As Amazon continues to eat the retail world, how can brick-and-mortar stores expect to not only survive but flourish?
Stephan Schambach, founder of Demandware, has made it his mission to answer this question with NewStore, his new mobile retail platform startup that recently closed a $50 million Series B round. The round, which was announced on Tuesday and brings the startup's total funding to $90 million, will be used to bring NewStore's software to market and help brands adopt an omnichannel approach to retail that will marry the physical and digital worlds under one integrated system.
In an interview with BostInno, Schambach said more than a dozen firms sought to lead NewStore's Series B round, but the company ultimately decided to go with Activant Capital, a Connecticut-based growth equity firm that specifically focuses on companies working in commerce and the Internet of Things. He said while other firms would make email introductions, Activant went above and beyond, seeking NewStore out at trade shows and parties and showing off their commerce chops.
"They did a great job demonstrating to us that they understand the space," Schambach said.
Other investors in the round include General Catalyst and Schambach himself.
As showcased in a video on NewStore's website, the company's vision for its mobile retail platform is ambitious and would help luxury retail brands specifically provide services that compare or, in some cases, go beyond what Amazon can provide. In the video, a woman downloads a retailer's native app, which lets her order a dress for in-store pickup that gives her a push notification when the dress is available. When the woman arrives in the store, her phone triggers a geofence that alerts a store associate via the app that she has arrived. Other promoted features include the ability to do rush-delivery, even for an exchange, all from within the app. The system also keeps track of item availability across multiple store locations.
To Schambach, providing a mobile-first retail experience is all about giving shoppers the level of convenience they have come to expect with things like Amazon and mobile apps.
"If you look at two similar brands in hand bags — one offering this level of convenience, the other doesn't — it's relatively clear who's going to be the winner," he said.
"The cost of doing it in a bespoke way is just staggering."
While NewStore is working with multiple customers, Schambach said, he has only disclosed the name of one so far — Adidas — and it's for a more narrow use case: a mobile app that exclusively sells a special kind of soccer cleat called the Glitch. But the company is clearly doing a lot of groundwork to ensure they can convince retail brands to use its system.
For one, Schambach released a book last month titled "Makeover: How Mobile Flipped the Shopping Cart," which he said gives "practical advice for how to save retail in a world where mobile and Amazon is changing everything." He said at least one large retail company that is a prospective customer has purchased copies for nearly everyone at its corporate office.
"We often run into situations where the C-level is sold on what we want to do, but they have no idea how to get there," Schambach said, explaining why he wrote the book.
NewStore, which now has 140 employees across Boston, New York and Berlin, also released a comprehensive report on the state of mobile retail that includes research on 112 leading retail brands the company couldn't find from the usual sources, like Forrester and L2., Schambach said. Among its key findings:
- Only 22 percent of retailers let customers make purchases through their app;
- A meager 4 percent of retailers promote their apps in-store;
- And a minuscule 1 percent of retailers let customers do self-checkout.
Not every retail brand is getting it wrong, however. Schambach pointed to makeup brand Sephora as an example, saying that the company employs a couple hundred engineers, with roughly 50 of them dedicated to the company's mobile experience alone. Given the company's success in delivering an omnichannel experience, Schambach said Sephore likely isn't a good prospect for NewStore. However, he said, there are plenty of retailers that don't have the resources to build their own technology teams, whether it's the capital or the ability to find the right talent.
"The cost of doing it in a bespoke way is just staggering," Schambach said.
That's why Schambach believes NewStore is in a good position to help brands catch up. It has built a mobile-first, integrated system that can hook into a number of existing ecommerce systems, including Demandware, which was acquired by Salesforce last year and renamed to Salesforce Commerce Cloud.
"I think the vast majority of the market is much better off [using] a platform like this as a cloud service instead of trying to roll out their own," he said.
