“Omnichannel brands need the ability to quickly shift inventory and investment dollars to the channels and campaigns that align with market demand and shopper expectations.”
Hi Eric, please tell us about your journey in the technology industry. What inspired you to start at SoundCommerce?
SoundCommerce is my sixth startup. I’ve been working at the intersection of ecommerce, digital marketing and software technology since my college days in Seattle. It was a great place to start an entrepreneurial career, at a time when Amazon was just getting started.
My earliest experiences with online shopping happened in the shadow of Microsoft, as I helped the BackOffice team there figure out how to bring early ecommerce storefront technology to market. I founded my first company MindCorps in a Microsoft test lab, to help forward-thinking retailers build their very first online stores. MindCorps was quickly acquired by Amazon and as a result, I helped incubate Amazon’s seller marketplace concept which led to Amazon’s first major partnerships with third-party brands and retailers.
I learned more about the complexities of ecommerce marketing and distributed ecommerce operations while leading Mercent, which merged with CommerceHub, a dropship fulfillment platform provider that processes $30B in annual ecommerce transactions. My time at CommerceHub reinforced the importance of data and operations in scaling any ecommerce business.
Following our IPO, I joined SoCal-lifestyle apparel brand Richer Poorer, where I helped them pivot from a traditional wholesale model to digital-first DTC commerce. There, I learned fast the challenges of running an inventory-driven business reliant on third-party suppliers and fulfillment partners. We found it nearly impossible to measure the basic unit economics of our business. With all of the digital marketing costs, merchandising discounts, cost of goods sold and variable fulfillment and shipping costs in play, where were we making a profit? It was even harder to profile and value the customers we were acquiring and serving as a brand.
It was the cumulative learnings from all of these experiences that inspired me to start SoundCommerce. Our vision is clear: retail brands need to align all of their actions to drive profitable growth from every order and customer. This granular, real-time decision-making is only possible with modern cloud data infrastructure which creates a build vs. buy dilemma for brands looking to modernize and compete. SoundCommerce provides a fast and flexible cloud platform that solves the profitable growth problem, without the need for years of complex custom data engineering work.
How did you stay on top of your game during the COVID-19 months? Which tools/technologies did you use to manage your remote workplace activities?
In February 2020, my last business trip before the COVID lockdown was Etail West in Palm Springs. Like everyone else, I initially had a hard time understanding the magnitude of the pandemic — but by July when our office lease expired (and everyone was already working from home), we made the easy decision to shift to a fully virtual and remote model.
We’ve never looked back. It took some time to figure out how to stay connected as a team and build our culture as we’ve scaled from 15 employees to 60. We now operate in 14 states across the country and just hired our first full-time engineer in Buenos Aires.
We never could have hired as fast as we did, had we limited our hiring to Seattle. And the unexpected benefit is that the diversity of our team is an order of magnitude greater than it would have been had we limited ourselves to the local economy.
What is the most contemporary definition of SaaS-based Retail Experience management in the modern context of globalization?
The consumer economy is truly global today, with vast supply chains impacted by regional events (like COVID lockdowns) and cross-border disruptions (like labor shortages in our domestic ports). Every brand is impacted by these global forces – and the ability to serve customers better comes from the ability to make faster-informed decisions about where to source, how to ship, where to stage, and where and how to advertise, merchandise and sell.
On the consumer side, COVID has accelerated a rethinking of the role of brick and mortar stores, and the interplay between sales channels. Experiential commerce means rethinking the value proposition of a store location. It’s rarely about convenient access to local inventory these days — it’s too easy to ship next day or even same day to compete. Instead, stores need to be consumer destinations that reward in-person engagement, loyalty and the senses.
Omnichannel brands need the ability to quickly shift inventory and investment dollars to the channels and campaigns that align with market demand and shopper expectations. Amazon for years has been preemptively moving inventory into high-demand markets, applying machine learning algorithms to dedicated sortation centers. Now the industry is catching up.
What are the key benchmarks in retail personalization strategies? How do the latest trends in payments and chat influence retail personalization?
For years, consumer brands have relied on cookies to collect anonymous shopper data to drive personalization. With society’s increased focus on consumer privacy, regulation like GDPR and CCPA, the advent of device restrictions like iOS 14.5 and Google’s decision to deprecate third-party cookies, brands must shift focus to direct, first-party data collection to enable personalization and compete on shopper experience. Opt-in, first-party shopper profile data is the new oil.
Merchants can personalize discounts and communicate to customers based on how those customers interact, but increasingly the data required to do this is legally regulated or controlled by walled-gardens like Apple and Facebook.
But here’s the thing — shoppers will share data when they believe there is a direct benefit from doing so. This might mean sharing sizing and body profile information with an apparel fitment application like TrueFit. It could mean responding to a survey or participating in a contest where I’m asked to rank my favorite bands — or favorite brands. This data might come from a payment history or a customer service chat log.
In turn, this data allows brands to answer questions like: “Which customers received their order late because of a shipping issue?,” or “which customers take advantage of free-shipping but end up returning half of all orders?,” and ultimately “who are my most loyal, high-value customers?”
Amazon continues to create new benchmarks in e-commerce. How can other brands and retail eCommerce platforms compete with Amazon?
Here’s the simple truth about Amazon: They’ve upended the industry simply through where they invest and where they do not.
It’s easy to see how two areas of focus have led to Amazon’s 50%+ market share in North American ecommerce. First is investment in operations as the driver of customer experience (e.g. Prime), and second is their investment in data and decisioning, to the point that AWS (Amazon Web Services) cloud became its own multibillion-dollar service.
Independent brands and retailers typically over-index on upper-funnel brand and lower funnel performance marketing — at the expense of customer experience. While marketing is key, independent merchants can take a page out of Amazon’s playbook to “out-Amazon” Amazon. This means focusing first on operations and data capability as the drivers of customer experience.
For example, let’s use data to determine the next product and offer to promote to that specific customer. Let’s drive highest-intent customers into high-CLV loyalty and subscription buying programs. Let’s move product inventory to the geographies where consumer demand is highest. Optimize doorstep delivery speeds based on customer lifetime value. Add free samples to the packages of our highest value customers — and allocate precious inventory, and pick, pack and ship their orders first.
The good news today is that retail brands don’t have to build all of this from scratch. While Amazon and Walmart control massive retail market share in the US, the global market is vast and 90% of the addressable retail market is still ripe for digital transformation. I believe that the next generation of retail winners will adopt disruptive technology products built on cloud data and machine learning and apply it to a distributed ecosystem of infrastructure partners like third-party logistics providers (3PLs) to unseat Amazon and take back market share.
Tell us how DTC brands can stay relevant in the post-covid economy?
For DTC brands, pressure to meet modern shopper expectations AND turn a profit feel mutually exclusive, if not impossible, because of the complexity, cost and time required to see the big picture. Warby Parker and Allbirds are at-scale examples of brands that have arguably nailed customer experience, but have yet to turn a profit.
Until brands can move beyond unsustainable measures of success, and instead make every decision through the lens of profitable growth (represented by CLV), enterprise valuations and even long-term viability are at risk.
What’s the product roadmap for SoundCommerce in 2022?
At SoundCommerce, we’re pursuing two industry movements. First, to help retail brands align every decision with profitable growth — and two, to rethink the way enterprise data is integrated into useful models by everyday business people.
On the first point, we’re investing in capabilities that support customer-driven retail decisions beyond the marketing department — namely, customer-driven assortment and promotions optimization in merchandising, and customer-driven operational decisions across the supply chain, warehouses and stores.
On the data front, we’re moving SoundCommerce from a low-code experience to one where any business user can take control of their data pipeline to support new use cases and better decisions without reliance on IT or data engineers.
What kind of integrations/partnerships do you offer to customers to improve retail experiences?
SoundCommerce is integrated with more than 100 retail SaaS platforms ranging from Shopify and Salesforce Commerce Cloud to Adobe and Google Analytics, Klaviyo (email), Attentive (SMS marketing), Recharge (subscription billing), and the full range of digital marketing channels from Facebook and Instagram to Pinterest and Tiktok.
Those names represent the marketing stack, but we go further. We’re integrated with ERPs like NetSuite, warehouse management systems like Manhattan and Island Pacific, ship manifest tools like ShipStation, 3PLs like Geodis and Radial, and even parcel post carriers like UPS, FedEx, and DHL. Collecting data from all of these systems is necessary to track and optimize the entire shopper experience from first click to doorstep delivery.
One event in 2021 that influenced your thinking:
I’ve closely followed the rise of private equity consumer brand portfolios, from Thras.io and Perch in the Amazon seller world to ABG/SPARC in the legacy brand space (see Reebok).
Why are institutional investors throwing billions of dollars into these categories? At SoundCommerce, our data shows a 10X enterprise value premium for investors that know how to maximize customer equity, the contribution margin version of customer lifetime value.
Investors are counting on the fact that they can generate billions in shareholder returns by optimizing these brand portfolios to better serve higher value customers over time.
Operations and data capability will be key.
Your predictions for the industry in 2022 that you think would drastically affect M&A integrations: Why do you think so?
At SoundCommerce, we’re drafting on three major industry trends that we see accelerating in 2022:
First-party Data Advantage
As described above, the entire retail industry must shift its thinking about data collection and shopper experience. As additional barriers to third-party data collection arise, brands must engage with shoppers on their own terms, offering incremental value for every personal data attribute shared.
The great irony of the SaaS economy is that merchants can quickly and easily adopt every software tool needed – up to a point. Data capability is competitive advantage, and the moment that operational complexity exceeds the abilities of these siloed SaaS tools, it’s time to invest in cloud data infrastructure. From GCP and Snowflake to Databricks and SoundCommerce, innovation in the cloud is accelerating.
The sleeping giant is awake! And we don’t mean Amazon. Retail brands now understand that efficient omnichannel operations are an existential mandate. Either figure out how to serve the shopper (profitably) across all business channels, or perish.
Thank you, Eric! That was fun and we hope to see you back on itechnologyseries.com soon.
Eric Best is a serial entrepreneur, CEO, executive leader and 20-year commerce visionary with strategic exits to Amazon.com, Liberty Interactive and the public markets (NASDAQ). He was previously CSO at CommerceHub through its IPO, CEO and founder at Mercent and Morse Best Innovation, and cofounder at Impresys, Emercis, and MindCorps. Eric is a husband, dad, swimmer, urban gardener and aspiring DJ.
The SoundCommerce data platform drives profitable growth, customer experience and lifetime value across retail systems and channels — from first click to doorstep delivery. SoundCommerce works with retail brands’ existing technology stack to transform customer experience across marketing, merchandising, supply, fulfillment, delivery, and customer service. The data platform tracks real-time operational events, profitability and customer lifetime value to drive decisions and actions fundamental to cross-channel and direct-to-consumer success. Founded by Amazon veterans and backed by leading venture capital investors, SoundCommerce is headquartered in Seattle.