Linear vs. Exponential Growth for E-commerce Entrepreneurs
As an established e-commerce business, you know how to bring your ideas to life in a profitable way. But successful entrepreneurs are never satisfied. We want our businesses to grow.
If we’re making good money, we want to make great money. If we’re making great money — well, there’s always a higher level to reach.
Ben Reed, creator of Diamond Whites Aligners, found that higher level through exponential growth.
While sitting in the dentist’s chair one day, Ben was struck by a burst of inspiration. But unlike many who simply dream and never do, Ben followed through on his big idea — bringing the promise of straight teeth without the expense to consumers.
It worked. Because of Ben’s well-crafted plan for strategic scaling, the business achieved 110% year-over-year growth.
Ben and the team chose a growth model that made sense for their unique business needs and growth goals. But do you know what that looks like for you?
To discover whether a linear or exponential growth strategy will serve you best, let’s look at differences between the two.
Linear vs. Exponential Growth
- What Is Linear vs. Exponential Growth in E-commerce?
- Linear vs. Exponential Growth Models — A Closer Look at the Pros and Cons of Each
- A Peek Into the Growth Strategies of Four Real Brands
What Is Linear vs. Exponential Growth in E-commerce?
Understanding the Linear Growth Model
A linear growth model is a focused business plan that involves creating a single product and selling it in one geographic location.
With this model, you’re banking on a slow-and-steady increase in profits over time, much like an upward diagonal line. Expansion happens steadily with solid goals and KPIs to measure your success along the way.
Here’s how a linear growth model works:
- With the linear growth model, your e-commerce store invests in materials to create a product and you then sell that product in a single market (typically your domestic country). For example, if you own a liquor brand in the US, you might turn grain and water into whiskey and sell it online in US territories only.
- You then scale customer by customer. Once you’ve got a sale, you’ll move straight on to the next prospect. There may be less of a focus on cross-selling and upselling.
- If all goes well, you eventually sell your flagship product in different territories to hit your expansion goals.
The linear growth model often takes a less aggressive but no less effective approach. It is simple to grasp and is the first choice for many e-commerce entrepreneurs.
As Compared to the Exponential Growth Model
The exponential growth model involves rapid growth in many areas simultaneously.
It often involves many products and even multiple product lines. E-commerce entrepreneurs employing an exponential growth model want to beat their competitors to market with the next big idea and see explosive growth quickly.
Businesses using the exponential growth model tend to 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 a lean methodology to scale faster and more efficiently. It’s an exciting approach that keeps your company on the pulse of current trends. With the right data and tools, it can also help you grow your business by using customer feedback to optimize your product offerings.
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.
Linear vs. Exponential Growth Models — A Closer Look at the Pros and Cons of Each
The great thing about these models is that although they function differently, you can be extremely successful with either one.
But the keys to that success depend on a variety of factors — resources, experience, timing — it all plays a role. You may even find yourself organically moving away toward one model and toward another as your business evolves.
At the end of the day, both models can be profitable, but neither is perfect. Let’s take a closer look at the upsides and drawbacks of each.
What Works About the Linear Growth Model?
You get to be a bonafide brand owner: Since you design, make, and sell the items yourself, you have the chance to use this as a selling point in your storytelling and build a strong brand community. This also means access to intellectual property rights to sell later if you choose.
You keep the focus on differentiation: With a linear model, you have the opportunity to lean into your brand’s unique superpower and bring a spectacular product to market. This approach will help ‘wow’ your audience and further increase brand loyalty and repeat sales.
Less money on the line: Since you have fewer products with this model, your production costs are lower than with the exponential growth model.
Easier to predict: Because you’re working with a smaller market and a smaller target audience, you can more accurately gauge the ebbs and flows of your unique niche and product seasonality.
When working within exponential growth with multiple product lines and markets, you’ll have to concern yourself with a greater number of external forces, such as a natural disaster in one country impacting your bottom line in another.
With a linear growth model, you typically have greater control over where you’re selling and who you’re selling to.
What Are the Drawbacks of the Linear Growth Model?
Requires increased control of the supply chain: To maximize your profits in a linear model, you need control over your supply chain. You may rely on suppliers to source raw materials as well as other shipping providers. Consequently, you may incur additional costs that cut into your returns.
Fewer revenue lines: In a linear growth model, you may miss out on opportunities to upsell or cross-sell customers — not to mention the innovation that comes with those opportunities. For example, it’s not a good look if you sell a green product like metal straws, but can’t reuse the leftover stainless steel used to make them. A green brand with an exponential growth model might recycle unused materials to launch other beverage items, like stainless steel water bottles or coffee mugs, to reduce waste and open up new lines of revenue.
Slower growth: The slow-and-steady approach of the linear growth model is, well…slow and steady. 🤷
You may not experience the type of meteoric rise that makes for great retail headlines. Instead, growth will be gradual and measured. While potentially less exciting, this type of growth is also far easier to track and predict. You’re essentially keeping the destination in mind on a longer growth journey.
What Works About the Exponential Growth Model?
Faster pathways to growth: The nature of an exponential growth model means you can usually increase sales at an accelerated pace. With multiple fingers in the e-commerce pie, this means you also increase your odds of success. For example, Ben and the team at Diamond White Aligners launched Diamond Whites, a product for non-invasive teeth whitening that they knew their customers wanted.
Dominate your market: With an accelerated growth path, you have a better shot at dominating your niche and adding increased value to shoppers by launching products to meet your target audience’s needs.
You also have access to multiple marketing initiatives, strategies, and tools you can use to optimize your store for repeat sales and return buyers. This strategy can help you become the ‘go-to’ store in your category and cause your brand name to become synonymous with your niche.
Broader range of sales channels: Unlike the linear model, the exponential growth model spreads sales across territories and products. This hedging allows your brand to generate more sales and expand its reach while diversifying risk.
What Are the Drawbacks of the Exponential Growth Model?
Wishful thinking: The downside to the exponential growth model is it assumes things will continue to scale, but that’s not always the 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.
There’s a lot on the line: If your products, timing, or market conditions are wrong, you can lose a significant amount of money. Since you have more products and territories to cover, costs like inventory, marketing, and freight, increase.
If any of these components are compromised, it can affect your operations.
More plates to spin: When you launch yourself into the global market, you have to deal with a new host of challenges that could impact your bottom line at any moment.
Unlike a linear model, where you’re working with a smaller more predictable area, you’ll need to keep your eyes on many different markets as you grow.
Linear vs. Exponential Growth: A Peek Into Four Brands’ Strategies
We couldn’t round off the linear vs. exponential debate without sharing some real examples of e-commerce businesses that used these models to crush their growth goals.
Let’s take a closer look at four inspiring stories from four very different brands — Gymshark, Goli, SkinnyMeTea, and Drummond Gaming.
Exponential Growth: How Gymshark Grew 193% Year-over-Year
What started as a supplements dropshipping business transformed into a bonafide gym wear brand in 2013. With the help of an exponential growth model, Gymshark built itself up to become an e-commerce titan, growing at a rate of 193% for three consecutive years with a value of $1.3 billion.
Gymshark began by sending merchandise to well-known bodybuilders and inviting them to become brand ambassadors. Noticing that their influencer marketing campaigns were gaining traction, they doubled down on their efforts. Today, the brand ships to an impressive 131 countries.
Exponential Growth: How Goli Became the #1 Global Health SKU
Goli’s success story started with one product: apple cider vinegar gummies (who knew?), and a strategy that resembles the linear growth model — but is actually more of a hybrid approach.
Goli launched its product in the US but made it available to the world via Amazon and its own e-commerce store. It marketed the flagship product through influencer campaigns using testimonial-style videos and photos and high-octane social marketing encouraging bulk and repeat orders through various discounts and promos.
Today Goli is an Amazon best-seller and the biggest health product SKU worldwide. Its new spin-off Ashwa Gummy reportedly sells 200 bottles per minute.
Linear Growth: How SkinnyMeTea Reached $1 Million in a Year
This next brand kicked off using the linear business growth model and was an instant success.
SkinnyMeTea launched in 2012 on Shopify Plus with just one product, a cleansing tea. They tapped into the popular ‘teatox’ trend at the time and combined it with the power of Instagram influencer marketing to go from $0 to $600,000 within the first six months.
While there wasn’t much cross-selling or upselling at the time, the volume of customers and sales SkinnyMeTea acquired each month offset any missed opportunities. The brand forged a tight-knit community around its product and built such a large customer base that its sales soared to $1 million in its first year.
Linear Growth: How Drummond Gaming Reached Seven Figures on Amazon
E-commerce entrepreneur Jon Drummond turned his passion for collectibles into a thriving US and Mexico-based business that quickly reached $1 million in sales.
As a reseller, Jon can’t rely on manufacturers. His inventory is composed entirely of collectible items. But pandemic-induced shipping and inventory challenges caused his sales to decline.
After using Sellers Signals for a clear view of his business, he was able to re-evaluate price points and inventory. With flexible working capital, Jon and Drummond Gaming could secure the right inventor, and gradually expand into new markets.
Can’t Decide Between Linear vs. Exponential Growth? You Don’t Have To.
At the end of the day, there is no one way to scale your e-commerce business.
So while the linear vs. exponential growth conversation is an interesting one, don’t feel pressured to pick a side. Some of the best brands have seen sustainable success using a hybrid approach.