Rough Times for Angels: Q&A With MarketStar Chairman Alan E. Hall

You might say that entrepreneur Alan E. Hall lives in two businessworlds. Don’t complain to him how challenging it is to grow a businessin today’s fragile economy. He knows those struggles firsthand as abusiness owner. He also knows how next-to-impossible it is forstartup business owners to find financial backers.

He is the founder and chairman of MarketStar, a US$4 billionsales outsourcing company that is part of Omnicom. In thisrole he is responsible for determining the company’s vision, strategyand culture, as well as client and employee advocacy.

Hall is a player in the venture capital sector as well. He is an angel investor, and he runs several private equity funds.

His exposure to the many sides of business and finance give him aunique perspective on how startups can secure funding in thisturbulent economy and what are investors want in potential investees.

“This is the most difficult financial environment I’ve even seen,”Hall told the E-commerce Times.

Business Menu Full

To say that Hall has a lot on his plate is putting it mildly.Everywhere he turns, he tastes morsels of economic ingredients.

For instance, he is a member of the Board ofTrustees for Weber State University, chairman of the Utah TechnologyCouncil, a trustee of the Intermountain Healthcare Foundation, amember of Wells Fargo Bank’s Northern Utah advisory board of directorsand a trustee of World Trade Center Utah.

Hall, along with his wife Jeanne, is the founder of the Hall Foundation, a private charitable organization. He is also founder ofseveral investment funds, including Mercato Partners and Island ParkInvestments. Additionally, Hall is the founder of severalentrepreneurial organizations, including Grow Utah Ventures and GrowAmerica.

Honored by multiple organizations for his business endeavors, he mostrecently was named the Mountain West Capital Network’s (MWCN)Entrepreneur of the Year for 2009.

The E-Commerce Times spoke with Hall about his panoramicview of the world of funding business finances. His funding forecastleaves young startups with a sense of guarded hope. It gives moreestablished entrepreneurs a bit more to hope for when looking for afunding source.

E-Commerce Times: How different is the role of providing fundingin today’s market?

Alan E. Hall:

As an angel investor, most of us tried to learn thestock market. We lost a lot of our liquidity and are holding firm withwhat we have left. Most angels have left the game to the sidelines.The money just dried up.

ECT: Is it more a situation where angel investors are sitting ontheir money until better times arrive?


Angel investors are hurting just as much as the startups lookingfor money. These are very challenging times. None of the federaleconomic stimulus money comes our way to help struggling newbusinesses.

ECT: When might startups expect to see money flowing their way again?


We don’t know when this money crunch will end. It will take acrystal ball. Venturing a guess, I’d say maybe a year or more. Thenwe’ll see a slow improvement in the money flow.

ECT: What do startups have to do to attract funding today?


I have 60 angel investments. I go to all of them and tell them tosurvive. I urge them not to go out of business. Instead, they need tokeep their concept going. They have to cut spending where they can.

ECT: What is the best advice you can offer to young startup owners?


These are really terrible financial conditions. Some companieswill come out of this intact. But those with a lot of payroll willfind it very hard to survive.

ECT: What do you see around the financial corner as far as theatmosphere for startups seeking investors?


Even though money is scarce for startups, I tell people to tryfinding investors. I also warn them to expect the worst-case scenario.

ECT: How are young companies faring with more traditional sources of funding?


Another bad side of this picture is that bank capital is alsoupside down. Banks want collateral for business loans. Most startupand many surviving entrepreneurs have nothing to put up.

ECT: What is the relationship between your private equity fund(Mercato Partners) and your angel investments?


I don’t see my activities as a conflict. Rather, I try tocoalesce and combine them to be mutually beneficial.

ECT: What are investors looking for in qualified startups?


On the venture capital side of things, we have money. To get it, acompany needs at least $5 million. We’ll give such qualifiedestablished entrepreneurs $5 to $10 million to help them grow theirbusiness.

ECT: So you’re not saying that the economy is totally againststruggling new businesses?


It all depends on where they are situated in the market. There ismoney out there for established companies trying to grow theircompanies.

ECT: What worries you most about the economic recovery cycle?


Because we (angel financiers) are on the sidelines, two or threeyears later, those startups still in business will be behind the curveregarding hirings and other business factors. That will have a rippleeffect for 10 years or so.

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Supply Chain Fears, Inflation, Robust Online Sales Drove Jump in Holiday Returns

During the holiday season, an estimated US$120 billion in merchandise is expected to be returned to retailers, a jump of seven percent over 2020, driven by supply chain concerns, inflation and robust online sales.

Returns during a typical holiday season are around 13.3 percent of total sales, with returns from online sales some three to five times higher than returns for in-store sales, according to information provided the E-Commerce Times by Optoro, a technology company with a focus on liquidating returned, overstock and damaged-box goods.

According to the National Retail Federation, online sales exceeded more than $222 billion during the holidays. Optoro and real estate firm CBRE estimated in their annual report on the subject that $66.7 billion of that is expected result in returns.

Online goods have a higher rate of return than those purchased in brick-and-mortar stores because consumers can’t touch and feel the merchandise before they buy it, explained Sucharita Kodali, an analyst with Forrester Research.

“They don’t know what they’re getting,” she told the E-Commerce Times.

While retailers aren’t happy with rising return rates, in the current environment, they are a reflection of success. “When you have the kind of growth we’ve seen in the online channel, that’s how you get an overall high return rate,” Peter Madden, a director in the retail practice of AlixPartners, a global, multi-industry consulting firm, told the E-Commerce Times.

“If sales are higher, then returns are going to be higher,” added David Swartz, an equity analyst with Morningstar, an investment research company in Chicago.

Frictionless Returns

Swartz told the E-Commerce Times that since the pandemic hit, there’s been a big jump in online sales.

“They’ve been increasing year after year, anyway, but they jumped even faster over the last couple of years,” he said. “Stores have been closed or they have shorter hours or people just didn’t want to go out to stores.”

While returns of online sales have always been higher than in-store sales, they’re getting even higher because online sellers are removing the friction in the process. “So many online companies — everyone from Amazon on down — has made returns cheaper and easier than they used to be,” Swartz explained.

“For example,” he continued, “you can return any Amazon product at a Kohl’s store. Nordstrom has a process where you can return anything you bought at Nordstrom.com to a Nordstrom Rack store.”

“There have been times in the past when online companies would make returns difficult,” he added. “That’s not competitive anymore because they have to deal with Amazon. If Amazon is making returns really easy and you’re not, you’re going to lose customers.”

Suboptimal Purchases

Streamlining returns can be particularly beneficial to online apparel shoppers. “In clothing, an online buyer can’t try on the clothes or see them before buying,” Swartz explained. “Sometimes, when they get the clothes home, they find out they don’t fit, or the color is wrong or the style is wrong. In a store, they would have known that already.”

With easy returns, a shopper doesn’t have to be reluctant about ordering multiple copies of the same item. “A woman might buy two dresses that are exactly the same but different sizes. She’ll try both on when she gets them, and then she sends to the one that doesn’t fit back,” Swartz noted.

He added that supply chain worries have also influenced returns. “There’s been concern about products being sold out,” he explained.

“People may have bought products earlier because they were afraid that they couldn’t get something later,” he continued. “Then they found out they could get it later and returned the earlier product.”

Supply chain fears can also lead to unwanted gifts. “Because there isn’t as much product, you may be making a suboptimal purchase — you’re buying something because it’s the only product there rather than an ideal purchase,” Madden explained.

“If that’s a gift and it’s not accepted, that will add to the return rate,” he said.

Liberal Return Windows

Inflation has affected returns, too. “The cost of returns has been higher because the cost of shipping has been higher,” Swartz noted.

“There’s been a lot of online sales in the last few months and a lot of online returns so shipping demand has been very high,” he explained.

Pricing can also affect the comparative value of returns. “If you have a product priced five to 10 percent higher than last year, that shows up in a higher return value,” Madden said.

He added that another factor contributing to an increase in returns is a more liberal window for returning items. “A lot of retailers are going beyond the typical 30 days and going to 60, 90 and even 90-plus days,” he explained.

“They did that to address supply chain issues and customers buying holiday gifts earlier,” he continued.

“Because of those extended return periods,” he added, “holiday return figures could be even worse because they might still be appearing in March.”

Ways To Reduce Returns

Retailers can and are doing a number of things to reduce returns.

“Users need to see products not only relevant to their queries, but see all products attractive to them upfront, so they don’t find something later that’s more attractive to them and they return whatever they purchased earlier,” observed Eli Finkelshteyn, CEO and founder of Constructor, an AI search and discovery company in San Francisco.

That can be done by collecting browsing information about a visitor to a retailer’s website. “It’s similar to how Netflix decides which movies are going to be interesting to you or how Spotify decides what songs and radio stations are going to be more appealing to you,” Finkelshteyn told the E-Commerce Times.

“You avoid returns by making sure a user sees everything a site has that could be appealing to them before they make a purchase so they don’t find it afterwards and return an item to make a different purchase,” he explained.

Swartz added that retailers also have 3D tools that allow people to virtually try on clothing and place virtual furniture in a consumer’s home so they know what it will look like there before they buy it.

Solutions to reducing returns, though, need not be complex to be effective. “If a retailer can get the fit-sizing correct on the original transaction, if they can hit the right shipping window when a customer needs it for that special occasion, those are the kinds of things that limit returns and are much easier on operations than trying to optimize on the backend for returns logistics, processing, restocking and repricing returned items,” Madden maintained.

John P. Mello Jr. has been an ECT News Network reporter since 2003. His areas of focus include cybersecurity, IT issues, privacy, e-commerce, social media, artificial intelligence, big data and consumer electronics. He has written and edited for numerous publications, including the Boston Business Journal, the Boston Phoenix, Megapixel.Net and Government Security News. Email John.

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4 Tips To Attract a Younger Customer Base

young adults

The need to allure younger shoppers today is redefining marketing strategies for retailers who know that growing a youthful base of loyal customers is an essential process for long-term success. However, the digital road to converting younger shoppers to adopt a new brand or favorite merchandise depot is often marred with bumps and detours.

Some of the more effective marketing tactics that attract a younger shopping demographic involve mastering the hallways within social media outlets. That process draws on how to put influencers to work in drawing in new brand followers.

Targeting young individuals can create brand affiliation and build brand loyalty. To do this effectively, retailers must think beyond the immediate sale. That means learning how to track social trends as well as using an expanded toolkit of marketing and customer retention strategies. Knowing what works for your competitors cannot hurt, either.

Attracting and engaging with a younger target audience is no longer optional; it is an essential marketing goal. The big question is: how to do it?

Marketers and online retailers who have found useful answers to that question shared their insights with the E-Commerce Times.

Make Convenience Count

That slogan proved to be an effective approach for Ambition Digital, a digital marketing agency in Edinburgh, U.K. One of its clients is an e-commerce company in the clothing niche. The agency built the store’s website with a focus on offering a diverse range of payment options, explained Gatis Viskers, director at Ambition Digital.

“They got started during the lockdown in 2020, and that is when online shopping saw explosive growth. Our research found that above all, younger audiences favor convenience, flexibility, and the smoothness of online shopping over traditional high street-shopping experiences.

“So, one of the easiest and most profitable ways e-commerce retailers can achieve this is by offering a wide range of payment options — particularly buy now, pay later options,” he told the E-Commerce Times.

Ambition Digital connected the website to the Klarna payment solution. The retailer saw a 55 percent increase in sales within two months. Most of the sales using Klarna came from tech-native millennials and Gen Zers — the all-important 18-to-40 age demographic. That approach also resulted in less cart abandonment and higher average order values.

“This is why I see these types of buy now pay later payment solutions as one of the most important trends in e-commerce for 2022 and beyond, especially for online retailers looking to attract a younger audience,” Viskers said.

Part of that convenience factor can help create brand affiliation and build brand loyalty among a younger customer base, added Alex Williams, CFO at FindThisBest. The younger generation is very much focused on cost savings. He believes offering more value for less price is the best way to attract young consumers.

“One of the best ways to get the younger generation of Gen Z and Millennials to focus on retail products is to offer experiences rather than products. The newer generation is very much focused on festival culture, which retailers can take advantage of,” Williams told the E-Commerce Times.

Do this by taking the retail experience out of your brick-and-mortar store and arranging events to showcase your products, he explained. This way, young adults will be more inclined to pay attention to your products.

Focus on Social Media

Retailers who make effective use of social media platforms can effectively reach the young demographic, observed Aviad Faruz, CEO at Faruzo, a jewelry and accessories retailer. But before devising a social media strategy, the product’s intended purpose should be clearly stated. Also, your campaign should be designed around it.

“I would recommend the product packaging to be colorful, as to attract young audiences,” he told the E-Commerce Times.

Everything from news to entertainment is now available on social media devices. Having a presence on social media can completely change the outlook of your brand, Faruz added.

“Social media could also act as a potential marketplace for your brand and engagement on different platforms ensures increased revenue,” he said.

Gen Zers will soon comprise the largest cohort of consumers in the U.S., observed Kayla Marci, market analyst at Edited. Insider Intelligence projects the number of digital buyers in this age range to surpass 41 million by 2025.

“American Gen Zer’s favorite trends are rooted in nostalgia, with Y2K and 70s influences boosting the sell-outs of straight leg jeans, cut-outs, and psychedelic prints,” observed Marci.

“Off the back of the #BamaRush TikTok phenomenon, preppy and collegiate aesthetics resonate with consumers returning to campus. As the season changes, Pinterest searches for seasonal outfits are heating up, indicating demand from this consumer group,” she told the E-Commerce Times.

Tap Into Young Buyers’ Mindsets

To better attract a younger customer base, marketers must optimize their online channels to appeal to a younger audience. Millennial and Generation Z consumers are avid researchers. They spend a significant amount of time studying and evaluating brands before picking from whom to buy, suggested David Bitton, co-founder and CMO of DoorLoop.

“During the exploratory stage of the customer journey, they check the company’s social networks for reviews, recommendations, and comments posted by others who have used the product or service or interacted with the company,” he told the E-Commerce Times.

Maximizing your social channels by showcasing customer reviews and testimonials demonstrates your value to these younger customers. This boosts sales and revenue. Younger customers are also more inclined to post a review if they have a positive experience interacting with your company and using your product, noted Bitton.

“They’re also more likely to share their experiences on their social media profiles, increasing your brand’s share of voice through word-of-mouth,” he added.

Also, retailers should shape marketing efforts to reach these generations and truly construct marketing campaigns that will resonate with them. Do this by learning everything you can about them. Doing so allows you to obtain a deeper grasp of their generation and their various points of view, he explained.

“Millennial and Gen Z consumers lived during economic downturns, a pandemic, and a slew of other calamitous events that shaped their perspectives and the way they value money in comparison to older generations,” observed Bitton.

Having a finger on the pulse of social trends is more important than ever before to attract young consumers. When marketing to younger customers, keep in mind that their attention spans are likely to be relatively short. As a result, you should always be on top of trends and what is currently trending to keep them from becoming bored with you, he recommended.

“If you do not keep your social media material, website, and promotional strategies up to date with relevant content as trends change, your clients will go to your competitors, who constantly provide relevant marketing content,” warned Bitton.

Don’t Discount Influencer’s Role

It is important to keep up with social media trends to attract more young consumers. Younger consumers are way more reliant on social media than they were a few years ago, cautioned FindThisBest’s Williams.

“Social media platforms are not just there for connecting with family and friends but also to stay up to date with the latest happenings in the world. The rise of influencer culture has pushed consumers towards seeking advice and recommendations from social media. In such times, marketers need to be on top of every upcoming trend,” he said.

Influencer marketing is gaining traction in an age when people are tired of sales tactics. More than 40 percent of Millennials use ad blockers. Long before they make a purchase, consumers engage in online interactions with their peers. Brands must be a part of that conversation to be effective, said Williams.

Influencers can reach a specific audience while also creating trust if they are used wisely. This is significant since many consumers distrust advertisements and will not base their purchasing decisions on them.

However, paid influencers face increased pressure to reveal sponsorships. So consumer opinion toward sponsored influencer posts is more akin to advertisements than word-of-mouth validation, noted Williams.

“This shift in mood does not, however, imply that influencer marketing has lost its allure. When it comes to producing influencer activations, brands just need to be more inventive,” he said.

Jack M. Germain has been an ECT News Network reporter since 2003. His main areas of focus are enterprise IT, Linux and open-source technologies. He is an esteemed reviewer of Linux distros and other open-source software. In addition, Jack extensively covers business technology and privacy issues, as well as developments in e-commerce and consumer electronics. Email Jack.

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