Zainab Hussain is an e-commerce strategist with a wealth of experience in customer engagement and operations management. In this interview, she shares her insights on eCommerce strategies, profitability, and the future of online retail.
Can you briefly describe StoreHero’s value proposition?StoreHero is the AI Profit and Forecasting platform for eCommerce brands. We centralize eCommerce, marketing, and finance operations to help brands focus on their profitability.
How did your experience at Shopify influence your journey into the eCommerce world?At Shopify, I worked closely with brands generating between $5 million and $150 million in annual revenue. This was an incredible opportunity because it highlighted how much of the picture was missing without an integrated view of costs, profits, and other critical metrics. This experience revealed the blind spot of not having a combined system to holistically view data, which is what we’ve created with StoreHero.
What lessons from your role at Shopify have been most impactful to you?The most impactful lesson was understanding how crucial it is to have a holistic view of a business’s data. At Shopify, dealing with various brands, I realized that without integrating costs and profits, it’s impossible to gain a comprehensive understanding of the business. This insight was foundational in creating StoreHero.
When and how did the idea of StoreHero originate?The StoreHero journey spans almost 20 years. I grew up in Ireland with a family DTC business, learning about the challenges of eCommerce from a young age. After running paid advertising for my parents’ business in 2014, I created spreadsheets to combine eCommerce, marketing, and financial data to demonstrate increased profitability, not just sales. This realization that ROAS wasn’t the full picture, along with my experience at Shopify, motivated me to co-found StoreHero with Karl O’Brien in December 2022.
What were the challenges you faced combining eCommerce, marketing, and finance data before StoreHero?The primary challenge was the disconnect between marketing data and financial reality. I had to manually compile spreadsheets to integrate various data sources, which was time-consuming and prone to errors. There was also a persistent issue of misaligned priorities between profitability and revenue, making it difficult to convince stakeholders of true business performance.
How would you describe your transition from Shopify to co-founding StoreHero with Karl O’Brien?The transition was driven by a vision to solve a problem I had long identified. Leaving Shopify, where I learned tremendously from working with numerous brands, I was motivated to build a platform that integrates eCommerce, marketing, and finance operations. Co-founding StoreHero with Karl, we aimed to bridge the gap between marketing metrics and financial health.
In today’s eCommerce landscape, what factors do you believe define a truly profitable business?The defining factor is whether your unit economics support the business you’re running. While eCommerce was once primarily driven by marketing tactics, it’s now a numbers game heavily influenced by financial considerations. Understanding and optimizing unit economics, where each sale supports long-term sustainability, is key.
How has the industry’s focus on Return on Ad Spend (ROAS) influenced eCommerce profitability strategies?The fixation on ROAS has led to some poor habits in the industry. Many businesses prioritize marketing metrics over financial health, leading to disproportionate marketing spend. This misalignment results in a lack of understanding of the broader financial implications and hinders true profitability. The industry must shift toward more comprehensive financial metrics.
Where do you believe the balance lies between growth and profitability for eCommerce brands?The balance hinges on cash flow. For businesses with substantial funding, prioritizing market share over immediate profitability can be viable. However, for most DTC brands that don’t have deep pockets, focusing on sustainable profitability is crucial. Emulating high-growth strategies without the necessary financial backing can be detrimental.
What role does cash flow play in determining the balance between growth and profitability?Cash flow is vital. It dictates your ability to invest in growth strategies, manage operational expenses, and sustain business activities. Proper cash flow management ensures that you don’t overextend into growth at the expense of financial health. It’s about maintaining a healthy balance that supports both immediate needs and long-term goals.
What are some of the most common mistakes eCommerce brands make when trying to improve profitability?A significant mistake is focusing solely on revenue and ROAS without considering the cost of doing business. This often leads to aggressive discounting and increased ad spend to hit revenue targets, which erodes margins. Brands also frequently overlook essential metrics like Contribution Margin, which offers a clearer picture of true profitability.
Why do you think there is an overemphasis on revenue and ROAS in the industry?The overemphasis stems from a lack of integrated financial understanding within marketing and sales teams. ROAS and revenue are easily accessible and manipulatable metrics that can show immediate positive effects, whereas comprehensive financial metrics require deeper analysis and understanding. This surface-level focus can be misleading and harmful in the long run.
Besides revenue and ROAS, what key metrics or KPIs should eCommerce brands focus on?Brands should focus on Contribution Margin, which represents the remaining profit after marketing expenses. This metric provides a true view of profitability by accounting for the actual costs of gaining revenue. Other important KPIs include customer lifetime value (CLTV), gross margin, and the costs associated with customer acquisition and retention.
Can you explain the significance of the Contribution Margin and how it impacts profitability?The Contribution Margin is significant because it reflects the remaining profit after deducting marketing expenses. It helps cover operational costs and contributes to overall profitability. Unlike ROAS or revenue, which can be influenced by attribution models, the Contribution Margin provides an accurate view of how marketing spending impacts real profitability.
What are the main advantages and challenges of the Direct-to-Consumer (DTC) model from a financial perspective?The main advantage of the DTC model is the ability to bypass traditional retail middlemen, leading to potentially higher margins and direct customer relationships. However, the challenge lies in the high marketing costs. Platforms like Meta and Google, which drive customer acquisition, act as the new middlemen, taking significant portions of revenue as brands pay to reach their audiences.
With rising customer acquisition costs, what strategies can eCommerce businesses implement to improve their margins?Businesses need to focus on customer retention and repeatability in product offerings. Ensuring that customers return for repeat purchases can offset high acquisition costs. Additionally, businesses should scrutinize their gross margins, limit excessive discounting, charge for shipping when necessary, and evaluate their return policies to minimize unnecessary expenses.
How important is customer retention to the profitability of an eCommerce business?Customer retention is critical, especially with rising acquisition costs. Retained customers drive recurring revenue, reduce overall marketing expenses, and often have higher lifetime value. A brilliant product, coupled with efficient retention strategies like email marketing and customer feedback loops, can significantly boost profitability.
What recommendations would you give eCommerce brands to enhance customer recurrence?Develop high-quality, repeatable products that keep customers coming back. Invest in thorough customer feedback to improve products continually. Ensure your retention strategies, like email marketing, are well executed and personalized. This attention to detail helps build stronger customer relationships and improves recurrence rates.
Are there any emerging trends in eCommerce that brands should pay close attention to in the coming years?Brands should watch the increasing concerns around advertising spend and data transparency. With skepticism about ad platform data, fixing tracking issues and enhancing decision-making confidence is crucial. Leveraging AI to optimize operations and understand customer behavior more accurately will also be increasingly important.
How will AI tools impact the optimization of profitability in eCommerce in the future?AI will reduce operational expenses as a percentage of revenue and provide insights to enhance efficiency. As customer acquisition costs rise, AI offers opportunities to improve margins by automating tasks, optimizing logistics, and providing recommendations based on advanced data analysis. The potential for AI to influence profitability positively is immense.
What practical ways can brands use AI to reduce operational expenses and expand margins?Brands can use AI for inventory management, personalized marketing, customer service automation, and financial forecasting. These applications streamline operations, reduce waste, and improve customer experiences, ultimately leading to expanded margins and better profitability.
What advice would you give to a new eCommerce brand looking to improve its profitability?Track and measure everything. Use a comprehensive dashboard like StoreHero to understand your profitability. Ensure your finance team or accountant is well-versed in marketing concepts or hire a fractional CFO. Align your marketing strategies with deeper financial metrics like profitability and Contribution Margin, not just ROAS.
How do you see StoreHero evolving in the next five years to support DTC brands?StoreHero aims to become the leading tool for DTC brands to grow profitably. We will provide cutting-edge insights and recommendations tailored to each business’s unique goals and profit objectives. Big initiatives are coming, and we plan on being at the forefront of this transformation in online retail.
