Linear vs Exponential Growth:
3 Real-Life Case Studies to Inspire Your Own ECommerce Journey
April 14, 2021
Ecommerce is the business golden-child of our era—over the past year alone it’s experienced spectacular growth and is tipped to hit a cool $6.54 billion by 2023.
This expansion has gripped companies all over the world: these days 45% of US businesses, 60% in the UK, and 66% in Australia sell overseas. The number of online buyers is rising each year too, predicted to reach a whopping 2.14 billion in 2021.
With so much money up for grabs, it feels like everyone’s after the secret to securing the top spot.
But there’s a pressing question on the minds of eCommerce sellers:
Will a linear or exponential growth model give the greatest odds of success?
Both models are powerful but there are some major differences, and they both come with a unique set of advantages and pitfalls.
Choosing the right one for your goals will put you on the path to scaling over failing, so let’s dive into the debate to uncover which model will help you fulfill your eCommerce dreams, along with some real-world case studies to keep you inspired on your journey.
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Linear vs Exponential Growth: Inside the Debate
- What Is Linear vs Exponential Growth in Ecommerce?
- What’s the Deal with the Linear vs Exponential Growth Models Debate?
- 3 Jaw-droppingly Good Case Studies to Ignite Your Creativity
- How Gymshark Grew a Whopping 193% Year-on-year Using the Exponential Growth Model
- How Goli Went Hybrid to Sweeten Their Customer’s Health Journey & Become the #1 Global Health SKU
- How a Newbie Entrepreneur Went Linear and Rocketed SkinnyMeTea to $1 Million in Revenue per Month in 1 Year
- How to Set Your Brand Up for Massive Ecommerce Growth
- Strategize for Next-level Growth in Your Ecommerce Business
What Is Linear vs Exponential Growth in Ecommerce?
Linear growth model
The linear growth model (aka pipe model) takes a more ‘slow and steady’ approach. It’s simple to grasp and is the first choice for many eCommerce owners—which is probably why it’s the more popular of the two models.
Here’s how it works:
- With the linear growth model, your eCommerce store invests in materials to create a product, and you then sell it in a single location (typically your domestic country). For example, if you own a liquor brand in the US, you might turn grain and water, etc., into whiskey and sell it online in US territories only.
- You then scale customer by customer. In other words, once you’ve got a sale, you’ll move straight on to the next prospect. No pitching existing customers for more business, asking for reviews, or persistent remarketing.
- If all goes well, you eventually sell your flagship product (or line) in different territories to hit your expansion goals, and aim to secure a 10% rise in profits or a 10% reduction in costs.
Exponential growth model
Businesses using the exponential growth model shoot for the stars. 🌟
They aim to 10X their value output, growth and reach by continually releasing new products into the market.
Some businesses combine the exponential growth model with lean methodology to scale faster and more efficiently. It’s an exciting approach that keeps your company fresh and on the pulse of current trends. It also enables you to grow your business by using customer feedback to optimize products.
The exponential growth model involves a race to the top to be the quickest to market. Often whoever reaches the market first with a killer product gets the most significant reward.
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What’s the Deal with the Linear vs Exponential Growth Models Debate?
The great thing about these models is that although the linear vs exponential functions differ, you can make a killing with either.
Whether you’re successful depends on many factors like your resources, experience and timing, and whichever model you choose can change as your store evolves.
Problem is, these facts tend to breed confusion as eCommerce sellers try to figure out which camp they fall into.
Both the linear and exponential growth models can be wildly profitable, but neither is perfect. Let’s take a look at the upsides and drawbacks of both:
What’s sweet about the linear growth model?
- You get to be a bonafide brand owner: Since you design, make, and sell the items, you have the chance to use this as a selling point in your storytelling to build a strong brand around your item(s). You also have access to intellectual property rights to sell on later if you choose.
- You get the chance to shine: You have the opportunity to hone in on what your brand is good at to bring a spectacular product to market. This approach will help ‘wow’ your audience and add value to their lives. An everyday example of this is the much-loved iPhone.
- Less money on the line: Since you have few products with this model, your production costs are lower than those using the exponential growth model.
What’s not so sweet about the linear growth model?
- You need deep pockets: The ‘onto the next one’ setup of the linear growth model drains resources, as it takes a lot of time, money, and energy to acquire new customers. In fact, research shows it costs 5 times more to get a new customer than to sell to an existing one. Plus, since you have just one finger in the eCommerce pie, it can be disastrous if your product fails.
- Control your entire supply chain if you want max ROI: To squeeze the most profit out of your products, you need to have control over your supply chain. This requirement can be challenging to fulfill when you’re a budding eCommerce store. You may rely on suppliers to source raw material, and it’s unlikely you have your own shipping vessel or vans to get the goods to you. Consequently, you’ll incur additional fees that cut into your returns.
- Eek! So much waste!: Not only do you waste opportunities to gather feedback that could improve products, you also miss out on the chance to upsell or cross-sell customers and recycle unused materials. This opportunity cost and waste can be terrible for your brand’s revenue, growth and reputation. For example, if you sell a green product like metal straws but can’t reuse the leftover stainless steel used to make them, it’s not a good look. 👀
What’s sweet about the exponential growth model
- Achieve success at lightning speed: The nature of an exponential business growth model means you can strike gold big time and at an accelerated pace. You have multiple fingers in the eCommerce pie, which increases your odds of success. For example, if you own an oral care company, you could launch toothpaste, flosses, bleaching kits, and mouthwashes in different flavours and strengths to suit regional preferences.
- Divide and conquer: With an accelerated growth path, you have a genuine shot of dominating a market and adding value by launching various products to meet your target audience’s needs. Plus, you can use various marketing initiatives, strategies, and tools to optimise your store for sales and return buyers. This strategy can help you become the ‘go-to’ store in your field and cause your brand name to become synonymous with the niche you serve. Think McDonald’s for fast food or IKEA for flat-packed furniture.
- Drive more revenue via more channels in less time: Unlike the linear model, the exponential growth model spreads sales across territories and products. This hedging gives your brand more opportunity to generate more cash and expand reach without exposing itself to unnecessary risk.
What’s not so sweet about the exponential growth model
- Wishful thinking: The downside to the exponential growth model is it assumes things will continue to scale, yet this is far from reality. Markets crash, natural disasters occur, and sometimes things just don’t work out. All of these can affect your supply chain, revenue, and scalability, and can even put you out of action for good. So, assuming constant growth sets you up to miss your goals.
- There’s a lot on the line: On the flip side to winning big, if your products, timing, or market conditions are wrong, you can miss the mark and fail big. Since you have more products and territories on your bucket list, costs like inventory, marketing, and freight, increase. Consequently, so does your risk exposure. If any of these components are compromised, it’ll affect your operations.
3 Jaw-droppingly Good Case Studies to Ignite Your Creativity
We couldn’t round off the linear vs exponential debate without sharing some real-life eCommerce businesses that use these models to crush their growth.
Let’s take a closer look:
How Gymshark grew a whopping 193% year-on-year using the exponential growth model 🏋️
This brand started as a supplements dropshipping business before switching into producing its own gym wear in 2013. With the help of the exponential growth model, Gymshark built itself up to become an eCommerce Titan, growing at a rate of 193% for three consecutive years with an envy-inducing value of $1.3 billion.
It’s secret? Social media.
Gymshark began by sending merchandise to well-known bodybuilders and invited them to become brand ambassadors. Noticing that their influencer marketing campaigns were gaining traction, they doubled down on their efforts. Instagram was a major marketing avenue that helped Gymshark enter multiple countries at once, and they now ship to an impressive 131 countries.
Gymshark’s results make a strong case for the exponential growth model, quite literally. 💪
How Goli went hybrid to sweeten their customer’s health journey & become the #1 global health SKU 🍬
This success story started with one product: apple cider vinegar gummies (who knew?), and a strategy that resembled the linear growth model but is actually a hybrid approach.
Goli launched its product in the US, but technically made it available to the world via Amazon and its eCommerce store. It marketed the flagship product through influencer campaigns using testimonial style videos and photos, high profile PR, and a concrete email marketing strategy. Plus, the company encourages bulk and repeat orders through various discounts and promos.
It worked. In less than two years, Goli has become a showstopping success, experienced exponential growth, and developed a cult-like following.
Goli is now an Amazon best-seller, the biggest health product SKU worldwide, and its new spin-off Ashwa gummy reportedly sells 200 bottles per minute.
Goli succeeded because it saw a major problem and ran with it. They’ve zapped the pain out of consuming bad-tasting but nutritious substances (and if you ever try apple cider vinegar, you’ll understand why this product is total genius!). 👌
How a newbie entrepreneur went linear and rocketed SkinnyMeTea to $1 million in revenue per month in a year ☕
This next brand kicked off using the linear business growth model, and was an instant success. SkinnyMeTea launched in 2012 with one product: cleansing tea.
They tapped into the popular trend at the time, the ‘teatox’, and combined it with the power of Instagram influencer marketing and high-level engagement, to go from $0 to $600,000 in sales each month in the first six months.
While there was no opportunity to cross-sell or upsell at the time, the volume of customers and sales SkinnyMeTea acquired each month offset any missed opportunities. They forged a tight knit community around their product and built such a large customer base that their sales soared to $1 million in their first year of business.
SkinnyMeTea has now branched out of Australia and launched more products. Not bad for a brand started by eCommerce entrepreneur Gretta Van Riel when she had just $24 in her bank account.
How to Set Your Brand Up for Massive Ecommerce Growth
Whether you choose to go down the linear growth path or opt for the exponential growth model, there are a few universal tips you should follow to become the next ‘it’ brand.
Let’s break these down:
1. Take hold of the reins
Congrats, you’ve launched your brand! 🙌
Here lies one of the few opportunities in life where you have full permission to be a total control freak, so give it all you’ve got.
Control everything in-house, from product development to after-sales care, as early as possible in your eCommerce journey. Each time you add an external party to your supply chain, you make it more vulnerable and put your business at risk of issues you may not be able to fix. For example, if your third-party logistics company (3PL) suffers a flood that destroys all your stock and makes operations grind to a screeching halt.
To give you a real-life example, we needn’t look further than Gymshark. One of the ways Gymshark was able to gain early success was by locking down its supply chain. Gymshark manufactures its own designs and sells them on a custom website. Plus, it’s even got a warehouse and ships every product in-house to ensure they stay on-point in every area.
2. Level up your technology and processes
Basic software, aged laptops, and clunky processes may have sufficed initially, but they can only take you so far.
Ecommerce is a fast-paced world, and you’ll need to keep up to succeed.
- Take an inventory of all the equipment and software you use, then look for options on the market that are the best match for your needs.
- Upgrade in stages to avoid major disruption to your cash flow and operations i.e, better laptops and computers, followed by inventory management software, and then a 3PL.
- Look at your standard operating procedure (SOPs). Is there anything you could improve?
It’s always a good idea to look to other industries for inspiration on how to become more efficient and productive. Commit to updating your SOPs regularly to ensure it doesn’t lag in strategy or information, and don’t be afraid to bring in the pros if you need a hand nailing your strategy. For example, Goli recently invested in help from Atos, tech consultancy, and digital transformation experts to improve its productivity, product quality, and capacity.
3. Give product pages a conversion-focused makeover
Don’t fall into the trap of listing a bunch of features on your product page and calling it a day. Think of your product pages as mini salespersons for your store that spring into action as soon as visitors land on your website.
Here’s how to optimize your product pages and attract more customers from day one:
- Make sure every word on the page has a job. If it doesn’t, cull it.
- Focus on the benefits of your product and use power words in your copy to elicit emotion.
- Sell what the visitor’s life will look like after they get hold of your product.
- Have a big, fat ‘buy’ button in an eye-catching colour, like red.
- Use a format that’s easy to skim and understand.
- Upload crisp, like-worthy images.
4. Can’t decide? You don’t have to.
While the linear vs exponential growth debate is an interesting one, don’t feel pressured to pick a side. Instead, you can take a hybrid approach and combine the best features of each.
For example, you could launch a product using the linear business growth model in one territory. Then create new products to complement your flagship product that fit the trends in the regions you want to expand into.
In action, this could look like launching a healthy lentils chips brand with one flavour online in the UK. Once you succeed, branch out to other countries and use their vegetables and seasonings to create healthy snacks like chips, health bars, and booster shots.
Strategize for Next-level Growth in Your Ecommerce Business
While the linear vs exponential debate has its place, regardless of which model you choose, it’s down to you whether you climb to the top with your eCommerce store.
Don’t spend a lifetime trying to work out when to use linear vs exponential. Instead, focus on executing your business growth plans with precision and speed to ensure you get to market in time with products your target customers actually want and need.
It’s great to look for inspiration but resist the urge to compare your store to others as it can be a deadly distraction. Your journey will be different from the competition’s path, even if you’re serving the same niche with an identical growth model.
Finally, be bold and take calculated risks. This will help your store get ahead and win.
Now get out there and build a brand to be proud of!
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