Swedish Startup Space

Here’s Tictail’s new plan to boost sales

Written by on August 12, 2016
Editors Note: This post is part of a series called Featured posts, presented by .

The much hyped e-commerce platform Tictail have decided to start making money – here’s how they plan to do it.

Tictail began in 2011 as a service for small business owners to launch an online store with a just a few clicks. Over time, the company has evolved into a broader marketplace, full of products for sale from small business owners.

Today, the company has over 125,000 online stores in its network, which together, form an Amazon-like platform selling all types of products, from electronic gadgets to independent clothing lines.

Customers can search products via the marketplace on Tictail.com  – or go into each small business owners’ unique e-shop.

Economically, Tictail has have been at a standstill for some time. According to the 2015 accounting report submitted to the Swedish tax authority, the Swedish subsidiary of the US parent Tictail Inc. had a turnover of $118,000 with a loss of $2.8 million.

So far, Tictail has chosen not to commented on their plans to go global, though the Swedish company’s turnover provides some clues.

Now, they are making their plans public. Over the past month, Tictail has quietly begun to capitalize on the hundreds of thousands of entrepreneurs who have opened a shop via the platform.

Starting an e-shop remains free, but now Tictail will take a commission on any sales made ​​through the Tictail Marketplace, which is the platform the consumer lands on when entering Tictail.com.

Tictail now takes 10 per cent on every purchase carried out on their marketplace.

In practice, the change means Tictail shop owners will lose 10 per cent of their income when a customer buys a something via Tictail Marketplace. But, if that same customer goes directly to the shop’s own page, or finds the page via Google, Tictail earns nothing.

“This is not something we decided on suddenly, or because we are in urgent need of capital,” Tictail co-founder Birk Nilsson wrote Breakit via email. “This is an initiative we have worked on for almost a year. While preparing to invest in marketing for our community, we engaged in thousands of dialogues with shop owners who want to continually reach more customers, and want our help in doing so. The commission supports our active investment in driving sales to those brands.”

Joining Tictail Marketplace is currently voluntary for shop owners. All products are initially available on the site, and the first sale carried out with the help of the marketplace is commission-free. If shop owners choose to stay with the marketplace, then the commission will be charged.

“We invest millions in driving traffic and sales to the businesses in our marketplace, without any fixed costs,” continued Mr. Nilsson. “Individual shops work just as before, and continue to be free of charge. We have always believed that we should not make money if the shop owner doesn’t.”

Is a 10 per cent commission reasonable?

“Absolutely,” answered Nilsson. “We based the figure on conversations with thousands of shop owners, the majority of whom were extremely positive about retaining 90 per cent. Afterall, they still benefit from our marketing, which is what drives the marketplace.”

Tictail has soft-launched the initiative in recent months. According to Birk Nilsson, the reception has been “absolutely fantastic”.

Whether this is true is difficult to confirm, but it seems reasonable that there may be some controversy over the new model.

The entrepreneurs who run Tictail shops now have a 10 per cent incentive to steer customers directly to their own sites, rather than to shop via Tictail.com . Also, if they wish, the shop owners still have the option not to participate the marketplace.

There is also the question of how the marketplace affects the Google ranking for individual websites. In regard to SEO, if the same product and text is on two different sites, it would potentially influence the individual Tictail stores on Google’s search ranking.

Last year, Tictail raised $22.4 in venture capital from a number of renowned investors including Creandum, Thrive Capital, Balderton, and Acton Capital.

Earlier this year, Tictail was forced to lay off ten employees because the company needed capital to increase their “focus on consumer offerings”.

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