A Cool $22 Million Says This Swedish Startup Can Take on Etsy

Small retailers are winning the race for smartphone shoppers

Wray Serna, a Brooklyn (N.Y.) apparel designer, started selling her first collection online in May via a digital platform called Tictail. A few weeks later, as orders poured in for her Relax Romper ($195), she was in Italy with her fiancé for 18 days. After a swing through Greece, it was back to New York for the 31-year-old entrepreneur, a jaunt to Quebec, and some summer leisure in Helsinki.

Running her newborn business on the road wasn’t a challenge. Serna had an iPhone. “I did have to buy an extra battery pack,” she says.

Web stores are already getting dated. The future of shopping, and selling, is in apps and smartphone-sensitive sites. Retail empires such as Macy’s and Nike's know this well and have adjusted their apps accordingly, but the shift to small screens appears to be happening most quickly along the long, thin tail of e-commerce.

If you're shopping for pair of guitar-shaped cuff-links, a mermaid crown, or some next-level beard oil, odds are you're doing it on an iPhone, Android, or similar pocket computer. 

Here's how the browsing breaks down. In the first quarter of this year, about 15 percent of all retail spending in the U.S. was e-commerce, according to comScore. Of that spending, about 15 percent came through smartphones and tablets, or about two out of every 100 retail dollars. But on Etsy, a marketplace for small-scale sellers, some 41 percent of all purchases in the first quarter of the year flowed in from mobile devices, up from 35 percent a year earlier.

Consequently, Etsy—and all the other businesses that hustled to get mom-and-pop entrepreneurs and corner-craft shops onto the Web—are rushing to fine-tune their mobile offerings. By the end of March, Etsy’s app for vendors had been downloaded 25 million times, even though the company has only 1.4 million active sellers on its platform.  

Etsy declined requests for an interview, but here’s a telling risk factor from a recent filing with the Securities and Exchange Commission: “If we are not able to deliver a rewarding experience on mobile devices, Etsy sellers’ ability to manage and grow their business may be harmed, and, consequently, our business may suffer.”

For those interested in Etsy’s suffering, smartphones are the best place to start. Enter Tictail, a Stockholm-based startup that offers a platform for small businesses to build their own websites and a marketplace where shoppers can flick from one vendor to the next. 

Tictail's app works for shoppers and sellers alike.
Tictail's app works for shoppers and sellers alike.
Source: Tictail

Just three years old, Tictail is still a blip compared with Etsy, with about 6 percent as many vendors. But some 55 percent of purchases on its platform are coming from mobile devices. What’s more, some 15 percent of new vendors on Tictail never use a desktop computer; they build their entire digital store on a handheld device, and they manage it from the same device, as Serna did on her European vacation.

“You can get an Android smartphone these days for $30. There’s your business right there,” says Tictail's co-founder and chief executive, Carl Waldekranz. “This is going to change the definition of what a store is.”

A handful of venture capitalists are betting that Waldekranz is right. This morning, July 29, the company announced a $22 million round of funding from Thrive Capital, a New York firm that backed Warby Parker, the eyeglass startup, and Harry’s, a razor-blade startup. Also joining the round were Stockholm's Creandum; Balderton Capital, a London investment shop; and Acton Capital Partners in Munich.

The company isn't profitable yet, but Waldekranz says revenue has increased in step with vendors as it sells premium services such as e-mail marketing. 

Serna, the romper maker, built a website on Squarespace and chose Tictail to connect with consumers. She found the service via Instagram and liked how it displayed wares on a small screen. “It visually just seemed like the best for me,” she says. 

Shopify, another do-it-yourself platform for Web retailers, is also in the hunt. A year ago, it noticed that more than half its vendors' traffic and about one-third of its sales were coming from mobile devices. In the months since, it has focused on increasing both of those data points, according to Satish Kanwar, Shopify's director of product.

Shopify is hoping its mobile app will increase its ranks of vendors
Shopify is hoping its mobile app will increase its ranks of vendors

The first step was making sure Shopify's 100 or so Web "themes" displayed well on mobile browsers. The company also overhauled its checkout template to smooth smartphone transactions. Finally, it worked to sync its ecosystem of websites with social networks that offer Buy buttons, such as Facebook and Pinterest. 

"The kinds of things people do on their mobile phones generally has a lot to do with discovering new things," Kanwar explains. "And while it used to be that selling online meant having an online store, selling online now means a collection of different sales channels and interfaces."

The potential market for these companies is virtually limitless; just picture every grandma with a crochet hook, every art student, and every guy welding in a basement somewhere and wondering: Would somebody pay me for this?

The service likely to be around in 10 years is the one that can round up the largest crowd of vendors in the near future. That's why many of these companies don't charge for sites but make money on a so-called freemium model. Each is angling for a network effect: The more vendors jump on board, the more vendors are likely to follow suit, and the more shoppers are likely to swing through.

Though there are sure to be losers among the platforms, the winners will continue to be tiny retailers. Any garage artisan can cobble together a website, but without some savvy search-engine gamesmanship, a Web browser isn’t likely to stumble on it. The mobile offerings, meanwhile, play perfectly to browsing. Potential customers can flick through stores and products like amorous Tinder savants, jumping from an apparel store in Brooklyn to a ceramics shop in Sweden.

Waldekranz, of Tictail, calls it "local everywhere." "We’re making the world smaller," he says, "and giving small, local brands global clout." Now he just has to beat Etsy and survive Shopify. 

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