At Permira the primary driver of our investment strategy has always been to back growth. When we think about investments, we instinctively ask ourselves what the world might look like in three to five years’ time, particularly when it comes to innovation and technology. And as private equity investors we invest behind specific long-term trends, allowing us to form a considered view of what makes a good investment.
Covid-19 has fundamentally changed the way people shop and we strongly believe that e-commerce will continue to accelerate its growing position within the total retail market over the next five years, driven largely by new and exciting innovations in social shopping. In fact, online retail sales’ share of total retail sales jumped from 17.9% in 2019 to 24.1% in 2020 as the adoption of disruptive technologies accelerated at an unrelenting pace1.
We have been watching the space closely for possible investment opportunities and, with our deep industry knowledge gained through investments such as Allegro, Klarna, Golden Goose and Reformation in recent years, had real insight into the social shopping revolution unfolding in China, and also being pushed in the US by the major social media channels.
The Evolution of Live Selling
The concept of live selling, whereby consumers purchase goods being displayed via a streaming video platform, is not a new one. Think of QVC, for example, which was founded more than three decades ago in 1986 and still generated $11 billion of revenue in 2020.
Livestream e-commerce is a digital version of a similar experience, which democratizes live selling as a channel that can now be used by anyone with a significant social media following. It’s gathering momentum quickly thanks to being sat at the intersection of a number of fundamental structural trends such as the increased adoption of mobile devices and mobile commerce, as well the rise of social ‘fame’ and the monetization of live content. After all, these days, for millennial and Gen Z audiences, mobile devices are more or less an extension of their existence.
Digital live selling began in China about five years ago and it has taken off rapidly. To give you an idea of how rapidly, livestream e-commerce sales in China growing by more than 120 percent last year alone to $148 billion2 (or about 10% of total e-commerce sales) and are estimated to hit $300 billion by the end of this year3.
The US livestream e-commerce market, on the other hand, is in its infancy, with 2020 generating a mere estimated $6 billion in sales, or around 1% of total online retail sales of $650 billion. The market is ripe for disruption and opportunity.
This is just one of the reasons why we are so excited about the investment in Alabama-based CommentSold, the turnkey, multi-channel live selling platform that enables livestream and social selling for small businesses across America. Key to its model is enabling merchants to build their own brand and relationship with their customers via an integrated website, e-commerce storefront and livestream selling app, as well as major social channels like Facebook, Instagram and TikTok, all within the CommentSold platform.
Once we discovered CommentSold and had had our first conversation with its young founder, we knew that he had created a fit-for-purpose solution that had serious potential. His company had single-handedly cornered more than 17% of the US live selling gross merchandise value (GMV), equivalent to over $1 billion, enabling thousands of small businesses grow and thrive, even throughout the pandemic.
The CommentSold Entrepreneurial Journey
CommentSold was founded in 2017 by CEO Brandon Kruse, a software serial-entrepreneur who was running his startup incubator in Huntsville, Alabama. It all started with Brandon trying to help his then girlfriend, now wife, Amanda, with her women’s fashion business which was primarily selling clothes on Facebook using comments as an order taking process. He started by helping her build an integrated e-commerce backend and then went on to develop live selling and comment selling features to make selling on Facebook easier and more streamlined.
It worked really well. In fact, it worked so well that it eventually allowed Amanda to automate almost every process involved in running her online shop, including shipping, inventory management, stream scheduling and payment processing. As a result, her monthly sales soared to $1 million.
As is often the case with products that address a clear and specific need, and do so seamlessly with speed and efficiency, other smaller scale online retailers quickly took notice and wanted to adopt the platform.
Brandon continued building and expanding CommentSold and created a custom mobile app which optimized and gamified the live selling process. The company enabled and white-gloved its clients to deploy white-labelled versions of this app on the iOS and Android platforms – multiplying the sales of most top retailers in its client base by up to eight times, in an average period of just three years.
The mobile app is a lot more than a simple livestreaming solution. It delivers a gamified experience that spurs engagement, conversation and purchase optimization that generates conversion levels unheard of in traditional e-commerce. More than 80% of CommentSold’s GMV is generated through these native mobile apps.
Growth at Scale
The growth that CommentSold has achieved in just four years is nothing short of astonishing. Today, the company has over 12 million registered users and is helping about 6,000 online retailers, whose needs range from selling a handful of items to taking thousands of orders a day. In the 12 months to June 2021, CommentSold generated over $1 billion in GMV and shoppers viewed more than 1 billion minutes of content on the platform.
Perhaps most impressively, the team was able to achieve this growth incredibly efficiently - today boasting 30% EBITDA margins and a 50% contribution profit margin. This level of scalable growth, coupled with a sizeable market opportunity in its infancy, is what led us to enter the sector and invest in CommentSold. It’s testament to Brandon and his team that we were given the opportunity, and we are grateful to have found a company the aligns with Permira’s culture of empowering SMBs and democratizing technology.
CommentSold is democratizing live selling. It is enabling a new economy. It is a potential multiplier, empowering and providing opportunities to SMBs, entrepreneurs and individual sellers to take their businesses to new heights. The socioeconomic potential of the company is huge!
We are extremely proud to back a founder and management team that are truly at the cutting edge of the US live selling market. The company has a long runway for future growth, and we can’t wait to partner with them to optimize and accelerate this journey and take their rightful place in the global live selling market.
- Global online sales reach nearly $4.29 trillion in 2020
- How China’s influencer factories mint live streamers to feed China’s billion dollar e-commerce industry, selling everything from lipstick to rocket launches | South China Morning Post (scmp.com)
- Livestream Selling Is 'QVC on Steroids,' and It Turned This Alabama Startup Into a Billion Dollar Business (entrepreneur.com)