Green, Yellow and Red SMBs: Where to Help and How to Do It with Gorgias CEO Romain Lapeyre

recover in the SMB space. And number 2 is, and I think that's one of the purpose we're doing this session, is that we've decided to offer up to 6 months free to our customers. And so I wanted to share a little bit why we did that, what has been the impact on our business. And just as a teaser, here are a couple of KPIs we saw. It cost us 4% of our AR to offer these credits, and the outcome was a jump in 40% in sales. So, and also for context, so for those of you who don't know Gorgias, we are a customer service platform for e-commerce websites. So that's why I'll be talking a lot about the SMB segments in the e-commerce industry. And we also have Q&A on this session, so feel free to answer, sorry, to ask any sort of questions you have. And I'll be happy to stop and answer it. All right, so let's do it. So the first part, yeah, how the crisis is impacting the SMB segment. So basically, I wanted to start by giving you some pointers on how consumers are behaving during this crisis, because I think that's kind of like the core of what's happening, and so all the B2C businesses are impacting based on the consumer behavior. And then as a second step, that impacts B2B businesses as well. So all of the SaaS ecosystem is impacted in a second step. So here is a little bit of data from the food traffic in the US. You can see that the sectors that are impacted the most are airports and everything that's travel related here at the bottom. The ones that are actually not doing so bad are everything that is like general merchandise or supermarkets. But overall, there's been a huge dip in the brick-and-mortar industry, and that has been negatively impacting SMBs. And so what is tough for these SMB businesses is that they are seeing this drop in sales because of the fact that the foot traffic goes down, the brick-and-mortar sales go down. And so it's particularly tough for them because they don't have a whole lot of cash flow. So on the slide, you can see like what is the distribution of cash flow in the SMB industry. Basically, it's about a month. We've seen a lot of our merchants, e-commerce merchants and brick-and-mortar retailers, we've seen a lot of them cut the staff, like some fired the entire executive team to— also on furlough. It has been pretty rough, like all of these retailers have been have been hit hard by the crisis. Something that's really interesting though is that everybody is starting to move online. So all of these brick and mortar stores, what they are trying to do to compensate for the lack of traffic in their stores is that they are going online. And so I think a good indicator of this is what you are seeing on the slide, which is the traffic for Shopify stores worldwide. And so it's actually pretty interesting to see that there is the traditional spike around Black Friday that you see on the left of the slide. And so I think one of the big trends that we've been seeing since the beginning of the pandemic, which happened around March for the US, is that the volume of e-commerce sales has been increasing by about 50%. And so a lot of people are asking like, Is that here to stay or is it just like a temporary bump? And so if you look at the Mario Maker reports every year, they have like a bunch of trends where you see e-commerce progressively going up as a part of retail. And right now e-commerce is about 16% of the entire retail. And so I think what we are seeing here is that basically we just skipped like a couple of years and we're gonna see e-commerce like go from 16% to maybe 18, 20%. And then stay there afterwards, which is an opportunity for SMBs that are suffering from the lack of foot traffic to actually recover or increase sales. So yeah, if you have any questions on that, don't hesitate to ask anything on the Q&A. But besides that, so I wanted to share a bunch of things also about what industries are being impacted. So on the slide, you see a breakdown by industry. So fashion and luxury are being negatively impacted. And it was specifically the case at the beginning of the crisis because obviously you don't want to buy a $500 fashion luxury bag when there is a global pandemic out there. But the thing that we've seen that has been interesting is that a lot of these SMBs and these merchants have been offering for the, sometimes for the first time, they've been offering promotions, gifts, etc., to compensate for the lack of— and so even some of the businesses that started doing pretty— that were like pretty hurt by this crisis in the segments that you see at the top, they've managed to recover by going online and offering heavy promotions. On the good side, you see like at the bottom, like all the businesses that are positively impacted by the pandemic. So obviously like everything that is food related, fitness, even toilet paper, with this on, is very positively impacted. So yeah, that's roughly what's happening in the e-commerce SME space, is that some people are suffering and suffered a lot at the beginning, but now things are getting slightly better for them. And some other industries that are like more related to like staying at home are doing extremely well. Something that's interesting as well is in the ad industry, which obviously tech depends a lot on, like Facebook depends on ads, Google depends on ads heavily. And so the ad cost has been going down, which shows that demand from ad buyers has been going down. And so this is actually creating an opportunity for, a lot of businesses, specifically in e-commerce, because they manage to buy ads for cheap. And so this way, the return on investment, called return on ad spend, is actually pretty good. And so you see that the spend dipped at the beginning of March and then went back up. So that's what has been happening at the level of the industry, like the e-commerce SMB space, in which So now I'd like to tell you a little bit about what things look like from our window as a SaaS business. So just to give you a couple of pointers, we are at Series A and we have 2,500 customers. So just to give you an idea of where we stand. And so at first when the the crisis started, we deep in terms of orders for our own customers. So you see the lockdown was here and then towards the second half of March, things starting to go pretty bad. And what I mean by this is that the top of funnel activities went down. So here's a quick recap of what happened. So we partially rely on events to, physical events to fill the top of funnel. Things went down by, sorry, events were completely stopped. 25% of our acquisition was killed. And then on the outbound emails that we send, the email rate dropped. You can see on the right, the graph is actually pretty interesting to see that things were working pretty well before and then completely stopped for about 10 days. People didn't want to buy anymore. That was pretty interesting to watch. In terms of sales buying, SMBs, like the smaller accounts, are stable. And something that was pretty scary for us, specifically at the end of March, is that there was a dip of 3%, which means we lost 3% of our AR base because of the crisis. How did we react to this? So the first thing we did is that we basically reforecasted Q2, as lots of businesses did. So we discounted the gross projections by about 30%. And then we also decreased the hiring plan by the same, about 30%, to be a little more conservative and maximize cash flow. And something that worked really well, and that's also what Saastr is doing right now, is that we migrated the physical events from, for example, happy hours and things like that to online. And that has been working extremely well for us. Like I told you, about 25% of our acquisition depends on events. And so by moving them online, we were able to get the same kind of performance even though it was completely different and new for us. So now let's talk about what we've seen in our business and how we responded to the crisis. So when we saw that, so we kind of changed the forecast like I told you, like we discounted the projections by 30%. But then we looked at what was happening specifically for our customers. And so what we saw is that about half of them were negatively impacted at the end of March by the COVID-19 crisis. And so we looked at this segment that you see in red here, and this is the decrease in sales. So some had their sales decrease by 20%, some by 50%, and some completely went to zero, which was obviously pretty tough for them. So on one end, they basically saw this drop in sales, and on the other hand, there was a spike in customer service. So this is the traffic of customer service requests, and obviously we are a customer service software, so we we saw that they needed our software more than before and they had less money to pay for it. Just a couple of questions that just showed up on the Q&A. Can you talk more about what specific events have you moved to virtual for your customers versus in-person? So sure, so what we've moved is the two types of events. One is trade shows, so similar to SaaS Tour Annual where there would be like thousands of people. We migrated that over to small events that we do with partners. And so the approach we've had is not to do like hundreds of webinars with hundreds of people, but instead do something very intimate, a bit like a dinner that you would do in town with some prospects. And so what we've done is that we organize these events with say like 20 attendees max. We get catering, so the food is delivered. And we've had close to 100% attendance rates on these events, and the impact in terms of revenue was the same, which was super surprising to us because we felt these in-person relationships couldn't be replaced, but it actually was. So that has been pretty good. And the other type of event that we also moved online were local meetups, and same playbook, like 20 people max, and everybody food gathering presentation to everyone and make it super interactive. So yeah, cool, thank you. Thanks, Don. Cool, so back to what we did to help customers. So to recap, 45% of our customer base is in trouble at the end of March, and they have more support than ever before. And so what we've decided to do is to help them by giving them credits. So basically, we gave them up to 6 months of credits depending on the sales. So to get back to this, like the folks that are suffering the most here on the left get like 6 months credit, the folks that are suffering a little bit get 3 months credit. So that has been how we approached it. And so what's interesting here is that we applied it to existing customers. So among the 2,500 customers, And we estimated that half of them would need— Then we also— customers. And so the approach we had here is to say, hey, if we apply to new customers, we're gonna treat them the same way we would treat any type of new customers. So we would pay sales commissions, we would pay success commission for the onboarding so that the team gets the same level of engagement and reward on these customers. So why did we decide to offer this? Free offer. There were two things. So the first and obvious one is that I was getting lots of emails in my inbox from customers and they were saying, "Hey, can you please suspend the bidding for the next few months? We're in trouble. We try to reduce our cost." And remember from the early slides, they have about a month of cash. So anything that you can do to reduce your spend is extremely helpful. So that was the number one goal. And two is, in tech you've probably seen that there was a lot of layoffs or like people stopped hiring in go-to-market functions. And so what we've decided to do is a bit like the government did, let's have a stimulus package that increases demand to keep the sales and success team busy. And obviously we also like keep growing through this crisis, so that was another way to do it. So I want to share a little bit about the reaction we have customers. So I copied some of the messages we got right after we posted about this offer. And I think it goes a long way because your customers are, like I said, like B2C is suffering before B2B because B2B, especially in SaaS, has recurring. And so I think it goes away when you say, hey, I'm comfortable, I'm in B2B SaaS, yes, I have some churn, but it's fine, but I'm gonna take some of my AR to support the B2C segments, and customers were extremely appreciative of that. So I wanna tell you a little bit about what happened in terms of numbers. So number one is that among the 45% of our customers that were in trouble, 12% of the total customers, about a fourth of who could leverage this offer, vantage of it. So we had an application form on the website that people could fill and then we would apply or deny if they met the criteria for this offer. And obviously most of the folks that applied were existing customers. So if you take a step back and look at what the impact has been here, is that we basically— the cost of this initiative is 4% of our revenue so far. To support our customers. And something that's interesting is, if you remember from a couple of slides before, -3% AR from customers that were either churning or downgrading. And so if you look at this, basically the cost of this offer offsets roughly what would have happened if we would have ignored the impact of our customers. So 3 to 6 months free, cost is 4% of our AR, customers are happy. What happens on the acquisition side for the new customers? So let's talk about that. So on this slide, you can see what the impact was on our top of funnel, which is essentially like how many people, how many new deals were created for sales team. So you can see it's in the high hundreds at the beginning and then it goes a little bit after the— So I think trying to understand what's happening here, some of it is the stimulus package that is boosting sales and some of it is the fact that businesses are going from offline to online, specifically in the SME segment. So not all of it can be attributed to this stimulus offer that we had, But I think it definitely helped and you can see it definitely met the goal of keeping sales and success busy through this period. So the way we approached it, like I told you, is that we gave commissions to the sales team and there was just a couple of caveats. One is that if you want to benefit from the offer as a new customer, you need to enter your payment information. So basically we ignore the first 6 months of revenue and then it's monthly recurring revenue. Like any SaaS business. And then the second thing is that, yes, they would give payment information and then they would pay commission and then we would discount in our AR numbers, we would discount 30% to say, hey, these guys are probably going to, like some of them might churn or downgrade. So we discounted by 30%. I think we have a couple of questions. How many of the newly acquired customers are paying versus free? So free is 40% And so everybody, if you look at the baseline that we had before, is still there, and that's people who are paying. And after, the folks that are coming on top of it are on the free plan. Another question is, how did you forecast your revenue projections for Q2? Did you do a cut, a 30% cut? Based on best estimates. The way we did the— was look at the trend in the search channel. The trend was about like huge across the board also for top of funnel.

Hey everyone, it looks actually like Roman's connection went down for a few minutes, but we will gather these questions and make sure to get them to you. Oh, and we got you back just in time. Roman, I think we're having just a little bit of trouble seeing your video come up, but coincidentally it lags lasted up until the last 30 seconds or so of the webinar, so that worked out perfectly. We'll be sure to keep these questions and send them over so Roman can take a look at them for those of you that didn't get your questions answered.

Yep, and I don't know if you can hear me still, but basically the learnings are on this slide. I know we're over time, so I'm going to stop there, but basically the bottom line is that the cost was 4% of the AR that we had and the increase for sales was 4%. 42%.

Thanks again, and we'll share the recording and of course all the questions soon. Thank you so much.

All right, thank you so much. Thanks everybody. Bye.