The WimLex Show #13

05:45

Alex: Could you give us some background on Trouva? What are your markets and what kind of shop-owners do you attract? It seems to me that your concept is similar to that of Farfetch, so I’d be interested to see where the differences are. Or another thing that springs to mind: are you not an eBay for boutiques?

Hugo: Wow, that’s a lot of questions! Let me start with our background. We started developing our technology back in 2013 as another business Streethub. Our co-founders Mandeep and Alex had been working in consultancy for big retail and had seen the efforts that the behemoths were putting into try and attempt a version of omnichannel: as far as they were concerned, there was just too much legacy – it was like trying to turn the proverbial oil tanker. That’s when they thought: “Who’s doing this for small guys?” The advantage they have is that they’re more agile.

So that was the genesis of Streethub, the idea being to take all this offline inventory and make it available online; the model was different back then, though, as the idea was to create more local demand for participating shops. It was app-based, so if you wanted to find a lamp you would enter “lamp” and it would tell you which shops have lamps in your town or area – then you could go and buy them.

Alex: That sounds like GoogleShopping…

Hugo: Exactly, except that it was all in-house at Streethub. It worked to an extent (and it was exciting for shops to feel like they were driving more footfall), but it was quite hard to prove causality: i.e. that this person was on the app and then went into that shop. It was a subscription-based model, so Streethub didn’t own the transaction; and while it got a lot of app downloads, it wasn’t a scalable model. That’s when we switched from trying to generate more local demand for shops to trying to open them up to demand globally. So we pivoted to Trouva and the rocket ship took off!

At the moment, we’re in peak sales – although we’re not a gifting site that does half of its business in the run-up to Christmas, December is a big month – so there’ll be 99 people working for us; then we’ll scale back down for a couple of months, but then things will pick up again. Most of the staff are at our London HQ, but we also launched a tech hub in Lisbon two and a half years ago so that we could acquire really good engineering talent (that isn’t outrageously expensive!).

Willem: Plus the UK is leaving the EU!

Hugo: That may have something to do with it, too. We’ve also started to bring a few hand-picked shops across Europe’s capitals on board; we now have a few business developers out in the market, starting off in Germany in Berlin at the beginning of the year, with a couple of shops in Hamburg and Munich, too; just today, we launched with shops in Madrid, Amsterdam, and Copenhagen. There is a list of other places where we’re signing up, but we haven’t announced them just yet. If you were to do some sleuthing on our website, you’d be able to find out, though, because we have stores listed in these places already.

(Willem tries himself as a sleuth in guessing the number of stores and number of products listed, before going on to expound briefly on the idea of The Long Tail and connect it to the Trouva approach.)

11:15

Willem: Looking at the sales volumes, are niche products that aren’t available elsewhere your biggest sellers? Or is it big brands being sold through another channel?

Hugo: It’s a real mix. The simplified way to look at it is to say that a lot of our shops have branded products; generally, we’re talking about selections of design-led brands, but often reasonably well-known – if you know about homeware, we’re talking about Ferm Living, Broste, etc. These brand names generate search volumes and we can buy the keywords; it’s a small part of our digital marketing strategy, but certainly pulls customers onto the site. If you look at the customers who come back more often, however, you see that they start buying lesser known brands from local artisans.

Willem: How do you curate repeat business?

Hugo: We’re shop-led, and that is what makes things so exciting, so interesting for the consumer. We have well over 90,000 products on our site now, and we only list them if they are on the shelves of one of our shops; each of them is quite small and only has, say, 10 metres of shelf space. What is more, they are run by highly-motivated entrepreneurs, because it is really hard to develop and offer than kind of great offline experience; one of the things these shop-owners tend to be very, very good at is curating an exceptional product range. They really care about what they stock, they’re experts on sourcing, and they keep up with trends. They know what products they want to have on their shelves and restricted by physical space: that means that, however many products we have on the site, we typically have a buyer for every couple of hundred., and that buyer is one of our shop-owners. And they are exceptional buyers who are motivated by equity, not salary. So as we scale up, it doesn’t matter how many products we end up with on the site: every single one has been hand-picked. That’s the magic of the business.

In terms of getting customers to return, we’re basing things very much on the shops. We’re not replacing the offline experience of the shops, but trying to augment it. What we do is recreate a tiny bit of that experience of walking into an amazing shop in The Lanes in Brighton or in Kreuzberg in Berlin, having a chat with the owner, finding out about how they sourced their products. We’re trying to take bits of that and put in online to create a different kind of online experience: discovery. That runs counter to many big e-commerce sites, whose job is to remove all friction from the sales funnel.

15:05

Alex: What kind of products are we talking about?

Hugo: So you mentioned Farfetch, and out of all the businesses we get compared to, it’s one of the most relevant: they’re known for luxury fashion, we’re known for premium homewares. Now, ‘premium’ isn’t luxury, so the price-point isn’t quite as high. We’re talking about design-led tableware, lamps, etc.

(Alex voices his conviction that the concept makes complete sense for shop-owners: they are unable to get critical traffic to their own websites – indeed, many even have trouble setting up a GoogleBusiness page – but asks why consumers would shop there apart from out a vague feeling of loyalty to small businesses when they could get the same products elsewhere.

Hugo answers by sharing Trouva’s customer insights: people who shop on the site feel a strong affinity to creatives and shop-owners – for them, shopping there is a pastime; he then reiterates the ‘discovery experience’ which Trouva replicates online. Moreover, shops have a lot of control over their content on the site; Trouva also offers shop-owners social media takeovers and organises events. Hugo expands on how the interaction between users and shop-owners works by giving an example of his own relationships to independent traders in his village-y area of London, Stoke Newington.

He goes on to elaborate on what he sees as a key difference between Trouva and Farfetch: Farfetch seems to have started out knowing which brands it wanted, and cooperating with the boutiques which stock them was a means to an end. Trouva sees it as its job to pick the shops – and then let the shops pick the products.)

21:45

Alex: I know that Willem has always dreamt of opening up a boutique store in Amsterdam selling designer lamps called The Shining Poffertjes. Let’s say he does that and gets decent footfall and revenue – say somewhere between €500k and €2m…

Hugo: Two million would be pretty decent for an independent shop!

Alex: Yes, but you need that just to pay Amsterdam rents! But: what would be in it for him if he started listing on Trouva?

Hugo: Well, you’ve just alluded to the fixed costs which small shops have to deal with, and just minor changes to these costs can have a big effect. If your landlord comes along and puts your rent up, that often means that most of your operating profit evaporates – and typically, if you own a shop, the operating profit is your salary! Or if footfall goes down by 10% or 15% and your stuck with loads of stock, then you’ve got money locked in assets which are costing you money to store. So in basic sense, we’re helping shops to make those assets more efficient. Our cost is all variable – shop-owners only pay commission on sales – so we take some pressure off. Moreover, we remove the need for geo-co-location, so rather than being limited to customers who come walking into their shop, they potentially have customers from all over the world.

In fact, we tend to separate out supply and demand: in new markets, we don’t necessarily build up the two at the same time. What we’re currently doing in Amsterdam, for example, is connecting shops to the database of a couple of hundred thousand customers we already have; the feedback we’re getting is that their first orders are being shipped to the UK or the USA, Australia, Germany. It’s suddenly opening up their shop window to the entire world rather than just the people walking past it on the street.

24:25

Willem: A few weeks back, we did a podcast with Michiel Muller, the co-founder of an online supermarket in the Netherlands called Picnic. He said that, because there were so many products out there and they didn’t always know what shoppers in different regions wanted, so they allow their user community to make suggestions for new additions to the product range.

I would imagine that you have a loyal community: do you interact with them to find new boutiques?

Hugo: From Day One, our users have always been able to submit suggestions for their favourite shop – anywhere in the world. So even when we were only active in the UK, we were already starting to build a database of shops abroad that we knew our customers loved. That is a very useful resource for finding out about shops which should be on Trouva. The other main way  we source new shops is: other shops. The preconception is that they’re all very competitive – and indeed sometimes there is some competition when they both stock the same products by the same brand – but mostly, they know and like each other.

This community spirit among shop-owners has a twofold benefit for us: firstly, people who run nice shops know other people who run nice shops; secondly, they become ambassadors for us. If they’re on Trouva, have a great experience, and then tell the shop down the road whose owner they met at a trade show or something that they have to get on Trouva too, that’s the most authentic recommendation we can get.

The UK is now quite a mature market for us: most of the shops we would want to work with are now listed on Trouva (essentially, shops apply to us and we decide whether they are a good fit). In new markets where we don’t have our track record, we’re trying to build this trust quickly; when we went to Amsterdam, for example, we actually took a couple of our UK shop owners with us. We hosted an event and did a panel talking about the future of retail with them, and it was nice because they weren’t selling on our behalf, but rather just telling it how it is.

Alex: What are the criteria a shop needs to meet to be listed on Trouva?

Hugo: It’s quite amorphous, really. We have a regular senior team meeting every couple of months where we sample-check, taking 10-15 shops and looking at why we took them on or rejected them; then everyone will have their say on whether we made the right call. Amazingly, we’re always much more aligned than we expect to be – despite all of the strong personalities on the team.

Alex: It would be interesting to hear about a case in which you weren’t aligned.

Hugo: About a year and a half ago (when we probably knew a lot less about our business than we do now), we started working with a trainer shop stocking big brands – Nike, Adidas, etc. Very quickly, they were doing a lot of revenue on the site because we have a very sophisticated digital marketing team that was buying keywords and bringing in traffic for the trainers. Looking at the lifetime customer value, though, it became clear that those customers weren’t going to continue shopping at other boutiques: they just wanted a good deal on trainers. Typically, given the acquisition costs, we don’t make money on the first sale; so if there isn’t going to be a second one, we’re just subsidising orders.

That was a good lesson for us, and what I’m very proud of is that we decided to end that relationship quickly. As an early-stage start-up, it was a hard thing for us to do, because they were generating a chunk of revenue; it’s not just about hockey-stick curves, though, but about building a long-term business.

The most important thing about the shops we work with is: do they have a great product range our customers will love? One of the indicators we use for that is if the shop applying to us stocks one of the brands which we know sells really well; if they do, it’s a pretty good bet that the rest of their range will be fit (unless we notice that they have a bunch of weird stuff, too, of course…). So it’s product selection first and foremost, and after that, it gets a little more esoteric: do they have a great offline experience? Is the shop beautiful? Do they have a good story? Do they stand for something as a brand? What filter do they apply to picking their product?

Within the team, there is me with my commercial hat asking “Can we sell lots of the products?” and the creatives asking “Can we make great content with them?” Mostly, we can do both, and we only tend to have a longer discussion about cases in which one of those factors is really strong.

30:30

Alex: What happens if the customer is looking for, say, a… pen tray, and there are five shops on your site stocking said pen tray? What does the customer journey look like?

Hugo: So if the customer types “[BRAND NAME] pen tray” into Google, we’ll buy keywords and push them to a product page from one of the shops; we route that demand across the pages of different shops who stock the product so that they all get a fair share of it. As a customer, you don’t see lots of versions of that product page, rather only the one you’ve been routed to; hopefully, of course, you click on the link to the shop, fall in love with it, and start shopping the rest of their range – and then think: “Ooh, what’s this Trouva-thing?” and go looking at all our shops. Yet even if you don’t, you buy the pen tray and we start marketing to you.

Willem: What about customers who search for the pen tray on Trouva?

Hugo: So if you are on Trouva and know you want the pen tray, but not who you want it from – i.e. you’re shopping by product and not by boutique – then if you type “[BRAND NAME] pen tray”, you’ll probably end up with a few pages of results. Our algorithm will spread out identical products across a few pages, however, so that you don’t see them all next to each other.

(Willem follows up with a specific technical question about the logic – which isn’t Hugo’s area of expertise. He explains the overall movement in their search away from static, product-related ordering through to more personalised results based on customers’ preferences. The overall aim is for every user to have their own virtual ‘favourite high street’.

Asked whether Trouva is planning to introduce on-site search advertising, allowing participating shops to push their products up the rankings, Hugo says that there is currently no interest in doing so because Trouva maximises conversions by showing customers products they want to see, not products shops able to spend on marketing want them to see.)

34:35

Willem: I know you’re not a tech guy, but I’d be interested in how you manage your data. Is there a platform in place?

Hugo: We’re very lucky: we have a technical co-founder who’s a genius! So we made everything from scratch ourselves. I know that we are currently moving from one data warehouse to another, but that’s not something I’m involved in; we are also really beefing up our analytics team. Broadly, what our product team is doing is building the services that power the market place. That includes how we manage logistics, for example, i.e. routing every package through to the right courier and getting it delivered efficiently with good tracking – and that’s all quite complicated to build.

Right now, our solution only applies to Trouva, but we are creating technology, as we are with real-time inventory management, we we’ve developed in incredibly user-friendly way to upload and update products. Many of our shops are shifting from keeping stock handwritten in a book (or even just keeping an eye on the shelf and replenishing when it’s empty) to our easy-to-use solution which offers them up-to-minute inventory data – data which we can use to feed useful information back to them, e.g. velocity of sales. By logging both in-store and Trouva sales, we’re offering them a single source of truth for all their stock and can start to predict when they are going to go out of stock on given items; that eliminates months of empty shelves and makes their business more efficient.

So really, what our technology team is thinking about is: what are underlying things which need to be slotted into these businesses?

(Alex asks Hugo about his own shopping habits: how often does he buy something on Amazon? Hugo professes his love of Amazon – for commodities. When it’s about more personal items such as clothes and furnishings, though, he – and Trouva customers – want a more personal and unique experience. There is also the social distinction aspect, i.e. being able to say: “Oh, that lamp? I bought it from a boutique in Berlin!” As such, Hugo doesn’t see Trouva and Amazon in opposition, but as offering different things. Willem also sees a difference between Amazon, which puts its own brand on everything possible, and Trouva’s “modest” approach, leaving centre stage to the shops. Hugo agrees, seeing Trouva’s role as being a “facilitator” and offering a heart-warming anecdote of transatlantic, cross-channel shopping by way of illustration.)

40:30

Alex: What is your message to any shop-owners listening: apply to get on Trouva now?

Hugo: What we’ve noticed is that the UK is a very mature market with high e-commerce penetration: for most shopkeepers, it’s taken as a given that they have to supplement their offline business by selling online; it’s almost got to the point that, for many shops on Trouva we speak to, we are a way for them to pay their rent so that they can get on with the business of running their shop.

Moving into Europe, we’ve seen that other markets are at different stages: some don’t have Amazon yet, some still have high footfall. So there is a sense of complacency in some areas, and my warning would be as follows: “This stuff is happening; the world is changing; it’s going to hit every market eventually. Rather than sticking your head in the sand, the best thing to do is to get prepared, get ahead of the curve, and future-proof your business.”

(Community, data, product selection: Willem sums up the ingredients to Trouva’s success (it has grown by 3000%) covered in the interview so far and asks Hugo if there is a missing ingredient. He says a crucial factor is the staff’s belief in their mission and finishes by explaining his own personal motivation for joining the business.)