Step into the typical store this holiday season, and odds are good the experience will feel pretty similar to the one your grandparents encountered: clerks stacking merchandise, a store peppered with printed signs, and a queue for the cash register when it’s time to pay. There may even be some clipped paper coupons involved in the transaction.
A Boston startup called NewStore wants to shake that up, bringing the worlds of retail and e-commerce together with new smartphone software that would be used by store employees.
Some of the company’s inspiration comes from the Apple Store’s approach, where staffers wielding iPhones can handle any kind of transaction, from purchases to repair appointments to merchandise returns.
“Retail is a growth market,” says NewStore CEO Stephan Schambach, somewhat counter-intuitively. But he and his company are focused on selling software to retail outlets run by a single brand — think Converse, Bose, or Warby Parker rather than Macy’s or Lord & Taylor. It’s those multi-brand retailers “who are in trouble,” Schambach says, with e-commerce sites offering greater choice and better prices.
To arm retail minions with more advanced technology, NewStore has raised roughly $100 million in venture capital. It has 150 employees, split between offices in Boston and Berlin. Its board includes seasoned industry veterans like Carol Meyrowitz, the executive chairman of Framingham-based TJX, and Sharen Jester Turney, a former Victoria’s Secret CEO. And Schambach’s prior venture, Demandware, was a supplier of cloud-based software for e-commerce sites. It went public in 2012 and was later bought by Salesforce for $2.8 billion. (Schambach personally made about $200 million from that transaction, some of which he has invested in NewStore.)
But selling into the tumultuous world of brick-and-mortar retail — where rents and employee turnover are high, and profit margins often are low — can be tougher than nabbing a good parking spot at the mall in December.
People in the retail industry “who came up through the ranks view technology as the enemy, because they see the world as online versus offline,” says Hilmi Ozguc. “And the groups inside those retailers trying to bring them into the modern age aren’t necessarily the ones that have the upper hand.”
Ozguc learned that lesson the hard way: in 2011, he founded a Boston company called Swirl Networks. It made a mobile app that tried to capture information about the styles and stores that you liked, and then serve up offers that would get you in the door. It even installed “beacon” technology in its customers’ stores – small wireless transmitters – to trigger marketing messages on your phone when you traveled to particular areas of the store. (Swirl’s app asked for its users’ permission to send these messages, Ozguc says.)
“Our best customer at Swirl was Best Buy, because they had the right mindset,” Ozguc says. “They had geared up for an existential battle against Amazon, and so they made the investment in transforming how they looked at technology, and how to combine what happened in their stores with online.”
But, he says, “when your house is on fire, deploying some cool new technology is probably not high on your list. You try to fight that fire with other methods that have worked for you in decades past.” Printed signs offering 30 percent off work just as well as a notification to your smartphone telling you the same thing.
Swirl raised $32 million in venture capital and sold its technology to other retailers, like Timberland and Alex & Ani. But the company let most of its employees go last summer, and its technology was acquired by Best Buy for an undisclosed amount in January.
But Ozguc says he likes the strategy that NewStore is pursuing, starting with newer, digital-first retailers like Untuckit, an apparel retailer founded in 2010 that now has 80 stores, including three in Massachusetts. Untuckit is an early user of the NewStore software, as is Outdoor Voices, a seller of athletic clothing that has a location in Boston’s Seaport. Schambach says the company has about a dozen customers so far, “some very large,” though he can’t mention all of them by name.
NewStore gives store associates a mobile app that lets them have complete visibility into the current inventory — whether it’s an item sitting on a shelf in the store, in the stockroom, or in a far-off warehouse. As Schambach explains it, it’s a way of running a store more like a website.
“If you want to buy an outfit consisting of three or four items, and one is sold-out in that store, and another item is only available on the website, that can be a very complicated transaction for most store associates,” Schambach says. The NewStore app lets all of those items be sold in one transaction, with some being carried out and some being shipped to the customer’s home. Payment can happen via a digital system like Apple Pay or PayPal, or with cash or a credit card.
Store associates can also use the app to handle returns, or see a history of the customer’s past purchases, using customer profile data the retailer already has, and information about the clothing or shoe sizes they prefer.
This has been a brutal year for all sorts of retailers, from Barney’s New York to Payless Shoe Source to Gymboree. But does that mean people are done with old-school shopping in real-world environments — the kind captured in classic films like “Miracle on 34th Street” and “A Christmas Story”?
“Not at all,” Schambach says. “We’re seeing a revival of it,” especially when it comes to dedicated outlets opened by digital-first companies. He just thinks retail is ready for an upgrade.