Derek O'Carroll
To get to the next level is very expensive and people think that you don't need to invest in the people factor, which is probably a major source of [their] failure.
Chase Clymer
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Hey, everybody. Welcome back to Honest Ecommerce. I am your host, Chase Clymer.
And today, coming to the show is Derek O'Carroll. He is the CEO of Brightpearl. And he was telling me some amazing stuff before we started recording, and I had to cut them off.
I was like, "I want to hear all this again on the podcast." So Derek, welcome to the show.
Let's get a little bit of background of what you were up to before Brightpearl and let people know what Brightpearl does and all this information you definitely have experience on. It was amazing. I can't wait to get into it.
Derek O'Carroll
Sure, Chase. [I'm] delighted to be with you. My background is, I did tech startups in the 90s. 4 of them. 2 of them were very successful. One was mediumly successful and one was a disaster.
The last one I did, we sold into a large enterprise and I went into the corporate world. And I served 10 years. [I] ending up running a brand called Norton for sales marketing globally, which is an antivirus product.
And then my daughter got to 10 years of age and my wife said, "Okay. You're free. Go back into the world of innovative new tech." And I joined Brightpearl just over 3 years ago.
And what Brightpearl does[es] and what we specialize in is essentially distributed order management with integrated accounting. And what that means in English, is keeping track of boxes and cash as you trade in multiple countries, multiple currencies.
And you listeners will be well aware of the complexities that occur once you go into that that scale/mode.
So today, Brightpearl serves just under... Sorry, just over 1000 brands, and we process --in the last 12 months-- $3 billion worth of invoice to cash orders. So that's me and that's what we do.
Chase Clymer
Awesome. So today, we're going to be talking about these key factors that you have noticed that are stopping people from getting to that next level.
Derek O'Carroll
Yeah. And that next level is very much [when] you've got to maybe $1.5 million to $2 million of GMV or gross basic turnover.
Let's assume that you've got the product-market fit nailed. You're all very happy with the margin and you're in a position where [you could] fund a nice little lifestyle for yourself.
And then it's the obvious question, "Okay. How do we scale? How do we grow?" And it's typically around the $2 million turnover point that we see customers running into a lot of challenges or --excuse me-- prospects that come to us. The 5 areas that we see... And I'll fly through them and then you can dive in if that makes sense.
Chase Clymer
Absolutely.
Derek O'Carroll
Yeah. Cool. So the first one would be a realization of what made them amazing at the beginning; Positive reviews, personal service, founder interaction with clients; What made their company successful at the beginning then becomes a negative when they scale because they start losing control of the operational rigor that exists within the startup as they scale past $2.5 million.
And the irony of it is what drove those positive reviews, in the beginning, drives negative reviews as you scale. And you lose continuity within the operation stack. So that's obviously a big challenge.
The second area is, as a company grows, they go into multiple channels. So multiple channels might be different marketplaces. So you might be on Shopify, and then you decided to go into a B2B marketplace or join Amazon or use different shipping fulfillments.
You might go into different countries, you might go into different currencies. And then once again, the myriad of complexity that pops up once you do that, both technology and regulatory, really gets people focused on, "Well, we need to go and get this nirvana. This holy tech stack in place."
But ironically, we did a survey last year of 200 retailers in the US --and I'll share some stats with you later on-- but the thing that jumps out of it is, people are quite confused and don't feel that they have the right skill or operational nuance within their organization to make decisions because of the huge amount of tech that's out there for people to choose from.
So people planning and skills are actually the differentiator not necessarily the tech if that makes sense.
The third point is, the landscape is rapidly changing. And so for example, I suppose, the huge evolution of sales tax here in the US over the last 2 to 3 years, has introduced a level of complexity.
And companies need to be able to respond to that complexity, obviously, in a positive way but also think about "Okay. How can I grow my business in other markets or maybe in different business models?"
So any tech stack needs to be able to support the business model today but retailers need to think about hybrid business models. So, Direct-to-consumer, B2B, or being able to switch and change sales channels as they required.
Because maybe they became too dependent on Shopify, and all of a sudden they find that the payment terms that they're being offered mean that they should be looking at other channels to grow their business off.
And then I think the thing that tops it all off is just, at a macro level, the cost of new customer acquisition is just going up.
I'm sure listeners remember the 1 cent per click days when you all went on to "Okay, let's do some GoogleSEO Advertising." It's not like that anymore.
And if you think about it, anyone who gets investments or anyone who gets into the scale discussion, the first place they go is "Well, we have to grow new customer acquisition."
And then the returns on that are diminishing and then some. And so, therefore, you have to actually plan out at the beginning; If you're going to scale, how you're going to do it by maintaining the return on the dollar when it comes to the cost of acquisition.
And then obviously, a part of that, your existing customers are obviously key. So being able to track and report on lifetime value --that you're getting from existing customers-- is huge.
So they're the high-level trends that I hear about when I talk to prospects and customers --that everyone's grappling with-- out there.
Chase Clymer
All right. There was so much in there and I'm literally just gonna go right back to the beginning.
So when we first went into this, you were talking about... Alright. These are brands that you're talking about here. These are brands that have...
Derek O'Carroll
Yeah,
Chase Clymer
They've got product-market fit. So in layman's terms, you have a product people want.
Derek O'Carroll
Yeah.
Chase Clymer
You have surpassed that failure rate that 90% of new businesses are going to hit.
Derek O'Carroll
Yeah.
Chase Clymer
You are going into seven figures in sales. So, $1 million to $2.5 million --in that range-- which is usually an entrepreneur’s dream. They're like, "I want to have a million-dollar business."
Derek O'Carroll
Yeah.
Chase Clymer
So these are the people you're talking about. This is where they get placated. This is where they get stuck. They get in a rut and they can't grow.
Derek O'Carroll
Correct. This is where any operator then needs to really deconstruct how they go-to-market, beyond the product-market fit phase.
And that's really important because you then plan your people and your skills and your tech to make sure that you have that same continuity of customer service as you scale and you don't drop the ball.
And dropping the ball is the ultimate arbitrator. It's getting crappy reviews on whatever it is. Trustpilot. Whatever review.
And the way I would recommend the people think about is obviously, the key... In English, it's "What will you sell?" But from a tech perspective, that's called product sourcing.
So you need to think about new product introduction, vendor selection, pricing, ranging... There's a whole bunch of stuff that you would need to think about onto that.
Then you would say, "How will you sell?" So that's customer acquisition. And this is probably where most retailers focus immediately.
And they spend huge amounts of cash on advert planning, advertising, advertising software, affiliate marketing, point of sale, email marketing... The list is endless.
And then the third category, which is the real sort of area that I see the most failure on is delivering on the promises that are made in the channels that you operate in.
So this is order fulfillment: payments, fraud detection, shipping options, carrier integration, rate optimization... My golly gosh! The list goes on.
And then, when people get that right, the next one is "Well, how do I deliver lifetime value from those?" So that's customer service, delivery tracking, returns management.
And then you get into the last 2 categories. Making the right decisions for your brand and for your customers. So that's customer service, that’s implementing barcoding in the warehouse or implementing dropshipping.
And then the last one is back-office and operations. And that's where really you enter into the area of scale.
So things like integrated accounting, HR, operations, all of that sort of good stuff, the full lifecycle.
So what we see is people don't think about “Okay. Who's my ideal customer? What are the experiences I want to deliver to them and the channels that I operate in?”
“And how do I get help on designing the workflows that I'm going to need and the processes that I'm going to need over the next year or 2 years as I break through that $2.5 million GMV?
“What is the process I'm going to design to support those required customer experiences?”
And what I find most companies are doing --they're the ones that actually fail-- they run too quickly to the technology stack without actually thinking about mapping the customer experiences they want, to the workflows they're going to build and operate internally as they scale if that makes sense.
Chase Clymer
No, it does make sense.
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Derek O'Carroll
[Did I give] a big answer there?
Chase Clymer
No, that answer was amazing. And essentially, I'm going to boil it down to the processes. I'm not gonna say all, but some of the tech stacks that you used to get from 0 to 1 --from $0 to $1 million-- is going to break when you start to literally move into a different business model, at that point.
You're not a startup anymore. You're growing, you need to look at your margins, you need to look at your efficiencies. You're going to have to replace them all. And honestly, if your systems aren't breaking as you grow, there's something else going on that you're not seeing.
They're going to break and you're going to have to retool them to make them work for you as you start to get bigger and bigger.
Derek O'Carroll
Yeah. And I think that when you look at... When operators look at that statement that you just made, the nuance to success is all about how fast you make those changes within the system because changes [in the] management and introduction of the types of processes and procedures that we spoke about is complex and it's risky.
So you need to think about "Okay, which areas are we going to double down on and get really good at in the next 6 months?"
And then, "In the following 6 months, what are we going to take on thereafter?" I see far too many retailers getting excited with the success that they've got and they go for that "boil the ocean" approach.
So, they come to me with this huge requirement list of new technology they want to deploy. And then I ask the question "Okay, who are the skills within your organization and who's got the experience of rolling out these types of technology sets?"
And it's usually then they go "Well, we're hoping you can help us with that."
And then we say, "Well, we're providing you with the tools. We're not actually giving you the ability to map everything together."
That's where most operators make a big mistake: They choose a bunch of spend on tech, but they don't focus on people and skills and experience. And they rely on the founding team to deploy this new stuff. And that is a major, major issue that we see within high-growth retailers.
Chase Clymer
Yeah, there are 2 things that I want to point out there. One is that technology is just a tool.
Derek O'Carroll
Yeah.
Chase Clymer
It will never replace human creativity. I hope not. But it's only going to make you better and more efficient as a business. It's never going to get rid of the entire job.
Derek O'Carroll
Yeah.
Chase Clymer
Even if you're talking about email automation, you still need a creative mind to locate what those workflows should be, write the copy, to understand what the customers expecting during that stuff.
Derek O'Carroll
Yeah.
Chase Clymer
What they expect from those emails. You're not going to get rid of that human part of it. I see this all the time with people setting up certain email software. They're like "Oh, yeah. We have that software."
And I'm like, "Oh, how's it working for you?" They're like, "Ah! I don't know. I don't think it's worth it." And then you look at it, they're not using it. Because there's no one around to actually put in the work and set it up.
Derek O'Carroll
A good example of that is people... The point we said earlier on about customer acquisition costs is just going up, so it's all about lifetime value from existing customers. The first place that I see people going is... I'm chatting to them and they say, "Right. I'm going to put in place a loyalty program."
And they go off, and they spend a bunch of cash on a loyalty program, and then they find out it doesn't work.
And the reason it doesn't work is no one's really thought about the profile of the customer. What the customer is going to respond to, the psychology of engagement, and then how you're going to design your loyalty program around that.
I mean, personally, I'm not 100%... I don't really get loyalty programs for certain brands. But that's another example of people just buying the tech and not thinking about the psychology of engagement.
Which obviously you wouldn't expect because these companies are probably 8,9, [or] 10 people, they might have got to $5 million GMV, and as I said, all going very well and the margins enormous.
But to get to the next level is very expensive and people think that you don't need to invest in the people factor, which is probably a major source of [their] failure.
Chase Clymer
I think as your business grows, you're going to be spending more time on smart people [and] on strategy than you are going to be spending on implementing some of these things. I think that's just how it goes once you get to a certain level.
Derek O'Carroll
Correct. And then the leadership within the company needs to... They need to straddle the excitement of bringing those smart people in with the founders because you're going to get that culture clash.
The new guys will want to change and implement all very, very quickly and the founders will really understand the business.
And that's another area [that] people underestimate: the pain that comes about when you bring those two types of people together. And I see that a lot.
Chase Clymer
Yeah. A few minutes ago, you used a phrase that has been stuck in my head: "Boil the ocean." So...
Derek O'Carroll
Yeah.
Chase Clymer
In layman's terms, I guess, it would be: "If everything's important, nothing's important. Therefore nothing's going to get done."
Derek O'Carroll
Yeah, no. I think we did a survey last year... Actually, it was in December... Sorry. August 2019. And the survey was about the technology stack. I can [send it to] you later on. People can download it.
But the question[s were] "How are you buying software?” And “What are the challenges that you face?” And what I was pretty amazed about is over 41% of... This is 200 retailers, by the way, in the US all trading more than $2.5 million up to $100 million.
But over 41% of them didn't make a decision, because they didn't feel they have the right skills or people within the organization to be able to deploy.
So, that's a huge industry-wide problem if that's actually the case. People are not actually proceeding with the acquisition of new tech, because they don't have the confidence in the skill set or their own abilities to get it working.
Chase Clymer
Yeah, I've been seeing some new SaaS companies going with the hybrid model of where they're like, "Hey, our software's so sweet."
And they noticed that people are like, "Yeah. It's so sweet. But we don't have the resources in-house to set them up the right way. Can you do it?"
Derek O'Carroll
Yeah.
Chase Clymer
So, they added in a high touch onboarding, essentially. It's pricey, but who's going to set that up better than them?
Derek O'Carroll
What we do essentially... Operations, it's complex. One of my major competitors is a company called NetSuite, which is a large ERP provider that people can buy and use partners to deploy. It gets very expensive, very quickly. It's got a very long deployment time.
But when we sat down about 3 years ago, we were designing our go-to-market approach, we went "Well, hang on a minute. We're a fast-growing tech company, but they're a multi-billion dollar corporation with an old-tech stack. They're going to be able to always build what we have because they've got the dollars that they can throw into R&D."
So we decided, "Okay. We'll go out and interview customers." And we found out that the number one barrier was adoption and skills.
So we have our own consultancy team that --to your point-- it's a fixed price implementation. Using our consultants, you come in and map out your org, we do all of the proposals before we ask you to sign a contract, and then we deploy it on a fixed price.
It's pretty unique for what we do. But to your point, we know that it's software and services, because of the people factor that we were chatting about earlier.
So that's what we've done. It's been remarkably successful. But I struggled to find enough savvy-minded tech people who I can hire as my consultants. That's my challenge.
Chase Clymer
Absolutely. So if anyone's listening here and they have a burning desire for ERPs and they want to learn more, how do they get ahold of you? I'm not going to kick you off the show just yet. But now, it's top of mind.
Derek O'Carroll
(laughs) Yeah, just drop me an email derekocarroll@brightpearl.com. You can just ping me on that and I'll come back to [you] pretty sharp. We're based in Austin, Texas. It's an awesome place to work.
Chase Clymer
I can second that. I love Austin to death. Alright. So is there anything that we haven't covered today that you think would be worthwhile sharing with our listeners?
Derek O'Carroll
I think it's, be aware of what your peers are doing if that is at all possible. And what I mean by peers is competition.
So if I look at the primary area of investment for retailers today, its technology, or localized around customer acquisition.
About 66% of the 200 retailers we talked to last year, they were all saying customer acquisition was the number one area of investment, but I would just challenge your listeners to think about... Don’t be the lemmings.
Think about how you can get a competitive differentiator in other parts of the stack, in order to drive excellent customer service and loyalty, which is obviously the nirvana in this area. So yeah, I would say that as a final close.
Chase Clymer
Derek, you're a fantastic guest. Thank you so much.
Derek O'Carroll
Cheers, man. Take care. [My] pleasure. Bye-bye.
Chase Clymer
I cannot thank our guests enough for coming on the show and sharing their journey and knowledge with us today. We've got a lot to think about and potentially add to our businesses. Links and more information will be available in the show notes as well.
If anything in this podcast resonated with you and your business, feel free to reach out and learn more at electriceye.io/connect. Also, make sure you subscribe and leave an amazing review. Thank you!
