Startup VIC’s Retail & E-Commerce Pitch Night

As with the same event last year, this pitch night was again hosted at the Kensington Clik Collective. Going by the audience numbers, the retail tech and e-commerce start-up sector continues to generate widespread interest, despite (or because of?) the fragile state of most bricks and mortar retailing in Australia, and the onslaught of global online shopping from the likes of Amazon and eBay.

The four pitches in order of presentation were:

barQode

According to the founder, it all started with a scarf… and how he might have paid more for the item at the time he wanted it (but less than the retail price), compared to the eventual discount price a few months later. If only he had been able to bargain on the spot. Enter barQode – a location-specific app that enables customers to make an offer on an in-store item, and retailers to match or counter the customer offer.

To be clear, this is not (yet) a price comparison tool or even an on-line platform – it’s an app aimed at specific, location-defined, in-store purchases.

While simple in concept, the app does require a huge behaviour change by shoppers. Australians are infamous for being “price sensitive” buyers (not the same as being “cheap”, as one retail consultant once corrected me). Cost plays a huge role in purchasing decisions, especially as choice is often limited in a sector dominated by an oligopoly of brands, and a traditionally restricted market in terms of parallel imports and geo-blocking.

But barQode requires Australians to get comfortable with the notion of haggling, and that is quite a culture shift. Yes, some retail brands offer price matching against their competitors, but as this pitch pointed out, this is all about in-store purchases and prompting a more emotional engagement.

Most of the questions from the panel of judges focused on the competition, customer acquisition and market entry. Using a combination of platform fees and analytics services, barQode claims to be cheaper than the competing platforms, which also risk dis-intermediating retailers from their direct customers. Costs of acquisition were not disclosed, since the app is only in very select beta. The founders appear to be targeting discount retailers rather than selecting a specific category launch. This raises the prospect of only attracting bargain hunters who are already tempted by stock clearance offers (a race to the bottom?) – rather than engaging with select brands who can afford to yield some margin while potentially securing a new customer base.

The team claim to have a patent pending (they are working on image recognition, rather than simply relying on bar codes and other inventory data), and is seeking $350k in seed funding prior to a $1.5m Series A.

Epic Catch

Under the banner, “The social collective – date differently”, Epic Catch claims to be fostering organic connections via shared experiences for singles.

I have seen this start-up pitch couple of times before, where the initial emphasis was on being a new kind of dating service. But now, presumably with more experience and more market research, it claims to be addressing the “loneliness epidemic” – despite all the so-called “connections” people have via social media (and given recent events at Facebook, how much longer will that particular trend run?)  there is actually less and less personal engagement in the world.

According to data cited by the founders, in Australia, 35% of households consist of single people, a figure expected to reach 60% by 2036. At the same time, single people (neither age nor other demographics were defined) each spend an average of $12,000 a year on social activities. (It would have been interesting to see a breakdown of this spending pattern by consumer category, season, age, gender and location?)

The business model relies on a mix of subscriptions, commissions and affiliate fees, via a business partner model, member fees and booking fees. The founders are looking to raise $1.5m, primarily to fund marketing costs, as customer acquisition has mostly been organic, word of mouth, and SEO. To help them on their journey, the founders have appointed a solid advisory board, in their quest to counter the “fast food culture of dating and matching apps”.

Winery Lane

Winery Lane is a curated online market place, servicing independent wineries. Currently engaged on an equity crowd funding program (to raise $900k in return for 18% equity), the founders suggest that the $7.5b wine industry suffers from too many brands. A few large names dominate the market (by supply and by retail consumption), and a long-tail of boutique and specialist wine makers struggle for recognition (even though they often have a superior product). The biggest challenge is: producers can’t control the end distribution, especially small producers.

Winery Land has identified three core personas of wine lovers: geek, aspirational, and seeker. Their goal is to connect independent wine makers with this target audience, by removing the risk for sellers – through enabling them to share their wine-making narratives, and only charging a success-based commission on sales.

The business model is to target 50-60 independent wineries, and charge a 30% sales commission, while offering a 20% discount to customers on 12 or more bottles.

Asked by the panel (which included a representative from Vinomofo) about potential competitor Naked Wine, the founders claim they operate in different segments – in particular, their focus on selling genuine wines (and not running private labels).

Behind the platform is a data acquisition component – by “pooling” their mailing lists, participating wine makers can actually reach a larger (pre-qualified) audience. The judges felt that marketplace models for wine are still to be proven, and wine makers are naturally very protective of their customer lists, to whom they can usually pre-sell their normally small vintages.

[As a piece of random market research, the next day I spoke to one wine-seller representing a boutique producer at a pop-up market in the lobby of a CBD office building. He claimed that by participating in a growing number of these pop-up markets around Melbourne over the past 12 months, he had increased the size of their customer list 10-fold. When I asked whether his sales and marketing strategy included using platforms such as Naked Wine, his opinion was these services were often more like marketing software. They may also require producers to discount too heavily, that they resemble something of a bulk distribution model, and that it was akin to a “pay to publish” model for wine makers – based on the cost of getting stock on to the inventory. And while it isn’t perfect, MailChimp was good enough tool for building, engaging with and growing their customer lists.]

Postie

This SME marketing platform highlights a major paradox:  small brands engage better than big brands, but social media and e-mail engagement are both declining.

Using Instagram-based campaigns, Postie has doubled average campaign engagement to around 42%, and tripled typical click-thru rates to 6%. Postie has also reduced the time to create a campaign from 5 hours to 8 minutes.

While there is some template flexibility, there are limited options, as Postie draws on the Instagram design aesthetic.

According to the founders, there are 15 million brands on MailChimp, and 8 million brands on Instagram. What makes Postie different is that it owns its e-mail campaign client, and brands get to control their own retail inventory management.

Despite some of the challenges in SaaS marketing solutions, Postie has seen success with some specific verticals such as hairdressing, but admits that is hasn’t quite got the right product-market fit. As a result, and as a means to scale growth, Postie is starting to train users, to become more of a self-serve solution.

Somewhat surprisingly, the judges voted Epic Catch the winning pitch – I guess it is hard to ignore the founder passion, and the decision to pivot away from being a “traditional” dating platform. Meanwhile, the people’s choice (based on Twitter votes) was for Postie, and by a large margin – I suspect because many start-up founders, entrepreneurs and SME owners in the audience would welcome such a service for their own business.

Next week: The fate of the over 50s….

StartupVic’s E-commerce #Pitch Night

A new venue, and a new theme – last week’s Pitch Night organised by Startup Victoria was hosted at Kensington Collective, and featured four contestants each working in different areas of e-commerce.

With some high-profile judges (including Ahmed Fahour, outgoing CEO of Australia Post, and Kate Cornick, CEO of LaunchVic), and an audience warmed by hot soup and mulled wine on a very cold and wet Melbourne night, it was not surprising that the event was packed out, despite the weather.

In addition to hearing the competing pitches, attendees were also able to meet with a number of other e-commerce startups exhibiting in “silicon alley”, including: VolStreet (a new market place for consumer goods), Liven (a loyalty program for restaurants), Buying Intelligence (data on retail trends from the fashion industry) and Straight From Farmers (a D2C platform for agricultural produce).

As per the usual practice of this blog, the startups appear in the order in which they pitched (and click on the startup names for their website links):

 Passel

Passel’s business model is built on a crowdsourced solution for same day deliveries, so that shoppers can get their purchases quicker from omnichannel retailers. According to the founders, a high percentage of online cart abandonment is due to freight costs, and delivery times.

Using something akin to the Uber model, retailers will book a delivery that could be fulfilled by one of their own staff on the way home, or by another shopper if they are in the vicinity. Same day delivery is apparently more secure, and with a registration process for delivery “agents” and no charge to the retailer until proof of delivery, Passel is also designed to de-risk the delivery service. But, not quite delivery drones across suburbia!

Currently running a limited trial at Bayside Mall in Frankston, Passel is putting most of its efforts in to training staff at the stores they work with, to make sure the process is bedded down.

The judges had a range of questions and observations about the business proposition and assumptions behind the pitch, such as: Retailing can be quite a separate function to distribution and fulfillment, and for larger retailers stock management may cover several stores, or be handled by core distribution centres – so how will shops retailers be able to match orders and deliveries on a same day basis? Within large outlets, the time taken for delivery staff to actually locate an item may become burdensome, so has Passel considered geo-coding within stores? What is the opportunity outside Australia?

My own observations about this pitch included: what are the issues with insurance, what is the fit with click’n’collect services, and is there a bigger opportunity in solving current problems with the use of contract couriers on demand?

Vesta Central

Describing itself as “a marketplace for destination partners“, Vesta Central is also one of a growing number of Product Data Distribution Platforms (PDDP), between suppliers and retailers. Essentially, it offers an API to allow manufacturers to upload their inventories to support downstream distribution and sales.

Citing technological, time and cost barriers for product suppliers and retailers to upload and distribute product data, Vesta Central’s main proposition is to help move from physical to digital, via a centralised master data platform. From here, retailers can pull product data in real-time.

I’ve seen similar startups and businesses that also provide product manuals, technical specifications and even product training to sales staff, so the judges also felt that the founders need to gain a better knowledge and understanding of the competitor landscape. Another word of advice they had for the pitch was, “Let go of the PowerPoint…”

To Me Love Me

With a tag line of “Fashion Tech – Made To Measure“, this startup is trying to address the issue of incorrectly fitting clothes which is creating retail dissatisfaction.

Using key measurements and six data points, the service develops personal profiling
based on a proprietary algorithm according to body shape and style preferences. In return, it can offer curated, personalised, and even some custom-made suggestions and recommendations – but mostly ready-to-wear brands.

Aiming to help brands bond with their customers, the service also introduces social elements via peer/customer feedback. The service provides a seamless experience and offers a level of control to customers – but essentially, it’s a data play: collecting, aggregating and distributing customer statistics and profiles to the industry.

Although the pitch mentioned a SaaS model (with three tiers of service and pricing), the economic model was not fully outlined. However, the judges were clearly impressed by the founders’ international contacts in the US, UK & Europe, and their global ambitions.

CableGeek

With one simple sales proposition (“selling trusted mobile accessories at low prices“), CableGeek aims to address three common problems in this retail product category: Inconsistent product quality, high retail mark-ups, and difficulties in buying online (especially the shipping costs on lower-price items).

The CableGeek solution includes: free shipping from Australian suppliers, offering global brands, a focus on mobile (ApplePay), and key partnerships (instant pickup via Blueshift’s IBP, and fulfillment via eStore Logistics).

With a Google customer review rating of 4.8, CableGeek must be doing something right. Asked about what sets it apart from the competition, and how it will fend off competition, the founders cited the end-to-end automation plus their own full stack development – so any challenge is more likely to come from large retailers (who don’t necessarily have the focus or the in-house technical capabilities?).

However, given that the business was started by Ryan Zhou, who is also a co-founder of CoinJar, the judges wondered whether he would be over-stretched, or unable to commit 100% to this new business – especially as in this type of retail business, the only way to succeed is by dominating market share, which requires full-time commitment.

The judges were obviously won over by To Me Love Me‘s approach, as it took out first place on the night. There was also a sense that it was the only pitch that clearly had a real eye on international opportunities, and had demonstrated some serious industry credentials.

It was also interesting that a couple of the pitches referred to issues with delivery costs in Australia, especially for smaller, lower value items – something that the incoming CEO at Australia Post might want to address?

Finally, it was disappointing that there was no opportunity for questions or input from the audience – with one of the largest turnouts ever for a regular pitch night, Startup Victoria needs to think about how to incorporate more audience participation – these events should not just be a spectator sport.

Next week: Law & Technology – when AI meets Smart Contracts…