Persona: Omnichannel Brands

Why Choosing Back-End Software Is So Hard

Look, if you're an e-commerce operator looking to implement back-end software for your business, this video is for you. You've got everybody from NetSuite down to SkuVault saying they're the best software for your business.

The reason it's so difficult to know if a software is going to be good for your business is this: e-commerce operations are not straightforward. For example, I could implement two supplement companies today that operate totally differently. Even though they're in the same category, their tech needs are totally different. So you can't just look to see if the software services your industry. You have to see if it actually services your operational archetype.

I promise you, if you understand your operational archetype, you will feel way less pain when you implement back-end software. So today I'm going to go over a better way to categorize yourself, so you can make better back-end tech decisions for your business.

The Multi-Channel Madness Archetype

All right, guys, for our next archetype, we have multi-channel madness. This archetype is near and dear to my heart. I was actually CEO of an e-commerce company that fit this archetype perfectly.

So, general bullet points of who this archetype is. These are multi-channel salesmen. Unlike the traditional DTC archetype, they're not really a product-focused organization, meaning they're not bringing unique products. Typically these are more commoditized products, nothing too unique, but they're excellent marketers and operators.

This is the sort of spray-and-pray business model, where you're taking commoditized products and trying to outsell and outoperate everybody in the market. It's a very difficult business to be in. It was one that I was CEO of, and I have a lot of empathy for these guys as well. So let's dive into it.

The Complexity Curve

Again, the point of this is we have our complexity over here. These are the decisions or things that happen in your business that make you more complex over time. And on the x-axis, this is milestones, so think revenue and time increasing.

Ideally, you'll have a perfect straight line, where you're getting equally complex as your revenue is growing. The problem is, a lot of times for these e-commerce archetypes, it doesn't work like that, and it causes incredible pain. Whenever you get super complex in a short period of time, that's where the pain happens. And a lot of times, you misimplement or misdiagnose your problems.

Diagnosing Multi-Channel Madness

So let's diagnose some of the problems of the multi-channel madness archetype. I was at a company called Qualtree. One of their competitors was PMall, Personalization Mall. That's a great example of this archetype.

Again: commoditized products, nothing really that unique. These companies typically have hundreds, if not thousands, of SKUs, and they sell them across every channel imaginable. Think Shopify, Amazon, Zulily, wholesale, Groupon, deal platforms, Etsy — anywhere you can put that product and sell it for a profit, they're going to do that. And they're excellent marketers and salespeople.

Stage One: Exploration

So let's dive into this. The first stage is exploration. I'd say this stage is anywhere from zero to about $2 million in revenue. This is them just trying to see what they can sell. And here's what gets this archetype complex early, and what they should be solving for when they're considering new processes and tech.

With this archetype, it gets pretty complex pretty fast, and it's because you get your first online sale. For example, at Qualtree, the company I was CEO of, the founder started in a garage, personalizing cutting boards. At the very beginning, he was just selling cutting boards on Etsy.

So you get your first online sale, and it's like, “Oh, well, this is kind of working. Whoa.” So you buy a bunch more SKUs and expand a channel. Early on in their history, in this exploration stage, they're just trying to see what will hit where. Cutting boards kind of fit on Etsy. Awesome. Groupon? Boom, we're going to expand to Groupon. Let's set up our own Shopify website. We're going to set up this and this.

So early on, you're just exploring, trying to see if things will fit. It doesn't feel too complex at the beginning, and you're really just solving everything you need to solve with ShipStation and Google Sheets. You don't need much more.

Stage Two: Channel Optimization

But once you get done with this exploration phase, that's when things start to feel pretty complex. I typically see it when brands cross about $3 million in revenue. Then you get into the channel optimization phase.

Here's the problem. This is where these types of companies feel pain with ShipStation and Google Sheets — and we can throw in QuickBooks as well. The back-end software they've implemented, this red line I'm drawing, only handles up to this complexity. It's not going to account for your bundling and your kitting, and forecasting and purchasing as you're expanding. Pretty soon you're selling 300 products across seven different channels that all go through a complex workflow.

ShipStation and Google Sheets really only handle and automate your operations up to these complexity markers. They pull in your sales data and connect your order flow to the different channels. That's about it. ShipStation has a concept of products, but it doesn't deal with kitting and bundling from an operational perspective, nor does it deal with any flow of production management.

In my experience, multi-channel madness brands start feeling a lot of pain at the end of their exploration phase. And the more they ignore it, the bigger the delta — or the pain — between what their software is currently handling and what they need their software and processes to handle.

Where Luminous Comes In

So for these brands, Luminous typically comes in at the channel optimization stage. You've already gotten some product-market fit in some of your channels. You're probably selling across three to five channels. You have over a hundred products. You've hired out a general team. You might have a full-time marketer at that point. You definitely have a lot of people in ops — somebody running ops and a lot of warehouse workers. This is typically where we come in.

So Luminous is a unique fit for multi-channel madness companies when they're at the end of their exploration phase. Google Sheets and ShipStation can get you to $1 million or $2 million in revenue, but that tech stack is not going to solve for the pain you're feeling when you get to your channel optimization stage.

It can feel a little bit like this when you start expanding to wholesale channels. That's normally when a big light gets shined on things, and it breaks. Now I don't have a central repository that accounts for and handles my wholesale business flow, the 300 different products and the seven different channels they're selling across. At a certain point, at the end of the channel optimization phase, it becomes impossible to forecast and plan for your business's key marketing and sales events.

So that's where Luminous comes in. We can come in as a central repository that does not break the bank.

My Two Choices at Qualtree

When I was CEO of Qualtree during this channel optimization phase, it felt like I had two choices. We couldn't forecast. We didn't have a system that was handling our wholesale, the thousand different products across seven different channels. There was no single source of truth capturing all of this data and feeding it to me in a meaningful way.

So it felt like we had two options that could actually service our complexity. It was either a point solution, like SkuVault, that cost $500 or $1,000 a month but couldn't solve for all of our use cases and couldn't really do what I needed it to do. Or it was NetSuite, which could come in and solve all of our problems, but it was going to cost $200,000 and something like $7,000 a month. We definitely didn't have the margins or the ability to implement that.

So Luminous is that nice middle ground. Luminous was a solution we used at Qualtree because it could fill all of these needs for this archetype, and it could do it at a cost that was in between. It wasn't as cheap as the point solutions, but it wasn't nearly as expensive as the NetSuites of the world, and it did solve all of my problems. That's actually where Luminous was born: out of multi-channel madness and what these operators run into.

Beyond the Madness

The cool thing about multi-channel madness, especially if you look at the quintessential example, PMall, is that they've gone way past the expansion. Once you get past it and solve all of these things — you solve the operational crises, you're able to forecast across all of your channels, and you nail down all of your operations — eventually you get to a point where you're strategically acquiring and growing the business meaningfully over time.

And as you can see, our multi-channel madman here has taken over the world of his industry, and he's doing great. So yeah, that is our multi-channel madness archetype right here.