"Make the great digital pivot": When Shark Tank investor Kevin O'Leary outlined how online sales became a survival strategy

In an interview on October 7, 2020, Shark Tank investor Kevin O'Leary discussed the importance of online sales for businesses, emphasizing that companies unable to establish a digital presence would struggle to survive.

Speaking with Boost Oxygen, a company he invested in during the show's season 11 episode 2, O'Leary described how the shift to digital platforms became essential for businesses amid changing market conditions. He stated,

"The ones that were able to make the great digital pivot... were able to tell their stories online on social media platforms, already had the skills to digitize storytelling."

The Shark Tank investor's comments highlighted how businesses that adapted to online sales maintained revenue streams while others faced significant challenges.

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The digital pivot: Adapting to online sales in a changing market according to Shark Tank Kevin O'Leary

The shift to digital as a necessity

O'Leary explained that many of the companies in his investment portfolio depended on retail distribution for a significant portion of their revenue before facing disruptions in March 2020. The Shark Tank investor said,

"Most of my companies, over 50 of them, had 50% of their revenues coming from retail distribution, which basically got shut down in March."

With retail channels no longer accessible, companies needed to pivot to digital platforms to sustain operations. He further outlined that companies with an established online presence and the ability to engage customers through digital content had an advantage.

According to O'Leary, businesses that effectively leveraged digital platforms not only replaced lost retail sales but also improved profitability through direct-to-consumer models.

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Direct-to-consumer sales and profitability

O'Leary described how companies that shifted to online sales improved their financial performance by eliminating intermediary costs. He explained,

"They have replaced the significant portion of their retail sales, which were 50% gross margin businesses at best, with direct-to-consumer, where close to a hundred cents on the dollar is there."

This transition allowed companies to generate higher margins despite lower overall sales volumes. He also pointed out that businesses that adapted successfully became less dependent on traditional retail structures.

"If they only replace half their retail revenue at 100 cents on the dollar, they’re agnostic to free cash flow, and that's exactly what’s happened to about 75% of them."

The Shark Tank investor emphasized that companies with a strong direct-to-consumer model were able to sustain their financial stability even amid significant market disruptions.

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Challenges for certain industries

Though O'Leary pointed to the success of companies that had adopted digital sales, he noted that some sectors had more trouble. He noted that approximately 25% of companies, especially those in the restaurant, entertainment, wedding, and travel sectors, had big challenges because of changes in consumer behavior.

"They're not having an easier time of it because their customers have basically changed purchase behavior, and maybe permanently, we don’t know." he said.

The Shark Tank investor noted that these businesses struggled because their operations depended on in-person interactions, making digital transitions more complex. O'Leary also pointed to companies with essential products, such as Boost Oxygen, as examples of those that successfully leveraged online sales.

"It’s companies that have essential products like Boost that were able to go online, and you guys already had the skill set to make great videos."

He emphasized that businesses capable of adapting to digital strategies had an advantage over those that were unable to do so.

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