What's Happening With SMBs Now? A Discussion with Romain Lapeyre, CEO Gorgias (2,500+ SMB customers)

Okay, hey everybody out there in Saster, there's the number one question that I get eight times a day, which is what are you seeing? What are you seeing? It's what everybody wants to know. What are you seeing in the enterprise? What are you seeing with SMBs? What are you seeing in work from home? What are you seeing in marketing? It's what everybody wants to know and we just can't seem to get enough information about this. And maybe a few of, you know, 50amazing SaaS and cloud cos yourselves that most of us don't. So I wanted to grab a few of the leaders that are breaking out, but not quite at the slack and zoom level. We know enough about them. But the folks that are the next slack in Zoom who are learning, who it's not all daisies and unicorns, who they have some segments that are doing well and some that are deeply struggling to hear their learnings. And so I wanted to first bring Roman from Gorgias on he spoke at the Saster annual and I'll let him talk a little bit about Gorgias, which is the leading contact center for E commerce in the Shopify ecosystem. But to me there's many interesting things about Gorgeous, especially because Gorgias has 2,000 something customers. I'll let you introduce himself, but how many?

2,400 customers. Yeah. So yeah. Hi everybody. I'm Roman, CEO of Gorgias. So I think Jason pitched us. Well, we are a customer service company for e commerce brands and so we help them build long term relationships with the customers. And so we have 2,400 customers, mostly in the SMB space and in the U.S. good.

So it's interesting because you have 2,400 SMBs, parts of E commerce are benefiting. We can see it at home. Right? Especially the big guys. I mean, Amazon's hired 175,000 people. Instacart's hiring hundreds of thousands. But at the same time, SMBs are hurting more than enterprises. Right. And so you've got an interesting cross section of some of your segments that are performing well, but they're not all perfect. Right. Some are hurting and you've done some fairly interesting and innovative things which I want you to tell us about. But talk us back. Take your. Sorry, I keep forgetting and I should know. But take your 2000 something SMBs and some larger customers and break them up into three groups of us. Who's doing well, who's doing struggling and who's in a lot of trouble. Like what are your three sort of green, yellow, Red segments.

Yeah. So I'd say, like the green one is like everybody who's getting purchased from people who are at home. So, like, food is up. Like food. E commerce is 5x, fitness is up, electronics is up. So these segments are doing really well and they're actually like, benefiting from what's going on. I was actually on the phone with one of our merchants yesterday and they basically make underwear and they've decided to reuse their fabric to make masks downtown la. And so obviously it's working really well. So some people manage to are in good segments, some managed to adapt and they're doing really well. I'd say the middle, the neutral ones are kind of the bulk of E commerce. And we looked at that very closely because we were doing the Q2 forecasting and then trying to see what is the impact of the crisis on us. And so we looked at the sales and we saw that it dipped on March 15 by about 30%. So all E commerce was down. Everybody was scared.

Right. The minute this happened, it dipped.

Yeah, exactly. The minute everybody got sent home and these guys are recovering. I was putting up the stats this morning and now we are back to pre COVID 19 levels. So, like, it seems it's neutral, like for E commerce.

That is not something I've heard. We went home on March 15. And you also have a lot of customers that are fashions, right? The fashions I've read about, you have a lot of cool brands. People are not shopping as much for Coachella this year.

I read today.

Isn't that true? Is it fast fashion impact and cool watches, cool shoes, cool clothes. I mean, I'm wearing slippers.

Yeah. So that's the. I would say that's the category that's being heard. So fashion, luxury apparel. And I think I was catching up with a big retailer who's actually like a public company earlier today. And so like something that they were saying is that obviously, like all the physical stores are closed, so they lose almost all of their revenue. And so now, like, everybody goes, they're trying to push online, but you can't like shift your business from entirely through like wholesalers or like retail stores to online. So it takes sometimes to transition. And so this is hard for them.

Yeah, so they're hurting fashion. Sorry, give me an example of someone in the middle that's sort of neutral, that like. Or that. Or more interestingly, who is. Because I haven't heard this story before, especially for smaller business, who is back to March 13th. Like, you don't give me you don't have to give me an existing customer. If you don't name an example of someone that's come back somehow in this crazy time.

That'S. Yeah, it's hard to not name people type of.

What's an industry that seems like it's back to.

Yeah, electronics for example. Like I think like, like everything was down like the week. Like if you make headphones for example, like everything was down and then people started buying again. Like people are getting the new iPhone again like you saw. And also like it's interesting to look at China because like Apple is back up in China. Like most of the E commerce companies, they are back to normal levels. So yeah, E commerce as a whole is recovering. Electronics is example of it.

So you've got, so just like a lot of folks, you have, you have segments that are green, yellow and red and gorgeous across thousands of today. How does that blend all together? Like how do they blend? How does the good pulls you up, the struggling ones pull you down? What are you seeing as a composite across these thousands of SMBs in E commerce?

So the composite is that we are back to pre COVID 19 level. So like yeah, there was this dip for everybody like across the board and then like we are back to this level and some are benefiting like food and some are suffering like apparel. So overall it's pretty good news. It means we are progressively catching up and going through this now we all listen.

I was a SAS CEO in 08 and 09 and we all tried to put a positive spin on it and I actually have your numbers so I know you're doing well. But stepping back a bit with your colleagues, you know a lot of the other next generation leaders in E commerce and even if folks listening to this aren't in ecommerce, you're probably signed to SMEs. What are you seeing across your CEO peer set? Like what, what's happening across the other 10 sort of breakout leaders in e commerce SaaS.

Yeah, so first on SaaS specifically I think, I think we are very fortunate because obviously like the merchants, their model is based on the sales. So like the moment the sales stop, like their revenue stops and then it's very worrisome and stressful. In SaaS, it's more like a second degree type of company because like obviously like we have recurring revenue so the heat doesn't come as fast. And so I've seen like, I've seen some companies like let go like forced to a third of the staff. Typically like it's sales teams it can be like a biz dev team or it can be across the board. So like, some merchants. Sorry, some E commerce companies, e commerce SaaS tools have done that, but I wouldn't say it's the norm. Like, some of them have done that because it's kind of. They might have been too aggressive before. And obviously since the crisis going on, they want to tend towards having like two years of Runway. So some are doing that, but for the most part, everybody's sticking to where they are readjusting the projections to something a bit less aggressive. But yeah, across the board. And something that was really interesting as well is that there was a podcast by Toby, the CEO of Shopify. He. He was saying that in 2008, during the previous crisis, they actually saw the number of merchants increasing because everybody was. Lots of people were being laid off. So they were launching their own stores. And I think for E commerce as a whole, retailers that have physical stores are switching to online. So the whole thing balances out and it's pretty stable.

And just two things. And then I want to talk about your free program because it's really, really innovative and helpful. But the first one, because we've worked on a little bit together, you have some tailwinds here and some headwinds. You have both in your business. How today have you changed, at least on a percentage basis, how much have you reforecasted? How much are you being conservative? How much lower have you changed your plan for this year?

Yeah, so we decreased the plan by 30%. That was the goal. So we had like gross goals and we decreased them to like two thirds of what they were. And we did that like at the end of March because we were seeing like, lots of contraction, lots of churn. So that was stressful. And we. And mostly like this was like driven by lower retention, though. What's really interesting is that over the last two weeks, and I think that's partly because we've launched some a program to support merchants. But like, what we've seen is that things are actually a bit like, for our merchants, like they dipped on March 15th and then they're progressively getting back to normal.

So because of this sort of. Because of the free program to support them or for external reasons, I think.

It'S because of the free program.

So let's dig into that. See, I'm super passionate about what you've done because I think now is the time for a lot of us to gain market share. Right. Especially folks that are fortunate.

You.

You've worked incredibly hard, you guys had your own tilt, right? You guys went years without much revenue, but you have enough momentum and enough capital that you can invest a little.

Bit in the future.

Right? I think tough times, folks that don't invest in their brand and their customers fall behind those that do. And I love free, but free has to be done. Well. If free is cynical, if free is a free week, or free is only for first responders, it doesn't make an impact. You've gone aggressive and you've tried to help all all your struggling customers haven't used. So talk a bit about that.

Yeah, so basically it comes down to what I was saying just a second ago is that merchants are being affected. Like the week the sales drop versus all the SaaS platforms. We are being affected months after that. Because it's a recurring business, some people decide to churn or contract right away, but for the most part it's a lagging indicator. Like you said, we were fortunate to raise the Series A before the crisis. So we were like, hey, what are some ways that we can help ease the burden on our merchants? Because we all suffer from this, some more than others, so it makes sense to support each other. So what we've decided to do is to offer three to six months free based on how much of a deep you are seeing in your sales and that supplies.

I don't mean to interrupt, but I want people to understand this. This isn't primarily aimed at new leads or new customers. This is for existing customers.

Yeah, it's for existing customers.

You've been paying us and we're just gonna give you three to six months free if you have a declining your revenue. Is that right?

Yeah, exactly. Because the philosophy is that like we only thrive with our merchants and if our merchants are in trouble, like, and if they don't make it through the crisis, obviously we want to help them. And it's like, Is it any SaaS business interest to help their customers go through this?

And is there a lot of drama to get this three to six month relief? Like, how much work is it? Do I have to go through like a $10,000 person sales rep interview or.

It'S like a long survey? Yeah, it's actually a pretty straightforward. Like you just sent us a screenshot of your sales for the period of pre Covid and during COVID and based on how much of a drop there is, like we give you three months or six months. That's how it works.

And did you tell everybody about this? Did you try to hide it? Maybe you were hoping some folks Wouldn't do it because it was hit your revenue. How did you expose this to your thousands of customers?

So we pushed it on social media. Like we have a Facebook group with our customers there and a lot of customers have been like reaching out, also asking for help. We are pushing a newsletter as well to all the customers to tell them about it. So yeah, you don't want to go like, you don't want to hide it and say, hey, we still do it. You just want to go all in and say, hey, this is how much it's going to cost us. Let's go, let's do it and see, see what the impact is.

So you've got. And so tell me where we're at today, since March 15th or. I think you launched this a week and a half ago or a week ago, right?

Yeah, yeah.

Manage of this, of this, we'll give you three to six months plus for free. How many folks have said. Have raised their hands?

So about 200 merchants so far.

200. So 8% or something of your customer base.

Yeah, exactly. So far. And I expect there will be more.

Right. And so. And so what? And as CEO, how do you guide your team to think about it? Like, how do you. Does it upset the sales team? How do you think, how do you align everyone to say, we want our customers to downgrade if they're struggling, if they're hurting. Right. If they're, if they're gmb, if their revenue has fallen. We actually want to be ahead of this. We want to support this as a team.

Yeah. So that's actually like a really interesting point because it's hard. So the way we've approached it is that it should be us as a company that take the financial risk here. It's basically like an insurance and say, hey, we give you something for free and we expect that this is going to happen at the end. And so we haven't changed the quotas for the team. So I'll give you an example. So it applies. 80% of this is for our existing customers and we also get some new merchants out of it. And so we were saying just a second ago that some businesses in the space have been letting go some sales staff, some success staff because of obviously like the top of funnel is going to be hurt. So what we did is that for every new merchant that signs up and says, hey, I want six months free, we still pay the sales team. So like we count the revenue as if it was closed by the sales team and we asked them to put a payment method on file. And so as soon as they do.

That, this is very interesting. They're getting. This is on new accounts, right? This is on new accounts.

New accounts.

New accounts. And this shocked me when one of my competitors did it back in the day. It shocked me. And it's.

It works.

You're giving them a sales commission essentially, on the free portion of their onboarding, right?

Exactly.

Yeah. It's aggressive. Most of us think that's crazy. I remember back in the day when our competitor did it to us, they made a deal that if you stole a logo account from us, right, a Facebook, a Google or something, they paid this massive quota and they give it to the customer for free. Right. It's aggressive. But you have to align incentives or it's too complicated, isn't it?

Yeah, yeah. Like, basically we kept it simple with the same incentive structure as before and we just pretend that the revenue is here. So this way, like, the sales team has an incentive to like, onboard them and. Sorry, to close them. And then they go to the onboarding team that has the same incentive to like, get them to onboard and use the platform.

And from both the new ones and the 200 or so that have taken advantage of this program because they're. Because they're under stress. Have you measured any of the feedback, the NPS impact? Like, sometimes we don't get credit for favor. Sometimes we get almost get criticized. It can be tough. How do you know if it's working?

So we haven't measured NPS or a metric for feedback. What we have done, though, there are two things. So one is we can measure how many people take advantage of the program. And so, like, yeah, right. Like roughly 10% of the customer base. I hope it's going to increase. And then it's like, what is the qualitative feedback? What are people saying? And actually, like, I'm getting like emails in my inbox, like every day. Merchants are telling me, hey, like, our sales are dropping. Like, can you guys, like, decrease your pricing? Or like, is there something we can do here? And so that's something that they are already expecting. So, like, it's just great to them when we tell them, like, hey, we actually have a program for you to.

Help you go through that, asking me for a discount. My product's not that expensive. Just join our free program for now if you're under pressure. Don't even worry about the drama around that. It's cool. What else, you know? And then I just. Let's wrap up on kind of culture and some other learnings. Just in terms of being a CEO, but you're seeing these different mixes. But Shopify, which we're both super fans of. Right. I mean, I think it's companies of our era, they suspended guidance in the public markets. They said things are so crazy, we're no longer telling you how we're going to do. So how does that square if you know with what you're seeing across you have thousands of customers, but I don't know how many. Shopify has hundreds of thousands. Right. How do you. Different elements in the economy where Shopify saying, look, I don't even know, like we're not even going to tell you how we're going to do it anymore.

Yeah. So basically it's actually not that hard to know. So we look at our metrics and we see like I was telling you at the beginning, that the sales are back to normal levels. Pretty much like all the SaaS tools in the ecosystem are also sharing the data. So they tell you like where they stand and so you can basically like compile the data for everyone and get an idea of what's going on. So obviously like, yeah, it's been hard end of March, it seems like things are getting better in April. So you might have seen also the stock price for Shopify is going up significantly. So we'll see when they release the numbers. But the indications that we have so far, which is the signals from the SaaS E commerce ecosystem, plus what we've seen in China where there is a JD and Alibaba sale that are back to normal as well, seem to mean that it's going to be back at the same level.

So let's just finish up with two things. Are you. So you're using China as your model. Are you. Are you optimistically assuming in three to four months, notwithstanding the rest of the world that things will be sort of back to normal in the sort of E commerce plus world.

So it's hard. Like the governor of California was saying, it's based on science and facts. So it's hard to.

It's just a crazy world where we're not getting enough guidance. So we're all building our own models. Right. We should have the answer. What are you modeling just to help other founders? When are you modeling normalcy or you're not even bothering to model normalcy?

Yeah. So two things. One is the forecast for Q2 is very pessimistic and assumes that what has happened at the end of March is going to be the norm for at least three months. So like the goals for the teams.

Are expecting any improvement in the short term, right?

Yeah, yeah, exactly. We are pretty pessimistic. There's that being said in the way I see things for the long run. I think China is a very good source of information because you see how fast they recovered. So obviously this all depends from how much these measures are followed and implemented in the us But China has recovered three months after they started working from home. So three months after the containment, now three months, sales are back to normal, like production is back to normal. So I'm expecting this is going to last probably like a little more because, like the measures were taken a bit later in the us, but yeah, something around like four months.

All right, last question. We could chat forever, but you have a team that has been somewhat distributed, but you also have cool offices, you like aesthetics, you like working together. Clearly you guys like to go out to lunch together as a team. Like, what?

Yeah, that's.

What's the top struggle you've had in shelter at home? And like, what's your top hack or thing you've done to improve culture for the team?

I think that's something we figure it out every day. We use Tandem, which is like a YC startup that allows you to click on a name and then you can start a conversation with somebody. We've done more calls as well. Like, lots of teams do daily standups before they were doing weeklies. So we compensate by over communication and.

More facetime change even. I've done that and I thought I was done with dailies for life. So you're doing dailies instead of weeklies? That's a good one.

Some teams are doing dailies, like not all of them, like about half. And the other ones are doing weeklies. And I have a kind of impromptu conversations about, like, it's easier to. We jump more on the phone. We have more like, like face to face conversation versus like chatting on docs.

And then like. And then we use Tandem. But I can't figure out what its real value is other than seeing what everyone's listening to on Spotify. Like, what's. It's running right now. What are you. What's the. You're so good with tools, you're at the cutting edge of collaboration tools. What's your hack with Tandem that's helping the team?

I mean, like, I don't know if it's a hack, but like, to me the value is that you can click on somebody and as soon as you click, they hear what you say. And so if they don't want to jump in. They don't jump in, but at least like it removes one step of friction to actually having a call with someone. So that's how we say the hack is more like you would like ping somebody on the shoulder and say hey, have a sec to chat. That's the same idea. Yep.

All right, last question. Just scale of 1 to 10, how are you feeling about next year?

So next year being 2021? Yeah, I mean I'm feeling great. I think it's hard to know because when you look at the public markets as an indication of what's going to happen next, it seems like it's recovering fast and everybody's bullish. I still think that there are 17 million unemployed people more this month. So it's still like very scary and I think going to take some time to recover. But yeah, I think I'm pretty bullish about 2021.

All right. Okay. Thanks my friend. This is good. This is what you're hearing, what you're seeing and we'll continue to hear more perspectives. This was insanely helpful to what several thousand SMB merchants are seeing all across Gorgias ecosystem. And also not only check out Gorgias if you can potentially use the product because you especially if you're even if your business struggling might be free today. But check out their website and learn about them as a case study. What someone with thousands of SMB customers that's growing at triple digit rates, how are they approaching this? What's their free program? How are they marketing? How are they helping out their customers? I think it's a great case study. So thanks again, Roman.

Thanks a lot. Hope that's helpful.