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Consumers buy into authenticity rather than product placement: CommentSold CEO

CommentSold CEO Brandon Kruse joins Yahoo Finance's On The Move panel to weigh in on the advantages of shopping with digital commerce platforms.

Video Transcript

JULIE HYMAN: We earlier were talking about the big increases that we've been seeing in digital sales for the big retailers, almost doubling, for example, last quarter for Walmart. We are also seeing more livestreams selling online. What that means is basically you have a Home Shopping Network-style stream where people are selling their products. This next company helps those companies sell their products directly through the comments, so sort of decreasing the friction of the sales, so to speak.

We're joined now by Brandon Kruse. He is CommentSold founder and CEO. He's joining us from Huntsville, Alabama. So Brandon, basically, your company provides the software that helps these retailers do that.

I have to admit, before I learned about your company, I didn't know that this was such a big thing. But you're now approaching $1 billion in gross merchandise volume. How did you sort of get into this world of livestream selling and your product tailored to it?

BRANDON KRUSE: I was right there with you, Julie. I mean, I didn't know that this whole world existed four years ago either. It was really my wife, actually. She started a small retailer, started down the very traditional path of selling on an e-commerce website, got crushed by everybody who figured out how to do paid acquisition more effectively than her.

And eventually, she just started to broadcast live and just talk about different pieces of clothing and why they fit well, how they fit, what she would wear it with. And soon, she really built this community of people that were consuming the content, that live video, every single day. And that's when it really clicked to me that this was kind of a democratized QVC, if you will, a new market emerging that's actually kind of an old market, but making its way into the US now in a different way.

DAN ROBERTS: Brandon, Dan Roberts here. I'd love to hear if there have been certain product category types that you have seen really get sales boosts during the pandemic because of this strategy. And just anecdotally, earlier in the show, we were talking about Walmart earnings. And I mentioned that I had bought an inflatable pool from Walmart.com for our backyard.

I put it on Instagram. And no joke, six of my friends asked me where I got it, then bought the exact same one during this time. And I wonder if there are other pandemic purchases that have risen thanks to comments.

BRANDON KRUSE: Pandemic purchases-- that's good. What we typically see is our largest market inside CommentSold is fast fashion. So it's a relatively low price point, women's fashion. What we've noticed is that home decor, jewelry, cosmetics are also growing very rapidly on the platform.

What it really comes down to is the product being demonstrable, which I think makes a lot of sense. What I think a lot of people may not think about is the product actually having a wide range of SKUs available to purchase. Because what we typically see in the retailer's kind of unit economics is that the repeat purchase rate is sky high, for our top retailers, five to six times a month on average. Many of their top about 10% of customers purchase every single day. So having a breadth of products is important in terms of that audience.

But we really view this as kind of the new age-- I hate to use the term influencer, which I think was on the show a little bit earlier, because we really focus on authenticity. The authentic relation between the retailer and the consumer is what really makes it powerful, not just the product placement on someone's feed.

ADAM SHAPIRO: Are you able to follow, though, if the consumers-- because fashion comes and goes, tastes come and go-- if because you have that community built, if they then go to the next product that's a group, or do they break off and form new communities to which you then sell?

BRANDON KRUSE: That's a great question, Adam. I like to use the term category elasticity in that case. What we notice, when people come in and they buy one type of product from a retailer, they will buy any other type of product. We have retailers that sell women's fashion and then they'll sell soup, which I thought was absolutely crazy. But people love to have that entertainment and that community.

And the product purchasing is almost secondary. What we've noticed is when lockdowns have been lifted, people still continue to consume this live content in a very aggressive way, about two times what we've seen the same consumer watching live, spending twice as much time, about an hour a day, compared to the beginning of the year. So it's really fascinating.

MELODY HAHM: Brandon, you mentioned that product placement can be sort of a political game. And even your wife had a hard time or was frustrated by the process. But we've seen that it works, right? And even on the Amazons of the world, seeing that sponsored post, I'm sort of double checking myself, making sure OK, is this actually the product that I want? Or is it just because it was served to me first and happens to have a good rating?

How are you thinking through those sorts of changes? Are you trying to give people better placement based on how much inventory they have, how much they've actually sold? Tell us your process, how you're working that out.

BRANDON KRUSE: What's nice is from the retailer's perspective, it's kind of-- they have the kind of market forces against them, right? So if they have products that their community doesn't like, they're very vocal. And they really have conversations with them. If you were to jump on one of these live sales, you're really interacting with the host through this whole experience, which I think is very powerful compared to hoping that the algorithm serves you up the right product that you might need at that given time.

So we've noticed that it's really about authenticity even more so than it is the type or quality of the product at that time-- truly building a relationship between consumer and retailer, seeing what products they have to offer, interacting with them, having fun, hanging out with other people in the community that they've gotten to know over time. And then purchasing product is almost secondary. And we think that it really is a culmination of people being somewhat tired of being sold products versus just hanging out with someone and truly having a one-on-one kind of curated experience.

And I think that shows up most in the demographics of the consumers. Our largest audience is 25 to 34. The second largest audience is 35 to 44. So this is definitely not the newest Gen Z sort of way for them to purchase products. It's actually quite different than most people think.

JULIE HYMAN: Yeah, and it's definitely, I would imagine, seen a bump up at this time when everyone has been at home and looking for that kind of human community connection. I'm going to have to go look for clothing and soup, as you talked about, Brandon. Brandon Kruse is CommentSold founder and CEO. Thank you very much. Appreciate it.

BRANDON KRUSE: Thanks for having me.