Gamifying the Ecommerce Experience with Tophatter COO, Sree Menon

Auctions are dead. At least, that’s what the press seems to think about auction platforms. But Tophatter is experiencing something different. The platform that started as an auction platform for homemade goods is now expanding to include a variety of products and is looking more like a third-party marketplace. Sree Menon is the COO of Tophatter, a discovery and auction platform that is gamifying the Ecommerce experience. On this episode of Up Next in Commerce, Sree explains the way Tophatter has differentiated itself through gamification, fast, real-time auctions, and a customer engagement experience that users have embraced. She also provides insight any founder or CEO would need to know about the fundamentals of setting up an online marketplace — or any start-up for that matter — and she discusses the importance of unit economics and A/B testing. 

3 Takeaways:

• The gamification of the buying process and the gamification of internal innovation are proven ways to create more engagement with your customers and your employees. Both will keep coming back if they are enjoying their experience, and creating a game-like environment helps build fun into everything
• It is impossible to build a marketplace or create a successful business without first understanding unit economics. It is good to have a story behind your business and a plan for where you want to go, but you need to have data points that prove that your story is true and that your plan will work out
• Retail consolidation is going to be a major factor in the coming years. There will be much more emphasis on creating omnichannel experiences that will completely change how we shop

For an in-depth look at this episode, check out the full transcript below. Quotes have been edited for clarity and length.

---

Up Next in Commerce is brought to you by Salesforce Commerce Cloud. Respond quickly to changing customer needs with flexible Ecommerce connected to marketing, sales, and service. Deliver intelligent commerce experiences your customers can trust, across every channel. Together, we’re ready for what’s next in commerce. Learn more at salesforce.com/commerce

---

Transcript:

Stephanie:

Hey everyone, and welcome back to Up Next in Commerce. This is your host, Stephanie Postles from mission.org. Today we're joined by the COO at Tophatter, Sree Menon. Sree, welcome to the show.

Sree:

Oh hi, Stephanie. Thank you so much for having me. I'm excited to be on the show.

Stephanie:

We are very excited to have you here. So I was looking at your background a bit, and it's very interesting. I would love it if we could start there, maybe telling us how you got into your role you are in now, and yeah, how you got there.

Sree:

Yeah. It's a very long, long career. I started in the online world, which I think is more relevant in this podcast at Dell. I used to lead the commercial online sales for Americas, Latin America, and North America. I was there for several years, perhaps nine years overall at Dell, six years in online, and then I moved to eBay, was the general manager for the motors group. It was an amazing journey. But I did know that I wanted to go and work at a smaller startup using the skills that I have, and that's what brought me to Tophatter. We are a discovery based shopping marketplace, and it's been an amazing journey, and I'm happy to talk more about that in this podcast.

Stephanie:

Cool. Yeah. I'm sure the shift from Dell and eBay was pretty immense from going to a smaller company. What was that like, and what kind of learnings did you take with you from Dell and eBay?

Sree:

So it's a great question. So the things that you take for granted at a big company are generally that, look, you're not worried about the fact that the startup may fail. There isn't that. There's a tremendous sense of security because you're working in a big company. There's of course a lot more pressure in terms of being able to communicate a lot about what you're doing, working with many, many different teams cross-functionally, and also, the time to market or the time to execute an idea is very long. It takes a lot of cycles. So when you go to a startup, it's absolutely the other way around. I hardly have any scheduled meetings every week kind of thing. It's mostly just, you need to solve a problem, and so you're meaning to kind of solve it or brainstorming on something.

Sree:

So the pace of innovation, the pace of executing is so much faster when you're in a small company. But of course, that kind of freedom also comes with a lot of responsibility, with a lot of pressure to meet numbers, to be able to understand the intricacies of the entire business and not just to function, and it's thrilling and exciting.

Stephanie:

Yep. Yeah. That's awesome. So for Tophatter, it kind of reminds me a little of eBay. But I would like to know, how is it different? Because eBay's auction business seems like it's kind of declining, but Tophatter seems like it's thriving. So how would someone think about what Tophatter is and how is it different?

Sree:

That's right. So eBay's auction, the way I think about it is, yes, as compared to the overall business, in terms of just eBay or how e-commerce has evolved as an industry, auction is probably a smaller portion. The way eBay was designed originally, let's go back to the historical context, it was largely a C2C business, right? Auctions work well in a C2C background or in any background or in any context where there isn't a fixed price or value of an item. It is what the buyer is willing to give you. So for instance, I have a Louis Vuitton which is five years old. I price it a lot in my mind. I think it's very precious to me. But that value may not be the same. It may not be perceived the same by a buyer. That's where an auction really fits in really well.

Sree:

Now, that's one use case. So from that perspective, I think eBay's still doing well in terms of that format when it comes to C2C, when it comes to very high word items, high value items like cars and stuff like that, used cars, again, things that don't have an MSRP. Now, in our context, the auction model helps because it's more of a gamification element versus here's the value of that item in terms of the emotion that I have of it. Because we largely know we're not a C2C platform at all. We are a B2C platform. But they are discovery shopping items. So it would be for instance, if you're working on Embarcadero road, which is here in San Francisco, and you had a nice lunch, and now you're just kind of browsing on the streets, looking at the vendors, and you see a bracelet which is made of shells, and you want to pay the pricing at $20.

Sree:

Maybe it's a little too expensive which you're already feeling happy, and you're ready to pay for that. Or you find something for $5. It's basically some just overall discovery and emotional connection with that item. Those kinds of products, and that kind of platform works very well with an auction format.

Stephanie:

Very cool. So give me a little more details on how you gamified the process. I saw it's a 92nd auction, which I had never heard of, and I thought it was very fun and definitely would convince buyers to buy quickly. But in what ways did you gamify the platform, and has it been successful with short auctions?

Sree:

No. I do believe so. I think even the auction, we call that as a gamification technique per se. So think about what a game does for us. It makes us competitive. We compete. So just competing on an item is gamification in itself. Because you shorten it, it's basically shorten the timeframe, the adrenal that you boost to get of competing is much more extreme. So I think the core of that platform uses that gamification technology, and then now we've added on things like badges. We've added on things like, you can collect if you shopped in certain categories, you collect a badge. You could collect it and then cash it in as chips to get some credits. So there's a bunch of other techniques we've added on, and we're continuing to do that, right? I think that's what makes our platform unique and different. We're literally trying to take an offline shopping, browsing, hunting experience and putting it online and having fun in it. So whether you call it games or just an absolute fun experience, that's what we do.

Stephanie:

Yeah. I could definitely see that being a big team because there are many 90-second auctions. That sounds fun. I'm going to have to try that out. Is there certain incentives that you've seen be more successful, whether, like you said, it's badges or certain things showing up on the user's profiles? What things have you seen work well, and which ones were kind of duds?

Sree:

No. This is the badges have been really useful for us last year that we launched it. We also launched a few other things. We tried to kind of add a community angle to it. But those experiments didn't do very well. You could poke, or you could give some... Even the gamification element, having a name there, that was very helpful to us. So I think what has been working well is having pictures. At one point, we even had pictures of individuals that they will upload, adding profiles of themselves. These are all things that were very successful, apart from the badges that I said. We continue to iterate. We experiment a bunch every quarter, every month, every week, and we try to see what works.

Sree:

But the big wins for us last year was badges, the names, and the profiles per se. We didn't think that people would want to add profiles and talk about themselves, but you'd be surprised they do. This is where I think the convergence of a little bit of the community and gamification and shopping is all occurring, and everyone's discovering their own comfort level in terms of that convergence.

Stephanie:

Yeah. Very cool. Is there any metrics that you look at when it comes to adding these different features, or you said you're running tons of experiments all the time. What are your go-to metrics to be able to tell you if something is successful or not?

Sree:

That's right. So if we look at the typical funnel metrics, we try to look at the engagement metrics, which are, are people bidding. More bids that we have, then obviously, it means that people are engaged, and it also drives up the ASP of the item, which is very helpful from the sell site. So that's definitely what we look at and eventually conversion. So if you're bidding, that is conversion.

Stephanie:

So I could also see it being interesting with... You're essentially getting, like you said, multiple conversions just by someone bidding on it to where I'm guessing you could retarget those people, and you have consumers earlier than a lot of other brands might experience. Is that what you've seen, and how do you go about reengaging those people?

Sree:

It's a great question. So I mean, what you're seeing is basically, even people are engaging on an item. Only one person is winning it. Let's say there were 10 bidders. There's nine of them who were interested in that item. Maybe they were not interested in that item beyond a certain price point, but they were. So what we do is if you bid on an item, we do consider that as a saved or aligned item. So we save it as an aligned item in the backend.

Sree:

So we use various notification methodologies for when that item comes back. So let's say I bid on the... I'm looking at the platform right now, on a CBD cream, pain relief item.

Stephanie:

Very popular these days.

Sree:

Very popular. No. I didn't mean it because it's gone up, like somebody is out to get me, and I don't want to pay $15 for this. So I kind of stop at 14. So now, the system will automatically capture that. If you look at the platform, there's a little heart-shaped on lot, which basically is our version of we like it. So the next time the CBD cream is coming up for auction, I will receive a notification that says it's coming up for auction. Come back to the platform. So we drive up a bunch of engagement with those kind of notifications.

Stephanie:

Yeah. That's very cool. What kind of investments have you done into personalization?

Sree:

Right. That's a very interesting question, actually. Stephanie, for us, the traditional definition of personalization is to be able to give you that item at the price that you want. That doesn't really work well in our auction platform. So for us, there's a broader meaning of personalization. For us, it's about personalizing to a group of people with similar tastes and similar needs and shopping behaviors versus tailoring it to an individual. So I would suggest that we use terms like targeting. So there are males if there are electronic items, shaving items. We know they generally appeal to men. So our feed optimizes knowing that this is a male. Their feed will optimize depending on the fact that are they male or female.

Stephanie:

Very cool. So the other thing that I was thinking about is it seems like it could be a little bit difficult to bring a seller to a platform and say, "Hey, you have there's 90 seconds for your product to get sold. I was curious how you convince sellers to come to the platform. One interesting thing I saw was your guys' blog, which seems to focus a lot on education that isn't really about Tophatter per se, but it's things like how to optimize your e-commerce warehouse strategy or how to sell more products. It seems like it's just an educational tool that could be possibly convert sellers to come on the platform. What does that process look like to get them to list their first product?

Sree:

That's great. You have multiple questions, and they're all very interesting. So [crosstalk 00:15:02]-

Stephanie:

I seem to be that.

Sree:

They are interesting. Your brain works very fast. I can tell. So I think the first question is, how can they? What happens in 90 seconds? I think you're trying to say, can they realize the price in 90 seconds? Well, that is the interesting part is you would find that there are certain items on our platform that can go up $100 in 19 seconds or a little bit more than 90 seconds. I'll talk about that in a little bit. But some popular items, we keep them on block longer because we know that there's a lot of excitement. So if I'm listing, for example, an iPhone, which is a refurb iPhone, but still not very old, you will see that will generate a ton of interest.

Sree:

What does that mean? So what does that show to the seller is that if you have an item that a lot of people will like and converge, you will be able to realize the price and probably more than what you wanted in a short period of time. So to sellers who understand the audience and understand what would appeal to the audience do really well on the platform. So that's the number one question on price realization. The second point I think you're making about educating and teaching them a lot on what can sell and how to optimize the platform, what your warehousing strategy should be. Well, because we are a discovery based platform, it's like people get bored quickly, right? Because suddenly, everybody likes this CBD cream. We've got a ton of inventory there on. We've got a ton of buyers.

Sree:

But after that point, it's like that song that has been at the top of your charts, and you've heard it so much. You're bored of it now. So then that very quickly goes out of fashion, and that makes it harder for a traditional seller to do warehousing strategies and what have you. Then they're like, "I had a great product, was selling really well. I was making a lot of money, and now I'm not. Now, what do we do?" So sellers have to be really smart about how they test. So they kind of have a marquee product that they know that they make most money in velocity. It keeps selling that, knowing that this is going to not be the case in a few weeks or a few months, but then continue to test on the others in parallel in anticipation of creating leads and nurturing more products that can fill in the gap when this one runs its time.

Stephanie:

Got it. Yeah. That seems like it's a lot of moving pieces to make sure that you're putting the right product out with their right amount of inventory level. Are these sellers also selling on their own websites traditionally? Or are they pretty focused on you guys and maybe Amazon?

Sree:

Yeah. So are we the primary platform, or do they sell on other platforms and their own-

Stephanie:

Yeah, or their own. Yeah.

Sree:

Or their own. Yeah. So some of them, we do find a mix of all of that. So if you think about the pyramid structure almost as the very top of the big players who sell on every platform, did themselves have their own big e-commerce companies, sorry, websites, and they're selling on those platforms themselves. They don't do a lot of GTV. Those are the ones that have found a marquee product and probably have a ton of inventory on the platform, and they kind of probably also want to do testing and channel optimization in their own companies. So we probably are one of them. So they don't do a lot of GTV. But they are good players. They provide great experience, and they're also happy to use our platform also probably because it gives them a ton of velocity as compared to the other platforms. So those are the very top.

Sree:

Then you have the ones in the center who are actually small, medium businesses. They are mostly for whom Tophatter is the primary channel. So what they do is they will do a ton of testing on the platform, figure out what's working, like I said, find successes. They'll build their entire business around it. Then if it doesn't sell after a point in time and they're stuck with inventory, then they liquidate it on other platforms. So the other way around. So different use case in this case.

Sree:

Then the bottom of the ones are just people who come in and go. It could be even a buyer like you and me who think, "Oh yeah, I have a purse in my closet. Let me try and sell it." So you'll have a bunch of people who come in and go.

Stephanie:

Gotcha. So as a COO, you probably have a very good bird's eye view, like you said, into the entire company. What advice would you give to someone if they were talking about starting a marketplace, which is probably one of the hardest, I would think, e-commerce businesses to start. What kind of things would you advise them to do or not do?

Sree:

Oh, that's a great, great question. So hard, so hard. You're exactly right. It's very hard. I think the first thing is you have to kind of figure out is your customer acquisition and your unit economics. You have to get a sense of, am I able to bring in the customer with the certain level of advertising costs? Again, do I have a platform that they are engaged enough that the unit economics will work out. I think that's the primary question. Sometimes the indications are that they will, and over time, they don't. Right? And that's where it all changes.

Sree:

So after having built the initial base for that, then the idea is to be able to understand the startup or whoever's starting the company has to constantly look at, how do I drive that engagement? How do I drive with LTV? What are the changes they could make? And really experiment a lot. Experiment a lot. Be open to walking away from... Be open to learning from the results of those experiments and being brave enough to not feeling so personal about those experiments and the business model that you have to hold onto it. Right? So you should know when a particular thing is not going to work or has hit a ceiling, and then you continue to innovate and continue to iterate and experiment.

Stephanie:

Yep. That makes sense. Are there any metrics, maybe financial ones or not financial that you look at to understand if you guys are growing the way that you want? How do you think about success when it comes to the growth of the business and the platform?

Sree:

Oh, absolutely. So those are the three big metrics for any company, no matter what, is always the three, right? The big ones. GTV in our case, right? Are you growing your top line. Then you want to look at, what's your margin or revenue in other cases? What's your margin? Is it healthy enough? How much liquidity do you have? Basically, that's the healthy part. How much of operating income do you have? You may have negative operating income because you're a startup. But the idea is you want to know whether your unit economics are going to be scalable.

Sree:

There has to be a story. So let's say your unit economics are not working on right now. That is because of X, Y, Z reasons. You are investing in logistics or investing in international growth. You're investing in something. But there has to be an IP that you'll build up that will allow you to be able to monetize this in the long term where unit economics will work out. There has to be that formula, and there has to be that clarity. There has to be proof points when you're building the business that that story or that narrative that you build is going to come true.

Stephanie:

Yup. Is that something that you all have been able to keep track of from the start? Because I could see a lot of startups maybe getting pretty far in and being like, "Oh, oh, I probably should've started measuring this." But you don't really think about that when you're starting a company. You're just trying to be scrappy and get it out. Is that something that you've paid attention to since the beginning or at least since you've been at the company?

Sree:

Well, actually, a lot of it right from the beginning. So even I've been here only for three years, but the founding team, they were very, very diligent about unit economics. So I think the fact that we have been staying standing for eight years now and as big as we are is a Testament to the fact that the founding team was so focused on unit economics. So we know our formula. We know really well what for our formula, how sensitive that is, and what are the factors that causes it to be sensitive. So we've got guard rails around that. We might make investments in my opinion, bold moves. But we also know based on the guard rail that we have established is when that is shaky and when we need to pull back.

Stephanie:

Are you A/B testing or running multiple tests on kind of what user interface works best or what users enjoy the most? I'm guessing you could have a bunch of different interfaces and see how they more eagerly interact with the platform.

Sree:

Well, totally. So A/B testing is just what we do, right? That's all we do. Even in operations, we kind of try to do A/B testing. But even retail sellers, why do you do A/B testing? Have a listing with these words? Have a picture with these words?

Stephanie:

Oh, that's great.

Sree:

Right? So that is such a core part of our DNA is A/B testing, being able to have population groups, hold out groups. Actually, that is so much in our DNA that even in terms of our OKRs, we actually call it games. Our OKRs are called games now. We want to know whether what we're doing even in an operational sense makes a difference to the company. So we have a holdout group that does not receive any of the things that the operational team is doing, and then we try to compare the effectiveness of the population, the holdout. So we've really taken this whole A/B testing to a whole new level.

Stephanie:

How do you get your employees to engage in that way and thinking that way of like, everything's going to be tested and measured? How did you get them to put that hat on?

Sree:

No, it's very interesting. It is a little bit of a struggle initially for us because in a marketplace environment, it's like an economy, right? There's so many things that are happening is really hard to measure the impact of one activity. So you bring in a big seller and you say, "Wow, this seller's GTV has grown by X%." Well, that's probably because he has replaced the GTV off another person. Right? So how do we know that this is incremental to the platform?

Sree:

Right. It's a very hard question to ask, and even at eBay, we used to struggle with it. But of course, eBay was at scale. So there are established ways of measuring things. So in our context, to answer your question more specifically in terms of employee engagement, what we showed was we actually did want to experiment with the marketing team, where it was about giving credits to our buyers and seeing how they engage, so lifecycle marketing activity. That was very easy to do. You just have a group that you don't send credits and see how they perform and give another group credits. It was very clear the impact of the team and how they were managing the spends in driving engagement very clear.

Sree:

So we use that as an example of how we could leverage that. But the key is how you set up the measurements, what kind of tactics you're measuring. You can't measure every single thing. You also want to measure things that are important. Also, you want to make sure that you have a business strategy and the measurement follows that versus the other way around that you define a measurement system and then say, "Okay. Now, let's only do things that we can measure."

Sree:

So there is a fine balance there. So just to kind of summarize then how we did this was we said, "Okay, what's the business strategy? What are the things we should do? Now, having said that, which activities are most amenable to A/B testing into measurements? Let's go ahead and play games around that." So on a daily basis, you will have SQL reports that are set up that speaks out based on those games how you've done. That actually really helped the teams understand and refine the tactics and levers. Once you found a tactic that worked or a lever that worked, then the teams could go and scale it into a big process, which is the dashboard and what have you. But if you didn't know what those tactics say, you're not sure, and you want to test it, this was a very good way for even the teams to understand and measure and refine.

Stephanie:

Yeah. That seems like a really fun way to engage employees and get them excited about data. Because I could see a lot of people being like, "Ah, I don't feel like looking at these metrics. I don't really know what they mean, and I don't know how to take an action from it." But putting it into a game format just your platform seems like the perfect culture fit as well.

Sree:

That's right. That's right. You have to understand also that as an organization, who's comfortable with data, and who's not, and find ways to support it. So all of these games are set up by our team in growth, the analytics team who basically worked very closely with all of the other teams, whether they are product and engineers or operations. They understand what the teams are trying to do, and then they suggest the measurement system. So it's a collaborative effort. So that gives the people who are not very comfortable with data to know that they are supported, and it's simple interpretation of the data. They don't have to define a whole lot of other things which could be perceived as pressure driving.

Stephanie:

Yeah. That's so important, having that team mentality, because I think in the past, engineers were kind of left out of coming up with the metrics or KPIs or helping influence product decisions, and I'm seeing this movement now where everyone's starting to work together and develop those KPIs and metrics to think about, and they're not kind of leaving the engineers out and just saying, "Hey, we'll come up with everything, and we'll let you know how to make it for us, or we'll give you all the specs." It seems like there's a unifying process happening right now when it comes to the different teams.

Sree:

Absolutely. I'm a big believer that we should have the collective intelligence of everybody. Just because you're writing code or you're making a sales call doesn't mean that you may not be able to contribute to the bigger picture. In fact, because you're in the trenches, you probably have a different perspective on that problem, and it's important to be able to harness all of that energy and all of that input to then step back and see what it's offering us.

Stephanie:

Yeah. Completely agree. Are there any marketing channels that you all are experimenting with? Because the world's moving so quick, and there's all these new platforms popping up. Is there anything that you're trying out right now or somewhere that you're finding success that maybe others aren't looking?

Sree:

I think it's just the usual TikTok and Instagram and Snapchat, what do you call, other channels besides the big two Facebook and Google. What has been interesting for us, we are largely a site for older people and women, majority. But TikTok is for young people. They're literally Gen Z or so. We're seeing some success there. I don't know how much that can scale to see it. But that's why it's so important to continue to experiment. You'd have some surprises. So TikTok is definitely a surprise for us.

Stephanie:

Yeah. We've actually had quite a few guests on the show mention TikTok. So what kind of ads are you putting on there? If a brand right now is thinking about utilizing TikTok, what are some ways that you're utilizing that platform right now? How are you engaging the younger generation on there, which I heard is actually aging a bit. So how are you using it?

Sree:

It's a short video format with the product and just making... I think we all know that video is very engaging and lot more content on video. It's just our ability to scale, I think, is the key here. We have so many products. We have so many items to be able to continuously find the right level of engagement in terms of... If it's a video, it has to have a product. It has to be able to do all of that messaging because we are not leaving it to the consumer to be able to browse and find that information on their own. So that's the only challenge in terms of the scaling, but yeah, generally, it's just very short. We work with partners who create all those creators for us.

Stephanie:

Got it. I'm wondering if you have to definitely probably have different messaging on that platform, where I wonder if it can't be... You can't have the brand up in front maybe. It has to be more like, "Here's the fun behind it and go find out what's behind this," I'm thinking, to market to that. There's different users maybe on an Instagram or Facebook where it can be more obvious. Is that how you guys have kind of approached that?

Sree:

That's right. That's right. Also, what is it that people are engaging with? So for example, on Facebook, it's value. Those are the things we use a lot because we feel like those are the campaigns that do well for us, right? Where we see deals and fun and value. Whereas I think more from a TikTok kind of a customer, it's more the experience, the gamification element and probably a lot more products that are skewing different to that audience. So that's the kind of experimentation we can doing and testing and coming up with the best optimization for that channel.

Stephanie:

Yeah. That's very cool. We'll definitely have to check that out. I was reading a very pretty funny article about how some of the younger generation is using TikTok, and they're... I don't know if you've heard about this. They're putting faces on different storefronts. So whether it's Nordstrom or Target, they're putting eyeballs and a mouth on it, and then they're creating personas for these brands. So then you're dating each other and having drama. They're like, Target and Home Depot are having a tiff today or whatever. They're breaking up. I was reading this whole article about how TikTok is being used for that, and I'm like, "Oh my gosh, is this really a platform?" Everyone on the show keeps talking about like, "TikTok's the way to go." And I read this silly article about the drama between brands that these kids are making up. I mean, it was pretty funny. I wanted to go check it out, but it made me question it a little bit.

Sree:

It is definitely engaging. Oh my, I have a 12, 13-year-old son. That's all he does all day long. It's so hard. We have to literally snatch his phone and hide it. TikTok is very addictive.

Stephanie:

Oh, man. Yeah, I believe it. But I'm sure there's a lot you could learn from him too of, "Hey, what do you think would be a fun ad? What would you like to see on here?"

Sree:

You're right. I do film them sometimes when he and his friends are bidding on Tophatter. It's interesting to see how they engage, what they do. It's fascinating, kids these days.

Stephanie:

Yeah. Hey, that seems like a good way to kind of learn and test product and test marketing if you have a 12-year-old. Now you know, everyone. That's what you can use for your product testing. So you've been in the e-commerce industry for a while. What's one thing that you wish online sellers would start or stop doing?

Sree:

Would start or stop doing. It's fairly mature now. So let me think about that.

Stephanie:

It could be D2C sellers, who they're all starting up on their own, where you're like, "You probably should do this, or shouldn't do that. Or I've seen success around this, or this is really annoying when people do this."

Sree:

No. I mean, as a consumer, I think the more connection that I have to the seller and being able to... So I'll give you my first experience to explain. When I was a consumer at eBay long before I joined eBay, I had a situation where I hadn't got the item that I wanted. So the seller simply just shipped me another item as a replacement, asked me to refund, send everything back and just kind of begged that I don't give him a bad review. So I mean, keeping that aside, but the whole idea of the way that seller actually engaged with me and took care of me made me feel very trusted as a consumer. So I think that is the big challenge for e-commerce, as all players, whether they are a retailer e-commerce arm of a retailer or you are a pure marketplace like us.

Sree:

I think the challenge is the element of trust. Because the end of it, I can't touch the item. I don't know who you are. I haven't seen you. I haven't gone in your store. That's I think the critical aspect. I don't know, Stephanie, if you realize this, that even though we think e-commerce is a very mature market from an online perspective, the penetration rate for certain categories is still fairly small. Books and CDs are probably 55% of online sales, penetration. But apparel and beauty, for instance, apparel is less than 30%. I don't know what happens after COVID-19. So I don't know the numbers, but the expectation for 2020 or apparel was 29% and beauty 11.

Sree:

So I mean, this is another angle to what I said. But it's also the emotional element of when I'm wearing this outfit, how do I look? Does it fit me? Am I getting the community feedback off? Yeah. It's great if I go shopping with my friends. They'll be, "Yeah. That looks very cute." How do they replicate that part? Or if it's beauty, how does it look it with my skin color. Those are some challenges that I think we still need to address.

Stephanie:

Yeah. I completely agree, especially the trust piece. I mean, on Instagram, every single day, there's probably five new apparel companies advertising to me. You go to their website, and you're like, "Did you just start yesterday?" It seems like there needs to be some kind of mechanism to show.

Sree:

That's right.

Stephanie:

I know there are people that are trying to show this is a trustworthy website, and they've been around for five years. But it definitely seems hard from a consumer perspective if things are moving more online and people do start getting more comfortable shopping online, if you get burned once, it's going to be pretty hard to want to try out a new company. I think that'd be something that'd be difficult but necessary to figure out.

Sree:

Yeah. To add to that, Stephanie, is also like... I don't know. What is the agency? If you're buying something, like you said, I click a lot of the ads on Facebook, and I have a similar reaction, and being also on the other side of a partner of Facebook, it's very interesting to me to see both sides of the aisle is, how does Facebook become an arbitrator here, right? How do they make sure that the buyer is taken care of and folks like us, Tophatter as a company who are sellers or advertising in the platform how to hold us accountable and managing our internal metrics of how we considered customer satisfaction and marrying that with Facebook's definition?

Sree:

So it's a very interesting challenge because you're talking about distribution across so many... There was a time when you knew eBay, right? It's organic search. So you didn't have to go through an intermediary like Facebook. Now we've added that on. Facebook has become one of the biggest ad pair. So when you add that on, what is their responsibility in all of this?

Stephanie:

Have you seen these platforms-

Sree:

I don't have the answers.

Stephanie:

... shifting? Have you see these platforms since you've been on them kind of shifting their viewpoint on responsibility and of upping their standards when it comes to new brands joining? It seems like it's starting to get better when it comes to that.

Sree:

No. It's a very good question. Actually, they have. But I don't think that they are very mature in terms of how to think about it. So let me explain this a little bit. So let me use eBay as examples. So when eBay went through that question of how responsible are we, how can we make sure that the seller's performance matched that customer's expectation? I think if you had like 25 years of experience building that out, seller performance management system. Facebook is fairly immature there, right? I think they're still very early in the process. They've just figured that out. People are asking them questions, not only on the news content. They're being held accountable, but they're also being held accountable for the advertisers on the platform from a commerce perspective.

Sree:

So they're not mature. They're figuring it out. They have some rudimentary measures. But I think the gap for me as a consumer of Facebook's advertising... not consumer, sorry, as somebody who advertises on Facebook, for me, the biggest challenge is that I cannot connect the dots as to what I think my customers need and how Facebook thinks my customers need. I may have great customer satisfaction on my platform, but Facebook may not think that I do and vice versa. So I think they have some maturity maturing to do.

Stephanie:

Yeah. It definitely seems like it's a tough pole between these platforms. Do you want more revenue, or do you want to cut down on your revenue to also have better brands come on and not let just anyone come on the platform and potentially hurt the end user?

Sree:

Exactly. That's the kind of challenge we have at eBay too, right, and we have [inaudible] right? All marketplaces have the exact same thing. Because anybody who has, generally speaking, sensationalism, whether it is news content or products, also, the bad sellers do things in such a way that they might get more volume, and they may be even willing to pay for it because they don't have the overhead costs. So that is the same challenge that we have as marketplaces. But then what you do is you create a performance management system where you reward good behaviors, and you improve the baseline for the entire platform. You move the goalpost for the entire platform consistently, continuously. That of course took 25 years for eBay to get there, and still, I think you need to continue to refine it. So I think it's a question of time before Facebook figures it out.

Stephanie:

Yeah. Well, hopefully, with everything going on with COVID, it's been speeding everything else up. So hopefully it'll kind encourage speed around that area and it doesn't take 25 years to develop, hopefully.

Sree:

I agree.

Stephanie:

So we mentioned COVID. That brings me to the question of, what do you think the future of online commerce looks like, especially after the pandemic's over?

Sree:

Great, great question. I think that the last I saw, there was like 120% increase in online shopping in Q1, I think. You're in the US, something crazy like that. That of course won't be as crazy. The growth rate will probably come down. But then some of the shift is significant, and they'll stay there. So we all know that grocery shopping penetration went up. It's probably going to not be as high. But people who have never done grocery shopping online will be like, "This is kind of cool. I need to stick with it." So there will be some shift that stays permanent.

Sree:

I think the more interesting thing for me is what I'm seeing with retailers. The retailers who do not have an online presence at all are kind of coming to terms with the fact that they can't ignore it. All of the industry is designed around physical location. The processes are designed around physical location. Their marketing is designed around that. Pricing strategy, procurement strategy, returns, everything. So that's why they have been very resistant in terms of... Generally speaking, there are some who do better than the others. Generally speaking, they're a little more old school when it comes to e-commerce. Can you believe that Ross does not have an online-

Stephanie:

Oh, yeah. I know. [crosstalk 00:45:37]-

Sree:

Or Marshalls. I love Marshalls. I'm like, it's too hard. I want to shop, and I can't shop because they don't have a website.

Stephanie:

I actually just brought this up in another interview about TJ Maxx. There was a whole article that they will not be going online. I mean, they have a very minimal e-commerce experience right now. But I think they put their foot in the sand, and they were like, "No. We're not doing it." Right.

Sree:

We won't do. That's fascinating. That's fascinating. So maybe they can get away with it because they are only a discount retailer, right? They have major investments, and maybe they've realized that this is the niche, and they don't want to divert the resources somewhere else. That's okay. But now, the other retailers that were on the brink of bankruptcy have been kind of pushed to facing it at the moment. I think, what, 25 retailers probably have already filed for bankruptcy thus far. I hear that in the next five years, there'd be a hundred thousand stores that may be closing now. Well, what that means is there will be a tremendous amount of retail consolidation, and we'll have to take it seriously. People will have to redo the processes.

Sree:

Some good example I think I've heard is Zara. Zara is very serious about this, and they're like, "We will close art stores, and we will have a few channel strategy. We are going to use COVID-19 as a way to accelerate that, that we were going there anyway. Let's do that." I think that's the right way to go.

Stephanie:

Yeah, that's great. I wonder what will happen with all the stores. It seems like there could also be an opportunity for different retail models to pop up, like pop-up stores and [crosstalk] shops.

Sree:

[crosstalk 00:47:13].

Sree:

It seems like that-

Stephanie:

Absolutely. I think that stores will never go out of fashion. But how you use stores, initially it was stores as a central point of a strategy. Instead, it will be a strategic lever. I mean, there's a reason why Amazon bought Whole Foods. The fact that there are retail locations is a strategic lever for Amazon. Best Buy turned around. They used the stores as a very strategic lever, same thing with Walmart. So people will always want to socialize. People will want to hang out. So the stores could be an experience. It could be a place where you pick up things quickly. It could be a place where actually, there are things that you don't want to try on. You can't figure it out. You go there. Maybe it's a place where you drink wine and hang out and-

Sree:

Cool.

Stephanie:

... do other things.

Sree:

That kind of store.

Stephanie:

That kind of [inaudible 00:48:11]. Stores could be an experience. It doesn't have to be a transactional place where you just buy and sell things.

Sree:

Yeah. I completely agree. Or even the stores are known for having the newest items, where some people who care about that, they can go into the store then-

Stephanie:

To the store.

Sree:

... for the people like me who maybe are like, "Yeah. It's been out a few months, I don't mind. I can just shop online." So yeah. I completely agree about the experiential aspect of it. So before we move into the lightning round, is there anything around the e-commerce industry that you wanted to highlight or talk about that I just missed?

Stephanie:

No. I think I didn't want to talk about the retail, which we covered. So thank you for asking me that question.

Sree:

Oh, yeah. Yeah, that was great. All right. Cool. We can move on to the lightning round, brought to you by our friends at Salesforce Commerce Cloud. This is where I'm going to ask you a question tree, and in a minute or less, you can give me a wonderful answer. Are you ready?

Stephanie:

No pressure. No, I'm not ready. Let's go for it.

Sree:

No pressure. Just take a deep breath. It'll be fun. All right. So what app are you enjoying most on your phone?

Stephanie:

Should I admit it is TikTok.

Sree:

Yes, you can admit that. I actually have just started getting into TikTok. So there's no judgment coming from my end. Are you doing dancing videos or what are you doing?

Stephanie:

No. I don't know. I just watch. It's hilarious.

Sree:

You're slashing from the sidelines. Yeah, that's me too. I'm like, "I'm not creative enough to make something per se, but I'll watch everyone else." What is the newest e-commerce tool that you're trying out right now?

Stephanie:

Newest e-commerce tool. [inaudible 00:49:45].

Sree:

So any kind of tool that you're working on for the platform right now at Tophatter?

Stephanie:

Yeah. So Got it. So React Native. I'll pick that.

Sree:

Okay. If you were to have a podcast, what would it be about, and who would your first guest be?

Stephanie:

I think it would be about managing stress and how to live a balanced life, a happy life. I would love to get Dalai Lama.

Sree:

Ooh, that's a good one. We'll have to email him. I'm sure he'll say yes.

Stephanie:

All right. What's up next on your reading list.

Sree:

On my reading list. I have a history book that I just ordered, and I have Ben Franklin's biography that somebody had written that is on my reading list now. I've done a lot of business readings, so I need a break now.

Stephanie:

Yeah. Cool. Yeah, it's always good to get a break and read something fun. All right. The last one, what one thing will have the biggest impact on e-commerce in the next year?

Sree:

I think the retail consolidation to me is the most interesting phenomenon that I'm seeing. So that forces a lot more innovation in the industry. I really think that the omnichannel strategies are going to be the new thing, taken at a different level. It already is a thing. But then taking it to a different level, that's what I foresee, and I'm very excited to see in the next few years.

Stephanie:

Yeah. Completely agree. Well, Sree, it's been such a blast having you on the show. Where can people find out more about Tophatter and yourself?

Sree:

Well, you can find out about me going to LinkedIn. Go ahead and download Tophatter on your app. Or if you are more comfortable in desktop, go to tophatter.com. You'll find us all there.

Stephanie:

Awesome. Well, thanks so much for coming on Up Next in Commerce. We'll have to have you back. This was a blast.

Sree:

Awesome. Thank you, Stephanie. Had a great time myself. Have a great day. Stay safe out there.