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News Plus 23 Nov 2021 - 4 min read

Booktopia’s Project $1 billion: Local ecomm darling shoots for the stars with in-housing, predictive sales algorithm, hourly advertising shifts

By Sam Buckingham-Jones - Senior Writer
Booktopia's Steffen Daleng

"We can tweak everything on a daily, an hourly basis to get the perfect amount of units in," Booktopia CMO Steffen Daleng says.

Booktopia is an Australian e-commerce case study for the post-Covid world, using an algorithm to predict sales, an entirely in-house marketing, advertising and media team, and hourly advertising spend shifts based on warehouse capacity. Chief Marketing Officer Steffen Daleng says “accuracy is key to profitability”, and by focusing on giving customers good service, Booktopia plans a sustainable revenue path to $1 billion.

 

What you need to know:

  • Booktopia, which started as a pure play online book store but is now a $300m ASX-listed business, has crafted an algorithm that effectively predicts sales: “We got really good at forecasting,” CMO Steffen Daleng says.
  • Daleng spoke at the Ashton Media 2021 Martech Symposium earlier this month.
  • He says Booktopia has an in-house marketing team: Agencies do not move fast enough. The company shifts advertising spend “hourly” to balance demand and capacity of its distribution centres.
  • The company’s algorithm can sometimes predict sales to within 100 units of 35,000 daily sales weeks in advance.
  • Booktopia is planning on reaching $500 million in sales in the next few years, and doubling to $1 billion three years after that.

I have an algorithm that can start calculating how we’re going to be landing at the end of the day...my team can quickly shift any kind of advertising spend in the moment. And we do. It’s not just wishful thinking

Steffen Daleng, CMO, Booktopia

Distribution day

Every day, the 20-strong marketing team at Booktopia starts by speaking to the group’s distribution centres and warehousing team. “That’s how we start every single morning, talking to them about how much staff they have down there, whether they’re going to be able to send all the orders out that came in overnight or in the morning,” the group’s Chief Marketing Officer Steffen Daleng said. “And if they can’t, we cut marketing.”

Booktopia started as a pure play online bookstore but is now eyeing $1 billion in sales – and is using algorithmic sales modelling to get there.

It's a compelling case study of agile growth in an age, and a pandemic, that has prompted an e-commerce boom and has fast-tracked growth for some retailers – often to their detriment. Rather than take every sale it can get, Booktopia rather focuses on ensuring deliveries can happen on time and growing steadily. Daleng says they’re expecting $500m in sales in the “next few years”, doubling to $1bn “within an additional three years”.

Daleng told Ashton Media’s 2021 Martech Symposium earlier this month Covid was a boon for the online book sales industry, a $4.2 billion sector of which Booktopia has a roughly 20 per cent market share. Formerly hesitant online buyers, like Baby Boomers, suddenly had no choice, and Booktopia had to pivot its messages and marketing to cater for a less trusting audience. Three men started the business as an online pure play but acquired Angus & Robertson’s digital component and the then collapsed The Co-Op bookshop before listing on the ASX late last year with a $43 million capital raise.

External agencies can’t move quickly enough

The only way Booktopia can lead the book sales e-commerce space is to stay extremely nimble, Daleng said. And that means an entirely in-house marketing team, as agencies, despite their expertise and talent, require time and a brief.

“I’ve got a dashboard that we created that basically shows me on an hourly, minute by minute basis, an update on the growth projection of the business and the revenues by units,” he said. “I can see how many units are going into our operation constantly. I can see how many of those units are in stock or out of stock. And I have an algorithm that can start calculating how we’re going to be landing at the end of the day, meaning that my team can quickly shift any kind of advertising spend in the moment. And we do. It’s not just wishful thinking or nice, aspirational ideas.”

If he believes they wouldn’t be able to ship all of their orders within a given time frame, “we’ll stop advertising, we’ll throttle down the orders and throttle down the customers,” Daleng said. “Those kinds of things are next to impossible to have with an agency, where you need to provide a brief and proper articulation.”

There are agencies who would put up their hand to say they can do this, Daleng concedes – himself a former founder and CEO of a digital agency, but “ultimately, we needed to be quicker, more agile, more nimble, and make sure that we could serve our customers best.”

Reverse econometric modelling algorithm predicts sales: ‘Accuracy is key to profitability’

Booktopia sells tens of thousands of products every day. It has a wholesaling arm that supplies books to independent bookstores, as well as a publishing arm that produces and manufactures books themselves. It has control over a whole supply chain, effectively. Despite this, the company can accurately forecast sales weeks in advance, and adjusts resources accordingly.

“Our framework of operating literally is that we can tweak everything on a daily, an hourly basis to get the perfect amount of units in. And considering that we’re sending out roughly 35,000 units a day, one would think that a high percentage of variation on a daily level would be acceptable. We have days where we have less than 100 units off the forecast, on a forecast that was set several weeks ago,” Daleng said.

“Some people might say, why aren't you just going as hard as you possibly can? And then everybody with insights into (distribution centres) and logistical operations will go,’ how are they going to staff a 30 per cent unit growth day over day? How they're going to staff for that?’ Predictiveness and forecasting are important. It's more important for me to make sure that we're razor sharp on the unit variation down to our (distribution centre) rather than going over or going under. Accuracy is key to profitability… Uncontrolled growth can be catastrophic for a business.

Covid meant many rounds of re-budgeting, which was difficult, but it also meant the business understood the impact of each part of the supply chain. “We got really good at forecasting, and we got really good at budgeting,” Daleng said.

Booktopia’s priorities: Strategy, people, tech

Daleng is blunt: strategy is king at Booktopia. It is the most reliable constant out of the three pillars of strategy, people and technology. “At the end of the day, a carpenter is not his hammer,” Daleng told the Symposium. “Ultimately, I would like to think that great minds need great tools to succeed. But 100 per cent, strategy (is key). Let’s be real, people come and go in any kind of company. We’re all here for a limited time. For a company, for an organisation, always strategy first, then talk people second, and then what tools do people need to succeed.”

Get C-suite buy in for martech search or it’s a “very expensive guess”

Even if technology is third in that list, it is still an important pillar – and one that marketers must secure executive buy in for.

“If you’re on the martech journey right now and don’t have C-suite executive mandate, or direct access to it, get it. Enforce the necessity for your remit and your role, make sure everybody in your organisation understands that you will not be able to choose the right technology and the right market strategy unless you have the full picture of what’s going to happen for the company within the next few years,” Daleng said.

“You’re just not, you’re guessing. And that can be a very expensive guess.”  

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