Top 5 in-store experience startups

 I saw a few interesting studies this past week on in-store shopping experiences, but one in particular peaked my interest. Samsung commissioned a report with Future Stores to study the in-store shopping habits of 16–24 year olds. The bottom-line? Retailers need to understand how to best engage with the next generation of shoppers.

We currently track numerous startups in the retail online to offline scan that can help merchants enhance the in-store experience; here are five of my favorite up-and-coming companies.

Swirl:

Swirl is an in-store mobile marketing platform that targets shoppers based on proximity via beacons (Bluetooth low energy devices). The company is exciting because of its Swirl Ad Exchange (SWx for short), which is touted as one of the first programmatic ad exchanges for proximity-based in-store marketing. The company also recently announced that it is integrating with ~5 DPSs and agency trading desks, although Swirl declined to state which ones (source).

Fiverun:

Fiverun is a cloud based retail platform that ties into a merchant’s existing software system to provide sales associates with digital product catalogues, customer relationship management tools, and mobile point of sale functionality. The company enables retailers to easily create a high-touch shopping environment and seamlessly integrate omni-channel management (e.g. inventory).

ByteLight:

ByteLight is a location-based marketing platform that delivers targeted content to a shopper’s smart phone. Unlike most location-based platforms, ByteLight is unique for its ability to integrate into a store’s existing lighting hardware to deliver content. The company uses a combination of Visible Light Communication (VLC) and Bluetooth low energy (BLE) technology to detect very granular location data, which it then uses to serve hyper-targeted ads.

Alluring Logic:

Alluring Logic is an omni-channel customer relationship management tool that can leverage inventory and social data to help sales associates personalize communication and experiences at scale. The technology can automatically generate customer insights and tasks for associates, as well as provide management with a real-time snapshot of key sales statistics.

Aisle411:

Asile411 is an indoor location and marketing platform that uses patent pending technology to map floor plans, track shoppers, deliver offers, and analyze data in brick and mortar stores. This company has a comprehensive solution and is currently used in over 12,000 stores with brands such as Home Depot, Walgreens, and Shop’n Save.

Here are some of the highlights from the study:

  • “The findings reveal that 71% of the 16–24 year olds surveyed said they visit large retail environments at least once a fortnight with two-thirds visiting to look for a specific item. However, they were found to frequently make their final purchase online, and increasingly through their mobile phones.”
  • “…44% will be searching for a better price online through their mobile device while they are in-store.” (Though it should be noted that some studies show that showrooming is actually on the decline source.)
  • “While 16–24 year olds see the value of using tablets and in-store technology to check stock or browse catalogues, few use technology designed to enhance their experience. The study found that less than 20% of young shoppers scan QR codes, while more than 90% ignore Augmented Reality apps.”

Five companies to watch in the retail online to offline sector

Retailers are approaching the most important time of the year – the holidays. These few weeks are the retail industry’s most lucrative period, which account for nearly 40% of most stores’ annual sales (source). According to the National Retail Federation (NRF), this year’s outlook is very optimistic with November and December sales for all purchases (excluding auto, gas, and restaurant sales) projected to reach $616.9B, 4.1% higher than 2013. The NRF’s chief economist contributes this optimism to macro trends such as increased consumer purchasing power and a rise in disposable incomes (source).

Despite the good news, retailers should always be looking for other opportunities to add new value and unlock different segments of consumers. I took a look at the retail online to offline startup space and picked out some of the most interesting companies of this year. Just to note, this is the beginning of a longer set of posts I plan to do on various macro trends.

Cover (In-Store Experience, raised $5.5M in July): Cover’s tagline is “Uber’s payment experience at restaurants” and enables consumers to easily pay for your meal on your mobile device. The app also allows multiple users to split checks, automatically calculate tip, and provides a digital receipt detailing charges.

Why it’s interesting: Compared to the broader retail and e-commerce groups, there has been significantly less innovation in restaurant and food service technologies. However, with mobile payment platforms on the rise and food-tech deal activity climbing by as much as 37% year-over-year (source), timing seems to be spot on. As of September, Cover is working with 97 restaurants in New York and 32 in San Francisco, it averages about 75 seated tables per night in New York with a monthly growth rate of 30%.

Shopkick (In-Store Experience, Local Incentives, acquired by SK Planet in September): Shopkick is a smartphone app that offers in-store marketing and check-in services for retailers. In addition to driving people into brick and mortar locations, the company also engages with in-store shoppers using contextually aware promotions. In September 2014, SK Planet acquired Shopkick for $200M to branch out into the US mobile commerce space (source).

Why it’s interesting: On the path to purchase, 50% of decisions are changed in store (source), so its important for merchants to be able to engage with shoppers during this crucial period. While this concept has been around for some time (e.g. coupon dispensers on store shelves), new technologies for richer campaigns such as smart phones and beacons are becoming much more ubiquitous and ingrained into consumer behaviors. Furthermore, the 10x acquisition by SK Planet and numerous positive indicators (e.g. Macy’s announced it was installing 4000 Shopkick beacons in its stores) for Shopkick indicate market validation for their model.

Blippar (Retail Augmented Reality): Blipper is an augmented reality app and technology platform that works with brands to help build and execute marketing campaigns with rich, interactive content (e.g. posing with a celebrity, unlocking an exclusive location-based video, virtual fitting rooms).

Why it’s interesting: Augmented reality enables marketers to create new experiences that maximize the capabilities we currently have available to us. The company counts global brands such as L’Oreal, Universal Pictures, and Jaguar among its clients and will be partnering with 50 big brands in India as it continues to expand globally. In June 2014 the company also acquired Layar, another player in the augmented reality space.

Instacart (Convenience as Marketing, raised $44M in June): Instacart is a same-day grocery delivery service that partners with local stores such as Safeway and WholeFoods. The company uses a crowdsourced marketplace model to connect users with personal shoppers who pick up, and deliver the items, sometimes in as little as an hour. The service currently operates in 15 areas including San Francisco, Los Angeles, New York City, Austin, Boston, Chicago, Philadelphia, Atlanta, Seattle, and Washington, D.C and more.

Why it’s interesting: Similar to how Amazon Web Services disrupted traditional cloud infrastructure costs, Instacart and other last-mile-logistics players have an opportunity to shift the way goods are delivered to consumers.

Estimote (Retail Internet of Things): Estimote builds wireless sensors that use Bluetooth low energy, known more commonly as beacons, to locate and communicate with mobile devices. The company also provides the corresponding software development kit (SDK) that developers can integrate into their apps.

Why it’s interesting: Beacon (or as Apple has coined, iBeacon) has been attracting massive amounts of interest from merchants and marketers as of late due to the variety of use cases and ubiquity amongst consumers (thanks Apple). While retail is currently the biggest interest, this is only the beachhead market with expansion into other areas such as sports stadiums, music venues, and more.

Retail online to offline company spotlight: liateR

liateR is a retail technology startup that provides fashion merchants with in-store interactive tools, (e.g. augmented reality displays) and analytics. The company produces products that enable retailers to set up digital catalogs, virtual fitting rooms, and social media connectivity. On the analytics side, liateR’s software automatically collects data across a variety of touch points on the shopper including age, gender, item preferences, interactions, and mood, which it analyzes for the merchant. I had a chance to speak with Antonis Argyros, co-founder of liateR and you can see a transcript of the conversation below. The company was founded in July 2014 and is headquartered in Athens, Greece with seven employees to date. liateR is a graduate of the Metavallon, a Greek social enterprise accelerator founded and operated by Alexandra Choli.

Screen Shot 2014-10-10 at 4.38.18 PM

Note: The below answers are verbatim from the CEO with only minor adjustments made for fluidity.

Q: Please explain your company’s value proposition.

liateR is an interactive sales solution for retailers and brands in the apparel and accessories market that uses gesture control, voice recognition and augmented reality to create an environment where consumers can digitally try on and buy clothing. At the same time we can combine the data that we can automatically get from the user like age, gender, overall mood with the way user interacts inside the application in order to deliver customer centric content. We can deliver this content two ways a) by suggesting specific products that the user is more likely to relate with and b) by creating tailor made messages and targeted offers that will increase a user’s engagement.

Q. Who is your target customer? How will these change as the company evolves?

We have identified three customer segments – retailers, brands, and shopping malls, and focus on serving them by providing top B2B services.

At the same time, we also acknowledge that almost all of the top tech giants have invested in similar technologies, Microsoft with the Kinect sensor, Apple with PrimeSense, Intel with the RealSense and Google with its project Tango. Our strong belief is that as the company and product evolve, liateR will become a consumer product installed on million devices all over the world.

Q: Who is your competition and what is your differentiation?

The vast majority of available solutions are focused on online retailers and do not provide any kind of personalization. Successful products like Fits.me and Dressformer are trying to help e-shops (e-commerce retailers) to create a more engaging experience for the consumers using avatars or 2d cameras in order to take photos of the user. Currently, there are limited solutions that use gesture controlled sensors, mainly limited to Microsoft’s Kinect product. In most cases with Kinect, the models are not even 3d and cannot offer the range of solutions (e.g. in depth analytics, customer support tools) that we can with liateR.

Q: What is your business model?

We have three revenue streams:

  1. A one-time license fee in order to get the basic version of liateR along with the necessary customization and training.
  2. Seasonal fee in order to receive the latest updates and upgrades.
  3. Extra customization services that vary from creating 3d models for the customer to providing the necessary hardware.

Q: What are the key barriers to entry for your business?

  1. Technology – We are really fortunate to have in our team well-educated and experienced members that have helped us to reach an outstanding level and speed in our product development. For example we are one of the few (if not the only) worldwide solutions that can support 3d models in the virtual fitting room functionality while at the same time we have developed cutting edge solutions that personalize the experience for every user.
  2. Domain expertise – We have over 30 years of combined retail experience in the industry. This gives us the ability to recognize the needs of retailers and serve them in a unique way.

Q: What are some statistics on your business?

We already have the first set of customers that have implemented liateR in their businesses. As we speak, liateR is installed in 10 stores in Athens as well as in the headquarters of the biggest wholesaler in women’s fashion clothes. In the coming months, it should be available in the biggest shopping mall in the country as well.

Q: What is the background/experience of the current management team?

We have a well-rounded team that combines many years of experience in the retail industry and deep knowledge of the available technologies. Half of our team is built with retail business owners and the other half are pioneers in Human Computer Interaction technologies.

  • Antonis Argyros (CEO) and Stamatis Argyros (Key account manager) founded their own retail business 16 years ago and currently have six sport stores and an e-shop (www.e-sportmania.gr) in Athens.
  • Marianna Vakalopoulou (Business development) was one of the co-founders of www.mageca.com, which is the first worldwide appstore for gesture-controlled apps.
  • Vangos Pterneas (CTO) has won the Imagine cup of Microsoft and was recently announced as MVP in his field.

As a parting thought, with approximately 90% of total retail sales still taking place offline it will be interesting to see what technologies will disrupt this market — especially with the difficult nature of fashion e-commerce. For complete coverage of the space, be sure to check out the Retail Online to Offline scan. Thanks for the time and good luck, Antonis!

RETAIL ONLINE TO OFFLINE COMPANY SPOTLIGHT: WRAPP

Wrapp is a Stockholm-based social gifting service and brand discovery tool for mobile consumers. The company has raised over $25M in funding since 2011, and competes in a variety of categories in the retail online to offline sector including coupons, social discovery, and local incentives. While there are a number of competitors in each category, Wrapp has a significant amount of funding and is backed by notable names such as Greylock Partners, Qualcomm Ventures, American Express, and Reid Hoffman. Wrapp has over 200 merchants using the platform with household names such as H&M, American Eagle, Office Depot, Victoria’s Secret, Sephora, and more.

Screen Shot 2014-10-03 at 2.04.00 PM

The app has four main use cases for end-consumers (taken from their website):

  1. Give gifts – Give your friends free gifts for top brands in-store and online. Choose from a growing list and send gifts via Facebook, email, or text message from your phone or desktop.
  2. Discover and follow brands – Discover new stores and revisit old favorites. Learn about merchants and visit their online stores to check what’s in stock. Follow your favorite brands to get updates and special offers.
  3. Claim promotions – Claim special offers before heading out to shop. If you’ve got a friend who’d love the deal, you can send it to them for free. Or, tell everyone by sharing it on Facebook or Twitter.
  4. Get updates – Get updates about new brands and promotions so you never leave home without some offers in your pocket. Birthday reminders let you know right when to send gifts to your loved ones.

I had a chance to chat with Lisa Enckell, VP of Marketing at Wrapp, who has been with the company for three years now. You can see a summary of our conversation below.

The founding story and management team:

Wrapp was founded in Stockholm, Sweden, in 2011 by a team of serial entrepreneurs – Andreas Ehn, Carl Fritjofsson, and Hjalmar Windbladh. The co-founders have years of experience and hail from various technology companies including Spotify, Rebtel, Stardoll, Groupon, and Soundcloud. They saw the success that Groupon was having back in 2010, but believed that the daily deals model was unsustainable for both merchants and consumers.

Wrapp’s value proposition and how the product works:

For consumers, Wrapp allows you to send free promotions and paid gift cards to friends as well as claim deals for yourself. At the point of redemption consumers simply open the app, click on the relevant deal, and Wrapp will generate a unique barcode or QR code that the merchant can scan into their system.

For merchants, Wrapp is a marketing tool that attracts new customers as well as engages existing customers. The company provides e-commerce style metrics for retailers to enable granular tracking, performance statistics, and return on investment metrics. Algorithms and data from social networks also enable better targeting capabilities and attribution tracking.

The business model:

Wrapp charges merchants purely on a performance basis, meaning there are no fees until the consumer makes a transaction – not even an initial setup fee. Once the promotion is redeemed, the company charges a fixed fee per use. In order to prevent merchants from abusing the free listing service, any promotions that are uploaded must be the best available deal – for example, a merchant cannot list a 30% off coupon on Wrapp then turn around and use it to drive traffic for a better 50% coupon in-stores.

Evolution of the company:

The company initially started with a tool that enabled friends to give birthday gifts via Facebook. Today, the tool has evolved into a mobile marketing and couponing platform. Going forward Wrapp hopes to move closer to the transaction and is currently beta testing a new product that, I presume, will be geared as another merchant tool. This new product is expected to launch in the US early November 2014.

Traction:

The multi-national company has operations in both Sweden and the U.S. As of September 2014, Wrapp had over 3M total users between both countries with the breakdown as follows:

  • Sweden: over 900k people on the app (10% of the total Swedish population) with core users consisting mostly of 30–35 year old moms in smaller cities
  • U.S.: over 2M people on the app with core users consisting mostly of 18–24 year olds in major metropolitan areas

As a final thought, Wrapp has raised a solid amount of funding and it will be interesting to see what their latest product turns out to be. There is no shortage of contenders in the mobile promotions space, but as uptick is expected to increase significantly in the coming years, more merchants will be turning to startups that can operate across all segments of the customer journey. I’ll be sure to update this as soon as I hear back from them in November!

Retail Online To Offline Company Spotlight: Placemeter

Placemeter, a physical location analytics company, announced a $6M series A last week, increasing its total funding to $7.8M as of 2012. The company uses video feeds to collect and analyze data around a variety of factors such as foot traffic, dwell rates, and even the velocity of movement to derive insights. While this company tangentially competes with other physical analytics players, Placemeter has a unique angle in how it uses data for purposes such as city planning and development.

I had a chance to catch up with David Fine, who works on product and community at Placemeter, and he spoke more about the company and what they are up to. You can see a summary of our conversation below.

What is Placemeter doing:

Placemeter is creating a real-time data layer, measuring physical activity and providing contextual information around specific locations. While the legacy method involved individuals manually counting the number of people via a clicker, the company enables its customers to use new technology to monitor anything that is happening on the street such as balk rates (e.g. how many people look into your store but decide not to enter), engagement rates, and other traffic details. The use-cases for this data vary and range from public works initiatives to private sector businesses that want to gauge performance in specific locations. The product is meant for customers who have been “starved for data” and to assist in helping clients make more data driven decisions.

How it works and how data is collected:

The company takes raw video footage and feeds that into algorithms that dissect, extract, and publish the data to its real-time data platform. Customers can request reports for this data, which are produced ad-hoc and currently based on the customer’s unique needs.

The data streams are collected from a variety of sources. In addition to public video feeds, the company also works directly with city agencies, private businesses, and crowd sourced video feeds from your average Joe. Users can take their old mobile devices, point them toward the streets, and then direct the video streams towards Placemeter in exchange for monetary compensation. The company is currently paying its users ~$50 per month in exchange for video feeds in New York. No word on how many phones are currently on the platform.

Business model and clients: 

Placemeter’s business model is fairly straightforward selling data, analytics, and insights to both public and private clients. While the company did not specify the customer mix, it did say it was working with public groups and private retailers providing insights on a variety of data points. The company believes that eventually the data will enable Placemeter to create a multi-tiered pricing and compensation structure with the lowest level of data sold for basic metrics and the highest level for advanced analytics using the data to measure things such as balk rate, performance tracking, and more.

Risks and privacy concerns:

Privacy and security, of course, is top of mind for most individuals – especially as of late with the recent Target, Home Depot, and iCloud hacks. We can also see this with the latest fiasco at Philz Cofee, a local bay area coffee chain that was using an analytics company to track its customers. If you are interested in learning more, check out the article I wrote here. Placemeter is addressing this concern by sticking to three “commandments.”

  1. Placemeter never records video. Ever. All data is anonymously aggregated and then analyzed in real-time, there is no video storage taking place.
  2. Placemeter will not build anything to individually track people. That means there is no “match hashing” for promotions and no personally identifiable information (PII) is collected.
  3. Placemeter doesn’t track data in your home or a private location without the owners consent. While the company does give you performance numbers (e.g. balk rate), it will not tell you what customers are doing once inside a private location.

This combination of factors should help ease people’s minds about what how the technology works and what the company is actually measuring.

Looking ahead: 

Going forward, the company hopes to continue developing its video streams as well as expanding its real-time video platform. Placemeter also wants to create an ecosystem of apps that can take advantage of the data they are providing. This can include location-based games, online to offline commerce, advertising technology, and much more. The company believes that the number one driver of growth is going to be its self-serve platform where users can easily log in and consume insights at any time.

In conclusion, Placemeter is tackling a big problem using a new approach to data collection and interpretation. The company is also positioning itself in a unique light by also working with public entities with the eventual goal of helping disrupt traditional surveyors and other obsolete processes.

*Note: This interview took place before the latest round of funding was announced.

Retail Online To Offline: Funding Breakdown

I pulled some data from our Retail Online To Offline scan comparing the total dollars raised to the number of companies in each category. You can see the breakdown below:

excel output funding sep

Categories that have higher funding amounts, but a relatively lower number of companies indicate larger rounds of financings that typically follow a few market leaders. Some of the categories that exhibit this include Local Daily Deals, Social Discovery, and Coupons – in line with what we’ve seen over the last few years. Vice-a-versa, categories that have low funding figures with relatively high number of companies indicate that the space is overcrowded (e.g. low barriers to entry causing a flood of similar companies), which could be disastrous for an investor or entrepreneur with no institutional memory of the space. The biggest group under this current criterion is Loyalty Programs.

To take a closer look at the categories that fall under high funding/low volume, Local Daily Deals encompass companies such as Groupon and Living Social, which grabbed the lion’s share of financing during the land grab back in 2010/2011. Interestingly, this category is also home to hundreds of clones (if not thousands), although many were localized and ultimately immaterial due to the massive financing rounds and IPO of dominant companies. We can also see the same in Social Discovery with Pinterest and Fancy raising a collective $841M. And this is also the case with Coupons, which includes companies such as RetailMeNot ($300M) and Coupons.com ($277M). Now granted some of these players are public, and while we focus on the startups, it’s still a good representation of the competitive landscape that any new startup would need to take into consideration when jumping in.

On the flip side, startups in categories that could be viewed as overcrowded may have a harder time attracting investors or significantly differentiating their product offering from others. The Loyalty Programs category is a prime example of this, there are numerous early stage companies that are approaching merchants with similar offerings but no clear market leader has emerged — we can see that only 32 of the 81 companies are funded, giving the category a 39% funding rate as compared to the inverse, which is as high as 72% (Social Discovery).

As we continue to cover more companies and more sectors, I expect this data to normalize, but it’s important for any entrepreneur or investor to always know what’s going on at any given time.

Updated retail online to offline map – Sep 2014

With the ‘Retail Online to Offline’ scan hitting 500+ companies, I wanted to take a step back and look at the current landscape. I’ve created over 19 categories with the latest one being “Retail Internet of Things (IOT),” which covers companies that manufacture or sell physical devices as part of their core offering. This is partially due to the rapid rise of Bluetooth low energy devices (ibeacon), as well as other products such as physical wallet devices (e.g. Coin), NFC stands, and smart objects that integrate into a retailer’s existing hardware.

See the one page tear-out below:

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So far I am covering 14 companies in this category, some from the existing landscape, which already represent ~$100M+ in funding. Following on the heels of IOT growth, we can probably expect to see much more interest and financings in specific retail applications over the next few quarters. The recent initiates from the likes of Apple and the Merchant Customer Exchange (MCX) to make mobile payments and mobile loyalty platforms more ubiquitous also exacerbate this trend – incentivizing merchants through sheer market size to try new technologies.

This sector is still rapidly growing so it will be interesting to see what other categories being to appear.