What Kevin O’Leary recommends each CEO put money into
Any aspiring entrepreneur hoping to pitch the attention of “Shark” Kevin O’Leary with a business pitch has a better answer to this question: what’s the next big thing for small business?
Although O’Leary recently invested in the crypto space and said he thinks it is “important” if you think it is bitcoin or blockchain, guess again. The Shark Tank co-host and host of CNBC’s Money Court says the COVID boom in direct selling is the most important business change and is equally important for small businesses and business giants.
Speaking at CNBC’s Small Business Playbook event on Wednesday, O’Leary said there was a rapid acceleration in direct sales (DTC) in “giant companies” like Nike. He said DTC sales for companies have shifted from 10% to 50% to 60% during Covid, but sales success alone is not the key to the future – it’s the data that comes with reaching the customer directly online connected to the customer.
Businesses are starting to collect data on customer preferences beyond the basics like physical location during the daytime and buying preferences, and this will matter as the technology huge companies are using to pull the data for insights – cloud-based AI – will be economical for all companies.
One of its portfolio companies, Wicked Good Cupcakes, which was recently acquired by Hickory Farms, became the # 1 “gifted cupcake” in US shipping through FedEx, and O’Leary said the company even learned about consumer buying behavior for things like Taste preferences and when parents buy college-aged cupcakes during the holidays. “The data poured in and then they could make offers,” he said, based on what they learned about each one.
O’Leary says the model’s success goes beyond this one example. “Some of my small businesses are doing better than ever with much higher margins thanks to DTC.”
“Doesn’t matter if you’re Nike or have $ 5 million in sales”
Cloud-based AI will lead to increased sales as well as other business benefits. This will result in higher margins and a better forecast of demand. Adopting the DTC and AI approach will allow managers to use capital much more efficiently and not end up with “a pile of inventory in big retailers that don’t make you money,” said O’Leary.
“I’m telling all CEOs to start investing now in what you can do with AI and data management,” he said. “I’m very excited about this for small businesses.”
O’Leary said what we’ve learned from this pandemic is that businesses both large and small have gone through an incredible digit pivot and the delta variant will only compound that shift.
“I don’t care if you’re Nike or a $ 5 million company,” he said. “That’s what happened with the pandemic. Nike hit 50% DTC in five months.”
Building a direct customer business and using cloud-based technology to perform AI on customers is a strategy “even a small business can afford,” he added.
O’Leary linked the DTC boom, which eliminates multiple tiers of distribution that squeeze business margins, with the booming stock market during Covid and “a much more efficient, profitable industry in every sector.”
“We have moved to a much more efficient location and you want to have a direct relationship with the customer going forward,” he said.