EP140 - Stripe Head of Stripe Issuing, Lachy Groom
Stripe is a payment processor that provides a set of tools to help businesses accept payment online. Their clients include Warby Parker, Wish, and Target. Lachy was the 30th employee at Stripe, he leads Stripe Issuing which is an end-to-end platform for quickly creating, distributing, and managing physical and virtual cards.
In this interview, we cover Lachy's background, the range of Stripes services, the state of online payments, mobile payment best practices, digital wallets, and marketplaces.
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Episode 140 of the Jason & Scot show was recorded on Friday, August 3, 2018.
Join your hosts Jason "Retailgeek" Goldberg, SVP Commerce & Content at SapientRazorfish, and Scot Wingo, Founder and Executive Chairman of Channel Advisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
[0:29] Welcome to the jason and scott show. This is episode one, forty, being recorded on friday, august third, two thousand eighteen. I'm your host, jason retail, g, goldberg. And, as usual, i'm here with your co host, scottwingo.
[0:43] Hey, jason, and welcome back, jason's got show listeners. Well, jason, one of our favorite topics on the show, and certainly something near and dear to your heart, is payments on dhere in two thousand eighteen.
You cannot think about payments without thinking about one of the top payment companies out there.
Stripe we're very excited tohave on the show, laki groom, who is the head of Stripe, issuing here with us today, he is employee number thirty, and we're excited to have you lucky. Welcome to the jason scott show.
[1:15] Thanks very much for having me.
[1:18] We're super excited, and i'm eager to jump into payments. But before we do, one of things we always like to do on the show is, have our guests give a little bit of a background of their career and sort of how theycame to the role.
And particularly in your case, it seems like Stripe was still a very small, entrepreneurial company. When you came to them. So could you. Could you give us the kind of ah, the version of your career project progression?
[1:43] Sure so i i started seven in online development startups things of that nature pretty young my my granddad actually taught me html when i was a kid,
which got me pretty fascinated with the internet and from there i had a,
i started a business creating websites for friends and family and that sort of just,
just grew into servicing clients around the world on di i got started in and sort of something tangentially related to payments when i started a company called card nap which is a was a gift card marketplace,
on dh ii build this side out in australia it looked pretty similar to a company called plastic jungle here in the u s,
and it was just a nightmare to set up setting up this marketplace where i had to accept payments and pay people out manage inventory in and verifications and and so i ended up pivoting that business to be something elsethat it didn't really have a lot of those complexities.
[2:41] Ah and and from there that that really just kicked off my fascination with with startups and tech and so i knew i wanted to move out toe,
san francisco and had had a few friends that walked it Stripe didn't really understand this whole,
developer tools thing until they explained it to me and explained how starting my business back in australia could mean so much simpler if something like Stripe have existed ah and that that began my my joanie it'sStripe as one of the,
first few business high as high, initially focused on on one of our products, a product called check out. Then i moved in tow.
International expansion, where i helped Stripe launch, and singapore, australia and new zealand, hong kong, on bit of the rest of europe. And from there, i i worked on partnerships and,
our co payments product, walking with all the different credit card networks, building our copayment acceptance infrastructure.
And after doing that for a few years, i got fascinated with the whole other side of of payment acceptance and the credit card networks.
Which is, is sort of where i've landed today, issuing cods. And instead of making in payments, rather than focusing just on accepting them.
[3:47] Very cool on dare you talking to us today from san francisco from the bay area.
[3:52] I am, yeah. We just moved into it new office here and talking to you from from san francisco.
[3:59] Well, congratulations on dh for listeners that aren't super familiar with Stripe, can you give us, ah, kind of the the high level overview of aa. What you guys doing where you sit in the eco system?
[4:10] Sure, so fundamentally, we're a global technology company. We build,
economic infrastructure for the internet, so we work with businesses of all sizes from from brand new startups to public companies like sales force and facebook who all you Stripe teo to power some,
some part of their economic infrastructure,
and accepting online payments, managing their businesses online,
you've got millions of customers and over one hundred hundred or so different countries that used Stripe to start, run and scale their business,
on one thing that we've really being focused on is just reducing the barriers to entry for starting a business and then subsequently growing it in scaling it especially internationally.
Andi, we fundamentally believe that we're still in the early days of the internet's potential on we're seeing people you Stripe to build the kinds of companies that couldn't exist ten years ago.
New models like online crowdfunding or undermanned aps e commerce marketplaces really high growth companies with a broad appeal on dh. We build that the tools that allow them tio stop those kinds of businessesand scaled them out.
[5:16] Very cool. Let's was kind of jump into some payments. Just topics that that we've covered on the show would love to hear what you guys are seeing out there.
There's been a lot of innovation around, you know, touchless payments. So, you know, google pay, apple pay and those kinds of things. If my memory serves me right, you guys were like one of the first folks to reallykind of support.
You know, those platforms, how are they doing? And he thought, son, on where that's going?
[5:43] Yeah, i'm i'm a huge fan of these kinds of payment methods, i think it is if you've got an iphone and you're paying with apple pay it's almost the perfect payment experience,
you know, there's been some, i think some hitches with the new face i'd method, but when it was touch idea and you just press that one button to pay, i thought that was, you know, it's almost perfect.
You don't even need to think about the payment experience, which is is our real aspiration to make payments fade into the background.
It shouldn't need to be this this thing that consumers think about on dso for may, apple pez i think it's had an even bigger impact on purchases online than purchases offline,
we we work with with a bunch of companies that have the apple pay flow is a core part of their e commas floor, their mobile check outflow,
and i want one of those companies insta cot, which is a a marketplace here in san francisco and throughout the rest of the u s for purchasing groceries, they see their customers check out,
i think it's around fifty eight percent foster with apple pay on so it's just the these kinds of methods really simplify the payment flow, so it's something that we're, we're really bullish on the trend that we're seeing.
[6:53] Yeah, that's. Awesome on dh. I have seen some similar stets, stan.
Ah, there definitely is. Ah, sort of universal, axum, that if you have a lower friction, check out option b it apple pay or samsung pay, or even the payment ap.
I built into the ah, the many of the web browsers now, which i know you also support that.
Not only do people check out faster, but just conversions higher. They have much of us abandonment, and so they literally make more money.
[7:23] Yeah, we receive that across a bunch of different uses where they're seeing typically double the conversion rates with when, when a consumer uses a method like apple pay, they don't need to go fetch that creditcard number.
It's. Just ultimately, great for businesses and that's, an area that we try and focuses. How come we reduced the friction to improve the the conversion rate?
[7:45] Yep, and so at the risk of alienating the apple pay team, which in all seriousness, i know our listeners of the show apple pay is awesome.
The traditional knock on apple pay is, obviously the whole world doesn't use or have access to apple pay right like that, you know, ah, a minority of users are carrying an apple device and, you know as good as apple.
Is it an upgrading everyone there's still a lot of deployed apple devices that aren't apple pay compatible and so it's like the traditional knock wass it's, a great conversion tool for this very affluent, high spending,
ah, subset of the market but it's now feeling like even if it's not apple pay, but samson payer our microsoft pay or google pay or pin and a p i,
you know, we're trying to get to a critical mass where the overwhelming majority of shoppers have access to one of those easier payment things, that's becoming much more you.
[8:42] Yeah, absolutely. And as you mentioned with the payment request a p i it's now really coming to browse isas well, with quick ways of checking out on dh.
So now that i think pretty much every major phone manufacturer has, one of these methods were seeing it at least come to ubiquity in terms of the gaps that are adopting it. And now, it's, really just driving the consumeradoption and getting those cards into those wallets?
[9:05] Yeah, and tell me about had this right like a if i built an e commerce experience and i used ah ah, an older school, more traditional payment gateway, i program my own check out flow.
You know, i'm i'm doing some sort of interface to that. That payment gateway and then some new technology comes to the market like, ah, the payment, a p i ah, my developers have to go in and update my checkoutflow.
And so, you know, that's got to get in the road map and it's competing with a bunch of other priorities, and it might take a while before i support it, but one of the benefits ah, to Stripe clients is,
that they're they're actually using a Stripe check out follow.
So when some new payment system becomes available and you guys jump on supporting it quickly,
that propagates toe to a large part or all of your your users basically instantly do what do i have that right? Or am i over selling you?
[10:05] Yeah, you were gonna hire you on our honor and our team to describe it to our customers, so we have a bunch of tools and what we focus on his building tools to make it quick for much ensign developers to reactto these kinds of trends.
Before apple pay existed, people didn't really imagine apple pay what would have existed, and so it wasn't is easy thing for them to comprehend, adding, and so what?
Well, we're focused on building is things that they can effectively drag and drop in.
One thing that we find is that margins are businesses they really liked to control their checkout experience, it's something they generally feel, ah, just a lot of protectiveness over, and so what we give them is the ability toadd that,
really, seamlessly, there are options where they can they can effectively outsource that checkout experience to us, and we'll continuously update it with the with the latest payment methods that we see here if they'reexpanding the new countries payment methods of different countries.
So we kind of have two pots, one is where you just want to drop in something like apple pay and then not need to do any other work beyond that, that little update and the other where will continuously update thecheckout experience.
[11:11] Got it. And is it fair to say, like, in my mind, sort of the original market positioning, whether this was, ah, accidental or intentional, is, you've always been the really developer friendly option.
And so it feels like, like you guys turned up in a lot of experiences because the product manager left it to the developer, toe comp something up.
And you guys had this, you know, you know, great fbi examples on your website, and the developer would grab your sample code and get it implemented quickly. And and that that was probably, you know, sort of one ofyour original conquest strategies for getting a lot of customers.
[11:46] Yeah, that's, that's absolutely right. When when Stripe got started, there was no easy way to accept payments online. And it would be a developer that starting this company and they would be the one that pickedthe payment solution. And they would want the easiest one to get up and running.
But increasingly, we're seeing larger companies come to us for the same.
Where there, glad your company's heir increasingly recognizing the developer leverage that that they have the scarcity of engineering resource is and the importance to pick the solution that will allow them to move thequickest and react to trends like apple pay.
And i think apple really is a great example that where if you're running on a legacy, stack may take months and months to get this this into the market.
Where is that nimble start up competitor? Or, you know, even even a larger company that has ah, better engineering tools or developer tools can get it out in the market in time for launch.
[12:39] Yeah, absolutely. And i'll fully say, i am, ah, still super disappointed in the percentage of e commerce sites that don't support the payment. Ap. Which, to me, seems like a big myth, sort of.
But going your point about, you know how resource constrained for developers. So many of these sites are.
[12:58] Yeah, it just doesn't make any sense that that there, they're not adding these things. It's leaving conversions on the table. Top line revenue on so it's.
It really holds customer companies back, not having.
I think the best developer tools out there. It's, it's, similar trend with eight of us, where companies have gone from,
on premise, hosting or building their own data centers, recognizing that if you have a provider like kws, he'll just be able to move so much foster it puts you on on equal footing.
[13:27] Yeah, for sure and it's funny like at the moment. So we talked a lot about mobile e commerce on this show on dh.
For years, we've been talking about this thing called the mobile gap, which still exists, which is essentially,
ah hey, way more users are shifting from desktop browsers to mobile browsers, it's the majority of traffic on most big sites now, but the conversion rate on those mobile devices is is poor compared tto desktop.
Maybe it used to be a third and now it's approaching ah half and like i look at that ah, apple pay, but certainly the payment fbi as ah as well hanging fruit.
Ah, to improve that mobile gap and then i you don't now have this macro thing, which is admittedly more work and not necessarily ah exclusively, you guys.
But progressive web aps is another huge tool in that arsenal, and a very small number of e commerce sites have successfully got in that stuff done yet, like, do you guys see those kind of mobile trends?
And are there any other mobile trends that.
[14:30] Yep, we see the same thing.
We we we continuously review the largest e comma sites on.
We did a recent review of the top hundred commerce sites globally, and seventy two of them had greater than three, errors in there. Check out flows, things that could really easily be improved, to reduce friction for theirconsumers to pay them.
And a lot of those areas were mobile related. One fifth of those sites made mobile check out significantly hotter by not having a numerical keypad for entering credit card numbers.
Almost half of them didn't have order phil correctly. Setup it's little things like that, where you just you just give up, you try and you know, you decide. You'll wait until you're back on desktop, and then the punch is neverreally ends up happening.
[15:16] Yeah, and it's and i have to admit, like being a practitioner in the space. It is like a huge pet peeve of mine. It's like nails on a chalkboard when, like developers, don't get their input masquerade and you get thewrong wrong wrong keyboard for input.
I'm a big fan of them. Ah, predictive type ahead for address entry and stuff like that, and you know you still, ah, don't see that. Enough. So it's it's crazy, but it's. Ah, not surprising that you're you're seeing similar similar.
[15:46] These things, really on hard to build it's just it's, kind of crazy that everyone has to do it themselves, and so on.
Area, we've focused, is how do we build the tools such that everyone is on equal footing.
Everyone gets the lessons of the best practices and were positioned really well to know what converts well, what,
what consumers like, and so that that's that's been a big area of focus for us in the past few years is,
how do we take all the learnings we have developed from, from servicing millions of bill's businesses around the world and applying those toe aah, letting businesses have the right defaults from the get go.
[16:23] I recall one thing i wanted to talk a little bit more about. I'm the marketplace guy on the show and there's been an explosion of marketplaces on and started with products.
And now we're seeing a lot around what i would call on demand services. And i know that's an area where you guys do a ton, tell us about some of the things Stripe does around marketplaces.
[16:43] Yeah, we got we got started with marketplaces and number of a number of years ago ah and then,
the way it happened is pretty interesting because before that Stripe was if you're accepting payments from customers on we didn't really focus on what you would then do with those funds,
on we started to get some pretty interesting requests and one of them was from from lift its must've been five or so years ago,
where they had this request to add multiple bank accounts to their Stripe account,
and we're scratching our heads wondering what they were looking to do that we found out that they had this process of cutting checks to pay their drivers and they were wondering why khan strategist automate that potlike they do with with our our daily payout,
on that seem to be a pretty common problem amongst a number of thie marketplaces that used Stripe at that point in time they had all these back office operations and they're all doing the exact same thing and it seemedlike a real opportunity for us tow,
really simplify that providing a pea eye for it and.
[17:42] Fundamentally automate it on so that was something we began doing about five years ago wade called that product Stripe connect and we internally we call that the payments platform for platforms it z,
marketplaces and platforms you Stripe connect to accept money and then pay out to third parties and we provide everything in the middle.
To do that compliant, lena. Handle the tax, reporting the identity, verification and onboard and compliance with the different regulatory laws.
And ah, pretty much everything you need to do to manage a marketplace online as it relates to the movement of money.
[18:22] Wrinkle. And then i couldn't help but notice your title now has card issuing in there. And, you know, one of the challenges you have in these kind of digital and physical marketplaces is if i send you mentionedinsta card earlier.
If i send ah ten ninety nine shopper to go buy some groceries for a customer, i'm going to need to pay the grocery store. And you know that that quote, unquote, shopper is going to want to come out of pocket for that.
Is that kind of what's going on with the card is sure thing.
[18:52] Yes, that's, exactly right there's a there's a bunch of different use cases that that Stripe issuing consult and fundamentally, it is infrastructure, like the rest of stripes products on its infrastructure that relates to money,movement, and so instant cult.
To use that example, they have that store of funds that they have taken from from customers that they need to move to ah, grocery retailer that they don't necessarily have a contractual relationship with and and the bestway of doing that is with the credit card.
And so what we're providing to companies like this is an a p i to issue cod's both physical and virtual, and then dynamically control the span.
So, for example, insta kat would know exactly when a sort of a shopping session is taking place, and they would only want to authorize transactions in that window.
They would know exactly which store it's happening out, and they're on.
Lee wants approved transactions at that store, and so we give you or the customer complete flexibility on on how they use those cards and what what transactions can go through them, but again, fundamentally it'sinfrastructure and that's one use case of,
of many that we could support.
[19:59] That's. Awesome. And it feels like, ah, marketplaces air, really expanding, like, certainly internationally. But even here in the u s, we're getting more marketplaces and a wider set of use cases from marketplacesalmost every week.
Are there any surprising trends or particular learnings that you would want to share with new entrepreneurs that are getting into the marketplace model?
[20:21] Yeah, there's, you know, obviously two sides to a market place, you've got your your bias and your cell is on.
We focus on both sides on the on the bias building tools, tow service.
Those customers, things like apple pay make the transaction experience incredibly easy on then on the cellars with that Stripe connect product is talking about but one one interesting thing way we've discovered recentlyfrom our data.
We have thousands of market places that use us and, you know, obviously not all marketplaces grow at the same pace.
We found that market places with higher seller retention rates generate much greater revenue than the others. This may sound obvious, but it's, in contrast, to buy our attention higher. Bio retention isn't really associate idfrom from our data with significant revenue increases.
Way saw that increasing seller attention by one percentage point predicts ten x more revenue than the same one percentage point increase.
Ah, in buyer attention, i thought this was a pretty fascinating stat.
[21:21] Yeah, that's. Always a challenge for entrepreneurs. Is, is.
How do you grow these marketplaces? And you put all your resource is on the the seller side or the the buyer side? Or ah, scott likes to advise, like you couldn't need to balance it, right?
[21:38] Right, right. But it's it's really highlights you need think about how you retain sellas and you know what, what to sell is care about.
One thing that we've found they really care about is the speed of their payment, so they're they're delivering value on a marketplace and then they need to get paid on dso one one area we've focused there is, how can wereduce that payout cycle?
No, i get paid every two weeks, but as a competitive advantage on one of these marketplace marketplaces, how can you bring that down?
And so, with a partner like lift, we built a product called instant payouts on so they can get paid out right after they complete ah, right.
And now, over fifty percent of of lifts drivers take advantage of that instant payout functionality on dh so that veterinary where we liked folks, is well, where the one of the ways in which we can help platformsdifferentiate,
toe better service, they're they're cell is not just the bias.
[22:32] Very cool, sir. Pivoting off marketplace is a little bit.
You talk to the very early part about international on dh.
You have, ah, cool international accent. So this ties in with your accent against what are some interesting international payment trends.
You guys, we're seeing you read all about it, ali, pay and and what's going on there. And, you know, china has a lot of really interesting things, curious to see some of the the trends you're seeing internationally.
[22:57] I think one of the most interesting things just a top level is how hard it is for market places to expand internationally,
there is there is a whole different regulatory environment different payment methods is your highlighting both on the acceptance side and on the pay outside on so it's,
it's i honestly find a pretty impressive any market place that has managed to build infrastructure to take them from one country to many just because of all of the complexity involved in that expansion and i i think that's,
that's just so hard to understate the power of that,
on so it's it's you know it i love it is a consumer of something like uber where i can use it in the u s and then go to a different country and it just works out of the box the same app and so it's really impressive theinfrastructure that built,
in the in the background but in terms of payment methods you know money is money is oddly cultural on dso we're seeing in every country we go too and we expand into,
is an entirely new set of payment methods that we have tto have to deal with and soon in the us obviously everyone uses credit cards on dh in france it's the same over eighty percent of online purchases are credit cardsbut for,
neighboring germany it's less than twenty five percent and they use something called sepa which is effectively just a bank transfer.
So if each of these new countries, marketplaces or retailers have to think about how they accept money from their consumers, and and we can just take this. U s centric view of credit cards and debit cards dominate.
[24:26] Very cool. A lot of companies, yourselves included, sort of started on the digital realm accepting payments online. But we've seen a number of them sort of extend to physical payments and sort of omni channeluse cases. Is that something you guys are doing as well?
[24:41] Yeah, and, you know, i think there's there's more than just a sort of the point of sale devices there we see a lot of,
like when you think of something like lift, fundamentally, you're you're operating with a real world service, you're you're getting into a car, and so what is ah, on online payment, what is an offline payment anymore?
And they've solved that by the having the payment experience just happened in the background.
You don't even think about transacting there's no, no riel time exchange of information with each ride that takes place or transaction on so that's an area where we really try to push the businesses that air.
Welcome with Stripe think about how to make payments fade into the background, but obviously with with retail transactions, and we work with companies like shopify and we'll be parka who have ah, store they'rethey're they're merchants have storefronts, and so,
we power point of sale systems for them as well, but fundamentally it's about unifying those systems and so it's a single system with stripes, they can look at customers online looking customers offline ah, and make it asseamless as possible.
[25:45] One thing that's kind of nursing as a sow, one of one of the atmosphere on fire and one of my companies was was kind of a platform play, if you will, are tools for developers,
sometimes it's, hard to kind of, you know, ask you figure out when to stop, have you guys so, like on the marketplace example,
you could go into helping marketplaces recruit sellers, you could go into you kind of hint, you know, said that you do a little bit of verification,
you could even go into, like, background checking of drivers or something like that.
How do you guys think about how deep you want to go? And then, like, no, we stop here, and this is kind of where this is the platform. Anything above it is not us. How do you guys think about that?
[26:23] It's a really good question on dh you know, i wish i had some framework i could just give it to you, but fundamentally we talk to our uses, what water, the common themes of problems that they're all having on,and,
then we do our best to solve them.
We generally don't go into super niche use cases on sort of solved just for one vertical.
We like to look at the problems that pretty much all marketplaces were having or in the case of subscription business is pretty much all subscription businesses are having and then build software toe,
to the extent that is useful for sort of the eighty percent and then where those nuances come in for maybe a very vertical ized business,
they build that lost twenty percent that's really specific to their business or the needs of those customers.
And this is where we try through the ap eyes that we build to make it generic enoughto handle that wide variety of use cases, and just really folks on the infrastructure is maybe that's.
One way of thinking about what is infrastructural thus is sort of what sits on top of the infrastructure.
[27:24] Cool one topic that's in the news.
A lot lately is. Security is kind of interesting as an e commerce guy, i think it's interesting that, you know, the variety of hacks read about now are kind of happening out on the physical point of sale system.
It seems like, but i know a full disclosure at my current companies. Fifty we use Stripe and one of the reasons we love it is on my previous company. We went out, we had to build out that whole pc. I stack ourselves.
Andi, i i love that we could just use Stripe and, you know, we don't even see the credit cards. You guys take care of all that, and we just kind of, you know, we get pc i compliance, quote unquote, for free.
What, you give us a little a little blurb about security in today's world, and you know how Stripe looks at that and any trends you're seeing there.
[28:10] Yeah i mean you've kind of set it all we really try and make security cool feature of the Stripe offering that again something folks don't need to think about it's just a strong default,
on and there's all this talk of token ization in the payment schemes are the payments walled these days but it's something that Stripe did from the get go,
i think a lot of people think about Stripe score innovation as developer tools i think of it,
one of the really important ones that got us to where we are today is that that pc i shielding that you're highlighting there we had the concept of a token since,
the beginning of Stripe where we would we would store there's card details and and the merchant or business owner wouldn't have tio,
and that was that was about eight years ago that we started doing that and so security is court of the dna off Stripe it's something that we think about in each new product that we launch because it is your highlighting itsomething that distracts from delivering a product to your customers,
building that pc i vote that isn't necessarily directly beneficial and if someone else khun solve that problem even better you can focus on unsolved ing the problem that they came.
[29:20] I think very broadly hackers will often talked at the weakest link in a chain stitch together many providers in in a long chain so there's many weak links that you can possibly target on dso.
We're focused on when folks use us, you've gotten and twin solution for, for all things security. You send the card numbers directly to Stripe.
We only provide one time use tokens to ma agents, and i think that really reduces the surface area, especially in an online payments.
[29:48] Yeah, it's. Funny. I talk a lot about trust and, like there's, a lot of evidence that consumers still have a huge trust. Graff gap with, with online experiences, even from very well established businesses.
And it's. Always ironic to me that fewer customers trust typing that payment information into the token eyes encrypted browser than they do, handing it to the minimum wage clerk at the store that has a skimmerunderneath her death.
[30:16] Yeah, i mean, for good reason to a lot of folks not trust the retail is that they're paying not because of any bad intent, just because it could be so easy to to breach these legacy systems.
As we saw, with many of the breaches that have come to light recently on so that's an area, well, we really just try and focus and make sure that their aunt ways of ah breaching Stripe much is by providing them the besttools possible.
But it's it's, obviously so hot. And i think one of the really mind boggling things is.
How can these small businesses have the kind of security that these large mega cops have?
Ah, and even these large mega collapse air getting breached. And so the more we can do to democratize security tools are best practices. I think it's, a really worthwhile place for us to continue to focus.
[31:06] Yeah, that is ah, on awesome area of opportunity and that's going to be a great place to leave it. Because it's happened again, we've used up all our allotted time.
S o. We certainly appreciate having you on the show if listeners have any questions there, encouraged to go to our facebook page and posting comments there, and we can continue the dialogue, as always.
If you enjoyed today's show, we sure would appreciate that. Five star review on itunes.
Gosh, really appreciated you being on the show today. If wisner's wantto contact you directly, can they find you on twitter? Or lengthen or what's your preferred method of contact?
[31:46] Yeah, i'm pretty active on twitter it's, twitter, dot com slash laki groom on it's. My.
[31:53] Perfect, and we'll put that in the show. Notes. Ah, and so, until next time, happy commercing.
EP139 - B8ta founder and CEO Vibhu Norby
Vibhu Norby is the founder and CEO of b8ta. b8ta is a software-powered brick and mortar retailer designed to improve the customer and maker experience. They help people discover, try, and learn about new tech products while empowering makers with a simple retail-as-a-service model that puts them in control.
In this interview, we cover Vibhu's background, how he came to the idea for B8ta, b8ta's retail partnerships (including Lowe's and Macy's), their unique marketplace dynamic, their experiential retail as a service offering, their recent fundraising success, and Vibhu's vision for the future of retail.
Don't forget to like our facebook page, and if you enjoyed this episode please write us a review on itunes.
Episode 139 of the Jason & Scot show was recorded on Wednesday, August 1, 2018.
Join your hosts Jason "Retailgeek" Goldberg, SVP Commerce & Content at SapientRazorfish, and Scot Wingo, Founder and Executive Chairman of Channel Advisor as they discuss the latest news and trends in the world of e-commerce and digital shopper marketing.
[0:26] Welcome to the Jason and Scott show. This is episode 139 being recorded on Wednesday August 1st 2018.
I'm your host Jason retail geek Goldberg. And as usual I'm here with your cohost Scott Winslow.
Scot & Vibhu:
[0:42] Jason and welcome back Jason's Ghosheh listeners. Jason I don't know about you but I've been on pins and needles this week no we have a special guest tonight.
You and I are both probably the biggest gadget geek ever and we have a new favorite store and it's pretty exciting to have someone from that store on the podcast.
There's a company that we have talked a lot about on the podcast so I'm hoping longtime listeners can kind of guess what we're talking about here.
The company is beta and that's B the number T.A.
Beta is such a unique company. I don't want to get in the middle of describing it to everybody.
I want to kind of leave that for our guest who is the CEO and founder of b8ta, Vibhu Norby.
Thanks for having me. I'm so excited I've been listening since the first episode.
[1:37] We are we're thrilled to have you.
And I do think Scott and I are the target market for your concepts. We'll get to that in a moment.
But before we do normally we'd like to start interviews is get a little rundown from our guests on their career progression and what led them to their current role. And in your case.
Beta is not your first cool gig. So definitely want to share that with the audience.
Scot & Vibhu:
[2:10] Yes so I I grew up programming,
and fell in love with computers and software when I was an early teenager and sort of joined a series of startups and then end up leaving to do one of my own.
And we got funded by Y Combinator and then raised a couple of million dollars from,
some investors and that we were making a social network for the phone and back in 2011 when snap chat and a bunch of these guys got started and we didn't make snap chat.
So the company didn't totally work and we we found a home at Nest a few years ago.
[2:53] At the time when they had one product and were just starting to think about launching multiple products and so there I joined as an engineer and brought my whole team and company over.
It was sort of an acquisition. And that was where I got introduced to retail for the first time really from the brand side.
Nest was a really pioneering company. A lot of ways we were were really introducing the idea of smart home to the consumer not just the Nest Learning Thermostat and doing that was complicated. It was a complicatedproduct.
We also really love retail because a lot of the team had come from Apple and understood the value of retail beyond sort of sales.
And so we used we used retail as a as a place to store and make people aware of the product and get them hands on and that was what the genesis but actually I want to talk about the first time I talked to you Jasonbecause,
it's kind of you know four years ago I actually didn't know very much about retail and so when I was trying to learn about the first thing I did was like you know basically typing like who who to follow about you knowin retail,
and your name came up and I ended up falling on Twitter for a bit.
And at a point when I wasn't sure if I should we should actually do beta.
I called him LSU and is like hey can we get a call I want tell you the idea that working on and just get your feedback and so we got on the phone. Do you remember this.
[4:20] I totally remember this. I wasn't sure you wanted to disclose it.
Scot & Vibhu:
[4:25] Yeah. So we we got on the call and I was like hey you know this is what we're thinking about doing.
We don't know much about retail what we understand the problem.
And I think you said you know this is like been done a lot,
or it might work but you'd be much better off if you could solve this other problem that I have which is that people are not buying chewing gum anymore because they're looking at their phone and they're checking out atthe supermarket.
And I was like oh that's that's interesting like I me think about they actually spent way too much time thinking about how to get people to buy chewing gum after that conversation.
But I'm very thankful that we decided to move forward with this. Remember that.
[5:05] Yeah I totally do. I might slightly I don't.
I'm not sure I necessarily tried to completely pivot you. But I'm also glad you stuck to your guns.
Scot & Vibhu:
[5:17] If you ever saw the chewing gum problem I'm not sure what.
[5:20] No no. I feel like there still is an opportunity as the world moves to auto replenishment for for you know all of those consumable items like you know impulse purchases are likely to go away.
So if there's any entrepreneurs out there with a clever idea you know we've got to we've got to figure out how how we're going to do impulse purchases in all digital purchases path.
Scot & Vibhu:
[5:45] So spoiler alert but I think we should put a gum station in every beta Boom problem solved.
[5:51] Yeah that that's one way to go. The part in conversation I remember us talking about though which I think we should come back to later is the role of other retailers in your concept.
Scot & Vibhu:
[6:09] Yeah. I mean you have I think if I remember you had suggested that we should talk to some other retailers who were pretty focused on building something for ourselves on the software side.
But that opinion obviously change in the last 2 1/2 years.
[6:25] Yeah I was gonna I mean that you probably got the sequence right.
But I think I feel like I mentioned that,
there would be potential interest in some established retailers and partnering with you or potentially funding the idea you had and at that time,
as any entrepreneur you were you were laser focused on crushing all the traditional retailers and doing it all yourself.
And so I think that's that's how you started that.
You may have progressed since then. So one other thing before we jump into beta hardcore though is you were at Neste pre Google right so you were actually acquired by Google is that do have the timing right.
Scot & Vibhu:
[7:08] That's right. Yeah. Very shortly after I joined,
and it was you know the acquisition was I think we learned about it like January 11 2015 14 and then it closed in February and I had joined just four months or five months prior to that.
But it was the company was at an inflection point when I had joined and it made a lot of sense.
[7:33] Yeah for sure. I feel like a super friendly product to everyone now but,
if you go back to that Genesis you original concept was sort of,
what with a smart thermostat look like if Apple were to design one and when you guys want that first product it was one of the original digitally native vertical brands right.
Like you you made this product that you were predominant you were selling direct and partnering with retailers on it required a bunch of education because no consumer knew they needed it.
And so I feel like there was a big retail education play in it which is of course interesting.
Scot & Vibhu:
[8:15] As funny. I mean we didn't see it that way at the time.
And even it took even after we started the company I didn't realize that but every single Early Stage Harbor company was a DnD VB as you noticed,
because they were selling the product direct and and that and the advantage that a lot of Harbor companies have relative to other types of,
DNA BS is that they always have the users contact information because most of them have an account sign up as part of the onboarding process.
And so it sort of they're sort of natively by default dnt Bebe's.
Scot & Vibhu:
[9:02] Yes. Let's let's jump into beta so let's start at kind of the the origin story.
Anything kind of tell us how you got that idea and maybe kind of tell folks what how you describe it today.
[9:21] Sure. So I don't think any good idea is sort of,
a singular eureka moment maybe it is but for us it was a lot of different kind of influences came together to create this.
The the biggest the biggest thing for me was working at NASA and,
understood and sort of seeing this disconnect between how we as a brand and as a supplier to stores thought about are the value of our presence in their stores versus the value that a retailer saw.
And the presence in their stores and that disconnect is is incredibly fundamental and incredibly hard to fix.
And so you know as a brand we wanted stores to be education point for customers.
We needed a scalable way to get our product Nest thermostat in the hands of customers.
And and we felt that you know when we came into a store we wanted to present the product in a beautiful manner kind of let it let it live like a hero product there.
We never came into a store without uncap or display or you know something that was sort of taking the product out of the box.
[10:45] And and in order to do that you know we end up spending a lot of capital a lot of time you know deploying a lot of people into the field to sort of ensure that like every time we had our product out there that cost.
And when a customer saw that it was presented beautifully and and frankly retailers back then and it wasn't that long ago. But you know how fast things have changed in this industry.
[11:10] This was not a totally common idea for them I think they had an Apple shop and shop and maybe a few of their large brand partners but to allow of any new company to come in and build a cool experience wasn'tnative to their business.
And you know they their business model of retail is really set up to to be the end of the supply chain the store right.
They've got a buyer they figured out that this is a product they want to bring in. This is how many units they want to get.
They think they can sell and the store is sort of like this the warehouse with a pretty face as a retailer wants described to me and you know for us it was the start of the consumer journey. And so.
[11:54] This basically what happened is I learned about this because I had asked our Head of Retail who's now my co-founder Philip RHA UB and he had a retail analyst.
I asked him why we weren't in more stores. You know we were in Target. Apple Best Buy Home Depot Lowe's.
And I was looking at our sales force.
One of the bucket in sales force and I just noticed like hundreds of retailers from you know globally who are asking to get its products in their stores.
And I was like This is a you know an amazing opportunity.
And he said well because we don't see retail as a surprising pivot you want to make sure the products are presented well and so we just can't,
give away it to anyone who asks and that was like you know that that gave me this aha moment that maybe there was,
a way to fix that.
At the fundamental level for a retailer.
[12:53] But but you know we.
You know I sort of sat on that kind of learning for a while and then I got more involved the retail team at NASA when they asked me to build a training system for associates inside of other people's stores.
And you know when I started working with the customer support team on trying to figure out how to,
address you know sort of this you know when a customer buys a product at a store but then they call,
our support center and then you know where we said that customers should they return the product and I realize that like a retailer like a brand like Nasz never wants the customer to go back to the store.
There's all these kind of weird things that I was finding out and I wondered if you know if we were having these issues that probably means that every other supplier in Best Buy.
That is like us like GoPro for example or Fitbit at a similar stage was probably having a similar similar fundamental issues.
And and you know if we were building sort of code bases and processes to solve this and they were as well that that's a very inefficient use of all of our resources.
So beta was this idea to create a retail platform from the ground up that supported a customer experience as the primary use case for the store.
[14:20] And supply chain as a secondary or test Cherry use case.
And then we I mean it is really that simple honestly we just want to we didn't you know the business model kind of came around later.
You know if you're if you're going to separate yourself from the supply chain use case of a store then you can't buy the product and so it kind of made sense to rent space to companies.
But yeah the disconnect was the genesis.
And as it turns out like you know now nowadays anytime we find a disconnect between,
two parties that are doing business you know a customer brand or a brand and a retailer or a retailer and a customer we think there's an opportunity to deploy business new business models or software to fix it.
There's but anyway that's that's a bit about the company but we can talk more. Yeah. So.
[15:19] Maybe this is a good place to start. How big is speed of just kind of from a store footprint perspective.
[15:27] So we have eighty two stores that we managed today and own operate 70 of those are inside of LOEs so we have a quite large partnership with them around smartphones.
We've got a store with Macy's inside of their flagship store and we've got,
13 actually I think 12 owned like kind of flagship in line stores or kiosks inside of malls.
And in terms of the scale of people we about 350 people that work inside of these stores and we're at our per post office call so I've been in Palo Alto is kind of what you would think of as the flagship store,
flagship for us we have.
We have a number of flagship. So we just we just mean any kind of any store that has our flag our logo on it that it was our first store.
That's actually a very unique store none of our stores look like that today it was it was built on a budget in a woodworking shop.
Beautifully done. But but definitely a one off. So the newer ones are fancier who's that Congressman.
[16:42] Yeah we spend a lot more time in designing them. It's the series a store the Series B stores are much nicer.
The Up series is this the series a sort of the best and then you start to realize that you've got to build a business and that every single thing that you see in the store has to be cut from a tree. Yeah.
[17:02] Yet it's all the timbre turns in all the hardwood turns into a particleboard is basically what happens in other curves.
Scot & Vibhu:
[17:09] 100 percent is exactly exactly right cool.
The way I've described it is it's kind of a you know Apple Store like kind of feel with seems like about 2000 square feet there.
And but you know literally hundreds of different kinds of products you can interact with mostly in the kind of gadget electronic category.
It's not fun because you come to the folks that work there are super helpful so if you had an idea of what you wanted they were ready to leave bailable.
But I thought my experience was just kind of spinning like two or three hours and they're just kind of touching everything and trying it out and learning about it.
Is that kind of how you think about the old experience at this point is that a decent description.
Yeah. So each store is about 25 100 square feet features that are 120 different brands.
You know maybe 130 different products.
Every price out of the box and it's a real live working demo.
Like we when we get a new product in a store we actually take like the first one out of the shipment and just take it out and set it up like we were a customer.
[18:20] There's a lot of space between the products. It looks like an Apple store although that wasn't the intention it was really designed around actually or analytics system and how overhead cameras capture information.
But you can definitely spend two to three hours in there because everything that you're seeing is kind of a one of a kind.
Interesting thing that you probably haven't seen before and these are complet.
You know the price to carry the tech products are complex and and they were hard time to understand.
And so you know having really good staff is super important to us.
I think two to three hours is definitely way above the average visit which is about 15 minutes.
But the average customer only usually look at about a third of the assortment on a given at a given time.
So but we have a tremendous amount of customers who kind of see it like a museum they come and they look at everything one by one and want to make sure they don't miss something.
[19:25] And it's funny because in one way I would argue you're sort of the the opposite of an Apple store in that,
there's not a lot of surprise and delight moments in an Apple store anymore.
They actually used to carry more third party products than there was a little more variety but my sense today is you know exactly every single product you're going to discover in the Apple store before you walk in there.Right.
So it's it's most people that walk into an Apple store are walking in with some kind of mission in mind.
Like they're either coming for service on an existing product or they're coming to buy a product that they already know about and know that Apple has there or maybe they want to see it and make a final determination inin a big way.
I would I sort of feel like your story is the opposite.
I'm not likely to know. I know the kind of products you're going to have in your store but I'm not likely to know exactly what you have and I'm almost certain to discover some products I didn't know about.
And so to me it feels much more like a sort of serendipitous discovery moment for the shopper versus a specific mission in mind a moment like I might have at Apple is that.
Scot & Vibhu:
[20:37] Yeah. So the data proves that out for sure. So 70 percent of the products at a average customer season are store they're discovering for the very first time.
So and actually on the other side of that and Apple and Apple stores about 70 percent Apple products.
[20:55] Oh you're probably 70 percent Sandras seeing something that you you definitely saw before.
But we have two types of shoppers in our store. There is there is the shopper who kind of wanders into just be surprised and be delighted by everything that people are making in the world.
But we definitely serve a use case for a lot of our brands of high quality demonstration.
So a lot of the company and you can if you if you like google some of the companies that we have in our store you can see when you go to their website they have a store finder and the store finder is just pointingcustomers to us you know saying hey if you want to check this thing out in person.
This is the place for you to do that and we love those kind of visitors because they come in for one thing and we give them that amazing demonstration experience that you know no one else could give except for beta.
But of course while they're there they'll find a bunch of other things that maybe,
they didn't know about and that's that in terms of a percentage of traffic about 40 percent of our traffic is driven by the brands that individually use case but in a mature store for us that that that tends to go up and up.
So basically like if you lived in Palo Alto once you've been to the store once and you've seen everything are a couple times the next time you come,
back is because you saw like a prophet on the Internet that you were interested in trying out first and then you'll come in for that specific thing and try it out.
[22:21] Yes. That makes perfect sense. It's funny because I imagine as people get more familiar with this door that you definitely could have some sort of mission shoppers and it it sounds like one way,
they might find you is through the product manufacturer's website.
But you do now have your own Web site as well. And that's another discussion you and I had when you first launched you didn't have your inventory online.
And I mentioned that like in the long run customers that became familiar with your store would want to be able to see what kind of products you were carrying before they made a visit.
So now that you apparently took that advice and so now I'm going to ask a terrifying question.
Has that had any value or are you finding that that you do have perhaps a subset of your shoppers that that shop your website and then decide oh cool you've got a new a new kind of product in stock that I want to go see.
Scot & Vibhu:
[23:18] Yes so funnily enough we I mean I think we specifically avoided doing an e-commerce site for a while because we wanted to stay focused on on stories which was our kind of unique value prop for brands.
And we also didn't want to do e-commerce that we didn't have something to offer that was special and we act.
We launched e-commerce in August officially last year.
So it's been one year to date in that time period.
It's gone from obviously zero percent of our sales volume of products to almost 20 percent today.
[23:55] So we've had a lot of growth there. I think you know what we learned more than anything was that our associates in the store needed a place to,
can point shoppers to who maybe wanted to do more consideration or you know had some kind of education like they were traveling and you know the product shipped somewhere you know.
And and so it serves an essential function.
Are our sales associates. I would say more so than customers.
We don't like buying from beta dot com is not better than buying from Amazon.
If you're a Prime member for example so we're not trying to compete for every single sale but it's been an effective tool on the store side of the business.
I would say we built the entire platform in-house for a reason which is that we have a lot of really cool things coming down the pipe that,
will give us at least some advantages over maybe shopping on Amazon or from the brand's website that we can uniquely do because we have a lot of stores.
[25:04] Nice. And just a clarification.
I like that to me is exactly why I was suggesting you have the inventory online was sort of as an adjunct to your sales process.
Not so much that you'd capture a ton of sales via e-commerce but that people would wanna know what you had in stock before they visited the store or or people would want to do that final consideration after the store.
So I'm glad to hear that. That's providing some benefit to you.
I get that you're you know nobody wants to our Amazon Amazon so it probably doesn't make sense to just try to compete with their exact customer experience.
But one of the things that I perceive is also true and I'd be curious to hear from you is I do think it's possible for you to be selling products before they're likely to show up on Amazon.
So I do think there's some early stage new new products that you know where manufacturers reach out to you as early experience and they may not be distributing through Amazon yet.
Is that true or does everyone go to Amazon Day one these days.
Scot & Vibhu:
[26:16] No that's totally true. And in fact it's not just that they come to us.
You know before Amazon but they also come to us after Amazon a lot of brands that we work with.
They start selling there and they don't necessarily get what they want out of that experience and it was a bit more control they want more data and they'll come back and you know will be sort of be one of the onlymultibrand experiences that can carry it.
We also have a lot of international companies that don't have a,
local distributor or as a Web site where you can you can buy from here and so there are a lot of cases where we are the only place you could buy that wasn't necessarily our strategy initially but,
you know more and more I think that will be a focus for us.
The other interesting thing is I think you know.
[27:07] When you sign up with beta as a brand,
your entire experience of managing your stores with us and deploying content and training and materials is all through our dashboard.
And so we've found that companies don't want to have to sort of manage all these different silos of of you know information and marketing information.
And so our our our system allows a company to sort of make a change once in it and that content reflects everywhere in-store online,
in our accounting backend in our checkout you know everything all at the same time and that's for the right type of company at an early stage that's actually better than even selling on their own website.
[27:52] Yeah. And I think that teases something that's unique about your model that we haven't totally covered yet which is you are not a pure traditional wholesaler where you just,
go discover some product you want to sell the people you buy a thousand of them at a wholesale price you mark them up to retail and sell them to someone else.
You're actually closer to Scott Wingels favorite thing a market marketplace right where you're essentially providing a platform and you're letting manufacturers,
leverage your platform your drive you're generating traffic and then you're letting them sell to do that traffic through your platform. Do I have that right.
Scot & Vibhu:
[28:37] Yeah we're actually a two sided marketplace and it's it's hard to see from the outside because we look like a kind of technology store brand.
But on the inside you know brands are subscribing to space in a store.
But we also work really closely with landlords and on that side they're competing through lower rents or things like you know funding for store build outs or you know marketing.
They're actually competing for these brands dollars and our store is sort of the glue that that brings those two together.
And so you know across our every store of ours is different because companies that sign up with us they can choose where they want to be and they don't have to be in every everywhere if they don't want to.
And they can also in every store sort of price differently and so you'll oftentimes you know you might see a company that is you know maybe moving from store to store or trying to figure out the right markets for themto be in.
And what really makes their decision is how good the data is in that in that spot and what and what the economics look like and that's driven by the landlord in our case that you know we didn't.
Again a lot of the stuff we didn't really see going into it we were just like we wanted to solve this really central problem that brands had.
[30:00] But it's evolved to look more like a marketplace on the business model side than any other type of retailer today.
And I think that you know just I can anticipate your next question but I think that's where we started getting interested in working with other retailers because you know there are effectively some of the largest landlordsin the country.
And and I think as we export our model further we knew that square.
Good square footage was going to be the thing that the supply side that sort of drove a lot of the demand.
[30:37] Yeah and I want to come back to that in a bit. It's even it's good square footage with high buying content which is even more exciting.
Scot & Vibhu:
[30:44] Of yes. Yeah.
[30:45] But the so one of the things that I'm always curious about.
So a brand has to want to work with you. The economics have to work. They have to see the benefit. You know they likely they have to have a product that requires some storytelling or some demand.
And so there's a bunch of factors that would make a brand want to work with you.
But it probably wouldn't work for you to just accept any brand that wanted to work with you. Right.
So you know you wouldn't want to end up with a bunch of brands that just were struggling to sell their crap.
And so therefore were were willing to you know be a tenant in your store and sell their stuff.
It does feel like you have a curated assortment of cool gadgets that people like Jason and Scott Wingo would like to buy.
So like I guess I'm I'm curious how you work that curation in a in like a traditional retail model of curation is easy the merchant decides what they're going to carry and what they're not going to carry.
It feels like your emergence if you even have a of merchant sort of has a harder job because they have to both decide what they want and then it has to be an appealing model for that stuff.
Scot & Vibhu:
[31:58] So we actually philosophically are anti-corruption.
We think that a lot of the problems that brought that retailers have encountered over time is is because of their you know quote unquote curation process on the buying side.
The way curation works. And the reason that that the products in the store are actually you know out to be really good is that their business model we chose.
[32:29] Weeds out bad products extremely quickly in the same way that maybe you know an advertiser in an auction system like Google AdWords weeds out bad ads as well.
Basically when you have a product that doesn't resonate with customers they don't want to spend money and so they leave.
And when it comes when a product is resonate with the customers they never want to leave because they're making money.
And in fact they start to expand with us and take over more space and more and more stores.
And we've seen this effect really dramatically in three years of running this model where you know we've built up you know for every 10 companies and maybe you know two or three of those company turns out to begood.
And we've built up a roster of you know the best brands in the world who again have great economics and would never want to go.
But it's important for us to compete you need to bring in new things,
because you know and we don't want to make the choice upfront all the time as to whether that product you know would sell because that you know frankly like you know maybe buyers have some some algorithmic helpand you know spreadsheets all kinds of stuff.
But like you know a lot of decisions are made at the gut level and I can tell you from our kind of internal game of trying to guess what their product going to do well with us.
We just get it wrong so often that it's not even worth trying to be honest with you.
[33:55] I think where we have a couple of of sort of post launch with beta curation moments for example with a product return block and we have an algorithm for that.
[34:06] We take it out. You know if the if the product doesn't have a you know a return policy that jives with ours.
We oftentimes won't accept it but we're pretty open.
I mean we I think to be honest that's what makes us really unique and.
And the other thing is like I think for customers retail can be a decision making tool and sometimes that decision is a negative decision.
This learning that that you don't want this product.
Maybe you saw this thing in mind but you know after seeing it in person it's not for you.
Disserve that kind of function you have to take things to that are kind of on the edge.
So I don't know if you expected the answer but I we we we take this. I mean we've really thought a lot about this and it's it's a big part of our business.
Yeah. I'm intrigued on the marketplace side of building a two sided marketplace.
Seems easy but it's hard because I always tell folks that are starting on it is kind of like rowing if you row on one side of a canoe or a kayak or something like that too much then you just go in circles ChAFTA.
There's a there's a balance you have to fall and there has been harder building this on the supply side which I think you call makers or on the demand side or tussle bit about it.
Any interesting stories there. I'd love to.
I think other marketplace people would love to hear.
Yes the supply side for us is there a state side. On the demand side as the Brandts.
[35:30] So it has been hard. And one of the reasons it's been hard is that we we have grown significantly faster than the category itself.
And so you know we ended up finding a lot of opportunities on the supply side.
You know really early on and so we've we've had to actually really control how many locations were launching every year and keep in lockstep with our best companies.
But the thing is like there's enough there's enough brands out there that are launching every day every week that we've been able to.
We've been able to open stores that are added and grow at a pretty good rate.
[36:16] You know the I think there I think there will be a point in the future that where it's not clear that you know opening another store is best for all of the brands.
But you know so far so far it's been working and it hasn't been as much of an issue as maybe you would think.
[36:39] Another interesting challenges like where do you stop. We all kind of like as a soccer guy your practice.
You know you like to solve customer problems.
I have this problem of where stuff.
So I imagine it's kind of interesting. So on the brand side you guys have done a really cool job of you know I can be in five stores in California and then I can kind of like you give me this life cycle that I can use right allthe way to.
You know I think you call it store open concept flagship when I looked to your site you have this kind of like model that I could even see on the soccer side.
You know if someone wanted to start selling on on Amazon there's no reason you couldn't like you know launch them there you know.
So. So that's interesting and then you know maybe you can almost become their PM.
You know there's there's because like you said earlier you've got their product data.
They've started with You Can you be you know is that an interesting place to go or do you start there and then on the landlord side.
I imagine you guys are you know generations ahead of a lot of these landlords on now to think about Dhara why are these things what's resonating with their customer.
So I can see you going deep there too. How do you think about those aspects.
[37:49] Yeah we we actually I mean we've we've talked about projects like that a lot.
But we've I think the opportunity that we have stumbled upon is really in physical retail becoming.
[38:07] Experiential rather than supply chain focused.
And I often started to to think that you know experience for retail is a third channel.
It's a new channel you know compared to maybe wholesale is the first one and an online as a second because it doesn't cannibalize your,
or other channels you're the focus is different you're capturing customers at maybe a different part of the of their lifecycle.
[38:40] And so.
For us we think about growth really on three vectors I would say.
One is on the contacts where one might find products.
So today we have like you said we have owned stores and they come in different flavors. We have that flagship in line.
We have the open air format and then we have this full store as a service product that we launched called built by beta.
And then you know in other contexts there's Lowe's. We just added Macy's as a big partner for us. And maybe you can imagine others as well coming down the pipe.
There's environments so these are the different ways that a brand might want to represent themselves in the physical world.
So you know we started with a two foot display that was the only option that companies had.
And then we we started adding more options you could take forefeet you could take a table you could take a room you could take half of the store you could take a TV,
you know create a whole store and and then on the on the third vector you have,
product categories and we've been really focused on tech for a long time but I think if you watch us closely especially if you watch our product assortment over time we started to to bring in other things like apparel andcosmetics and and so on.
[40:04] I think those each of those three vectors is is is growing for us and we're we're exploring them as far as we can take it.
But we've I mean I think you can. I think one day we we've imagined sort of building that that software distributions system that you're talking about,
but the online experiential retail opportunities is such a fast growing category that,
we'd be remiss not to to see how far we can take this. There.
[40:38] Very cool. And you you mentioned something in that answer I want to drill into a little bit more of the built by beta program.
Real quick you guys have like I mentioned that right from my perspective you guys have built a platform you engineered a lot of the pieces yourself like as opposed to a lot of retailers go out and buy,
a POS from company eBay and they buy you know gondolas from Company B.
You guys built the digital signage system for the stores and a content management system that the that the brands have access to to publish content to those digital signs you you build your POS you alluded earlier to thefact that you have.
Scot & Vibhu:
[41:18] Training system.
[41:19] Yeah. Training for the sales staff. You alluded to that,
detail the in-store analytics package that's not just purchase analytics but actual browse analytics so you're you're watching shoppers flow through the store.
So you're using that in your own stores and obviously in your shop in shops in Macy's and was,
built by beta is you selling that whole platform of tools to another brand that wants to have their own branded store is that right.
Scot & Vibhu:
[41:56] Yes so as I mentioned like experiential retail is a different channel and what we realize what we noticed you know in sort of trying to find the right tools to build the business.
We notice that everything has been subtly architected around the store as a sales channel as a place to get a box out the door.
And and and you know as it is as one example a lot of the companies that we work with don't see the first purchase from a customer as the as the last time they're going to make money from that customer.
Right. They are thinking about it as a customer acquisition cost but they maybe have a subscription package or accessories other things that they are or are you know consumables that they think are going to drive longterm value from a customer.
And the typical In fact every single point of sale system in the world today,
does not support a customer or checking out and adding on a cloud subscription or does not support a customer or checking out and adding on accessories or or other sort of options like that.
And so we we you know in order to serve the brands that we work with the best we had to we had to think about those challenges.
And we ended up just sort of building a lot of the pieces ourselves.
[43:17] But that that kind of example I mean that's just one of many many things where like the existing tools out there are just not good enough for this new channel thats being created.
And so when we you know I think as Scott was mentioning before like this this continuum of like you know a company is the way we are.
The ideal path for a brand with us is that they start with something small in a handful of stores that they think are really good.
Maybe a display is two feet and as they find success though maybe take out a room and build something thats a,
more custom and and a bit more of an experience and I think we started to hear from some of our our our best customers are especially our large customers that,
maybe a room inside of our flagship store wasn't enough and they wanted,
a much larger kind of representation.
And so we said Well of course like why not like we can easily take a lot of the stuff that we built and help other companies.
[44:18] But the store just like we have. And I think even the business model that we have was useful in thinking about this because,
when you are a new brand opening a store and maybe your vertical brand and you sell a few products but you don't have that many.
It's actually hard to figure out like what your store looked like and what other like should you bring other third party products in there like you know should you have like you know a product duplicated. You know 20times in the same space.
So our business model actually helps companies who deploy stores with us,
find other brands that that may want to participate in their ecosystem and so they in effect.
The the people who consume our platform on that side also kind of plug into this marketplace as a supply supplier.
And so it's a unique product I don't think anyone else has ever worked or built a turnkey storefront that has staffing and build out and all the things that you need included.
It's I mean we launched in April it's super early but you know we've there's a couple of.
[45:34] But you know definitely a lot of interest on that saw from companies across categories not just in tech.
[45:39] Nice in my remembering right. So I feel like I read something about him. There was a TED store that may have permanently or temporarily opened using built by beta. And then I think you guys did a net gearcompany in stores right.
Scot & Vibhu:
[45:56] Yeah. So we. So we launched it at TED. TED had asked us to come in and build the store with them.
So that was that was a really cool experience for us.
But yeah the net net your flagship was the first one that we announced and is live today in San Jose at Santana Row.
So basically it's it's a it is it's a Netgear store it has their signage.
It's got you know their logo on the receipts it's got their logo on the bags and on the employee's shirts.
But behind the scenes we've actually we're actually running the store so it's our people they're on our payroll.
We designed the experience with them and then we worked with them to find other third party products that would be sort of merchandise around theirs.
But it's the first time that they've ever done something like this before.
They've typically I mean they're gigantic company but they've typically,
you know a wholesaled to Best Buy and a lot of multi-brand retailers like that and like a lot of enterprise company a lot of large companies they had been thinking through,
this transition that's happening from wholesale direct to consumer and they don't want to miss out.
And so you know in in that when you become a direct to consumer brand you start to think about retail differently.
And I think we were we really worked with them to define the first version of the beta to be honest with you.
[47:18] But they're just one of many companies that are going through this right now. This transition very well girl.
It's kind of like experiential retail as a service. So everyone you know you have to have as a as a service on your name these days that is exactly how we talk about it.
[47:37] Very cool that is a good time to pivot. Fellow entrepeneur so I love to talk about the nuts and bolts.
I was looking on base and it said that you guys have rates 38 million.
So progress on that and you have some really good blue chip investors like Khosla Ventures Comcast and then some strategics like me.
And there I imagine it was kind of fun. Two or three years ago when you started pitching VCs on a retail concept because you know every headline is about end of stores and mageddon and whatnot,
but you've restarted it. So I'd love to hear a little bit about that journey there.
[48:13] Yeah. Yeah. We've we've raised a lot and in a short time frame. So what I'm going to say it doesn't sound authentic but it's true.
It wasn't easy to raise the money. I think we you know in our seed round we must have approached about 75 investors and a lot of them didn't even want to talk to us.
They didn't believe in brick and mortar the kinds of things that we heard about stores were apt to be honest with you were ridiculous.
We we you know I think retail is kind of interesting in the sense that like everyone thinks that they know it because they shop in stores but very few people actually understand the dynamics.
And we definitely face that a lot.
But as as time has gone on I would say each year of our company the environment has gotten easier and easier for brick and mortar are concepts.
And you know in this year Larry you've seen a lot of direct consumer brands getting funded and a lot of that a lot of funding is going into opening stores.
And so I think our business case has been validated increasingly so.
But you know a couple of years ago when we started it was definitely like you said like the headlines were just not good and a lot of people based there in vestment decisions on how the group is thinking.
And that was probably a mistake.
[49:41] And we're coming up on time but I want to ask this question because you guys you know you guys have developed some interesting category leading experiences up to now.
Do you have a vision for where experiential retail is going.
Like if we jump in a time machine and move forward like five years what's awesome experiential retail environment going to feel like that as it is it just a slightly more polished version of,
what we're doing a day or do you see some significant changes.
Scot & Vibhu:
[50:14] So we were not a gimmicky company. So I don't you know we don't think a lot about how the store experience itself is going to change.
But I would say that if you look at a macro level every.
I mean you know this as well as I do but every bad retailer is going to go out of business.
Between now and like you know 2040.
[50:34] And they're you know a lot of them are going to be replaced by these new brands who are you know getting to a point where stores start to make sense.
You know brands that sort of online. And and I think when you walk into a mall in the future really five years from now,
it will primarily be a bunch of kind of direct to consumer and vertical brands taking up the space there and,
I think that's great for customers because those products are better.
They resonate with a different audience than maybe the typical traditional retailers that today occupy a lot of square feet,
and and frankly like the business model these companies are using kind of naturally lends itself to better customer experience in the store because there's certain no conflict of interest between you know what a customerwants and what what the brand wants like that.
These brands don't care whether that customer buys the product right there and then they they think about the store for lots of thing for customer service for learning for for events all things that people love.
[51:46] But yeah we don't have a lot of insight into what the store will look like but I can tell you that if we have something to do with it a lot of stores will be designed around analytics and data and data capture.
And so they'll probably look a little bit more like our stores than than not.
[52:05] Yeah I hope you're right on that one. I know you and in the show you know at the beginning of the year we do this prediction show.
And I feel like I used to do a prediction every year that retailers would get more serious about their in-store analytics and I keep losing on that prediction.
So I would I would love your help in making that one finally be true.
Scot & Vibhu:
[52:26] Well it will be true by NEC and by just by companies these retailers going out of business and being replaced by new ones like us.
[52:34] Yes yes. Although that cooling takes a little bit of time.
But it's happened again. We've used up our allotted time serve if listeners have any questions that they didn't get answered during the show.
We encourage them to jump on Facebook and ask questions and we certainly feel free to reach out to you you know to the extent that any of them are,
focused on your business and of course if this show is valuable to you we sure would appreciate if you jump on iTunes and give us their five star review.
Scot & Vibhu:
[53:08] Thanks for joining us. And where can folks follow you online if they want to learn more about either what you're up to or beta.
[53:17] Site. I look at every e-mail I get. So definitely email me via B.H.
You made a dot com or you can follow me on Twitter.
But to be honest with you I just tweet about beta. So if you if you want that that's the best place for Beta news.
[53:34] Nice and Until next time. Happy Commercing.