SXSW: With Pivot, Zaarly’s Focus Shifts to Merchants

zaarlyblockLocal e-merchant Zaarly’s recent drastic revision of its business model suggests that the hyperlocal scene today is so dynamic and fluid that virtually any player in the space had better be ready to reposition quickly. That goes for investors and service providers too.

Speaking at a panel at SXSW Interactive on Sunday, CEO and co-founder Bo Fishback was joined by Chi-Hua Chien of Kleiner, Perkins, Caufield & Byers, one of the chief investors that has backed the hyperlocal startup to the tune of $14 million so far. Chien was sanguine about the about-face as Fishback described the new approach to an audience of hyperlocal marketing enthusiasts.

Zaarly’s original model had consumers using its app to request services and products that would be fulfilled by local providers, many of them part-time artisans and hobbyists. The company’s new strategy is to supply pre-selected local merchants with storefronts that will let them showcase offerings as well as receive payments.

Zaarly rolled out its “storefronts” initiative last fall, and soon will completely drop the consumer-generated request model it was founded around to shift entirely to a storefront selling approach. From a hyperlocal marketing perspective, one of the most profound effects of this will be the way Zaarly is now counting on merchants to bring in buyers — a reversal of the original approach.

Fishback said the data suggests that having sellers recruit buyers isn’t just the best way — it’s almost the only way. In February, he said, 92 percent of the service’s buyers came through its sellers.

To Fishback, that means the key to ramping the local seller up to scale in its targeted communities is making sure that it has the right platform and the right service providers. “They’ll go out and do this if you give them the tool-kit,” Fishback said of Zaarly’s storefront owners.

From his point of view, the marketing challenge is finding the right merchants. Zaarly’s mission is to enter communities and identify especially deserving merchants that fit its mold. Then the company provides high-quality photography to illustrate the storefronts, and also gives merchants access to its payment system.

Locating the appropriate merchants, who are typically very small and under the radar, in individual markets is labor-intensive. “We’ re on the march to find the most amazing people in the cities we go into,” Fishback said. The search is typically done through old-fashioned off-line word-of-mouth and personal referrals by local residents.  “That’s one of the things we learned,” he said. “Local really is local.”

That method of expansion constrains Zaarly’s growth somewhat. The service is in San Francisco, New York City, Los Angeles, Seattle and Kansas City and should be in 10 to 20 by communities by the end the year, Fishback said.

Many suppliers are craftspeople such as bakers, cabinetmakers, photographers and the like, who create hand-fashioned products. For example, Chien said he’d recently ordered a custom-made coffee table from a Zaarly storefront craftsman. The price — $550 — and quality were far superior to anything he could have ordered from a conventional supplier, Chien said.

Another difference with the new Zaarly is that it’s less mobile-focused. That’s because of the perceived requirement for high-quality photography on the storefronts.

The key marketing takeaway from Zaarly’s new thrust is that it’s growing by entering individual new communities in search of individual new sellers who can bring buyers to its marketplace. “If you’re going after local,” Fishback said, “it has to be done one at a time.”