purchase. It’s done generally in drug stores or in retail locations. It wasn’t really a big online business. The thing about greeting cards is people give them on birthdays, on holidays, on special times when they want to think of somebody, and not just the electronic ones, these ones were important. But we thought, wait a second, what about Mother’s Day? If all the flower stores are shut down too, why don’t we pivot? Why don’t we make bouquets of flowers instead of just greeting cards out of the same technology – 3-D laser cutting paper machines? We can’t sell them retail, but we’ll reach out online. What did we do? We set up a Shopify platform. We bought geo-locked ads all over the country around where we used to have stores. And lo and behold, the customers came back by the millions of dollars. And remember this, when you sell direct to your customer, that’s not a 50% gross margin business, that’s near 100%. So even though our sales were down, our cash flow was even better than we anticipated.
We made the same amount of money with less sales because we went direct. That’s what I call the digital pivot. And you can do it too. If you’re not selling direct to your customers, my question is ‘why not?’ Why aren’t you using technology? All of these technologies today: Wix.com, DocuSign, Zoom. These are all the licenses we bought. We standardized on Microsoft. We went and developed really rich platforms online with images in video and really high resolution photos and it wasn’t that expensive to do it. And, all of a sudden, instead of making 50%, we made 100%. The cash flow remained the same. And we’ve been doing this for six months now in pretty well every one of my businesses.
There’s a new America 2.0 emerging and it’s digital. It requires you to understand you’ve got to communicate directly to your customer. Now if you don’t have that skill set, hire somebody who does. You know, those kids are young, they’re smart, they understand the social media platforms, they’re using all of them, and they help us deal direct to our customer. It’s a new empowerment that small businesses in America never thought it could have. All of that technology exists today for you to use. You just have to engage in it and get active and start telling your customers, “Look, you don’t have to leave your house to use our product or service. We’ll send it to you. Just like the guys at Love Pop did.” Brings a tear to my eye, you know every time I open up these flowers.
Thanks for watching. For more of my small business tips and advice go to SpectrumBusinessInsights.com.
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