When Montreal eCommerce company Lightspeed acquired Dutch platform SEOshop in November, it laid the groundwork not only for expanding Lightspeed’s presence in Europe, but also for the eventual launch of Lightspeed eCom, the company’s fully integrated platform for allowing retailers with a brick-and-mortar presence to manage inventory while also fully leveraging an online shop, and vice versa.
Founded 10 years ago by Vancouver native Dax Dasilva, who bootstrapped the company for years before hiring his first employees, Lightspeed has now raised a total of $126 million US, almost half of which arrived last September with a $61 million US investment co-led by the Caisse de dépôt et placement du Québec (CDPQ) and Investissement Québec (IQ), along with previously existing investors Accel Partners and iNovia Capital.
The company has also renovated and occupied a crown jewel of Montreal real estate, the old Gare Viger, an aesthetically amazing old train station hotel a few blocks from City Hall, where Lightspeed’s 440 employees now work.
What separates Lightspeed from its competition, too, is its international outlook and expansion, not only through acquiring SEOshop, but also by expanding into the European restaurant point-of-sale market with the acquisition of Belgian payment processing company POSIOS in October 2014.
As Lightspeed eCom launches, Cantech Letter spoke with the company’s chief revenue officer JP Chauvet, who is quick to distinguish Lightspeed’s offering as being aimed at “serious retail” when compared with Shopify, the Ottawa eCommerce success story that nonetheless serves, according to Chauvet, “the low end of the market”.
And if, as Chauvet suggests, the introduction of Lightspeed eCom is set to double Lightspeed’s monthly recurring revenue, the company’s growth will likely launch it from an already impressive position into the outer reaches as a globally dominant eCommerce player.
Cantech Letter interviewed JP Chauvet by phone.
Lightspeed is launching eCom on March 9 in North America, but it was foreshadowed in November with the acquisition of a Dutch company called SEOshop. Since then, you’ve rolled out the service in Europe and on a beta level in North America. So you’ve had a couple months to study its behaviour. How’s it going?
It’s going very well, actually. We’re very stoked about the launch. We think it’s a game changer in our industry. I’m sure you know, but our customer base is serious retailers. So most of the people we’re going to be promoting this to have a brick-and-mortar store. We’ve been doing a lot of analysis on our existing customers. As you know, before that we had Connectors with a number of systems. What we got from the market is that prior to our launching, our customers had to make compromises, in a way. If they wanted to have a really good eCommerce platform, that means it would be poorly integrated with the point-of sale or they’d have to go with a point-of-sale that was of lower quality with a very good eCommerce platform. Then the third segment were those that weren’t integrated. And the majority of those that were serious, who really had a very strong online presence and a very strong offline presence, all of those guys had little to no integration between the two platforms. So internally, we call this the “no compromise” launch, where you can actually have the best now of both worlds, fully integrated. What that means is very deep, very functional eCommerce that is much better than what’s on the market, and fully integrated with our point-of-sale, which has always been the best system on the market. So we think that this is actually a pretty big leap for us in the market, and a pretty big leap for our customers, ultimately.
So the “game changer” as you call it is the integration between point-of-sale and eCommerce platforms that wasn’t there before?
Yes. SEOshop was the leading European eCommerce platform. It was, in a way, the Shopify of Europe. But it was very focused on Europe. So being European-focused, that means it supported taxes very well, multi-currency, multi-languages, but it wasn’t adapted to the U.S. market. We have an app marketplace, and we have 150 partners in Europe who had developed it for a European player. So the first thing we did was brought this to AWS infrastructure in North America, and then we had to port all the apps onto the North American marketplace. And then obviously, we had to do all the integrations between the products. Finally, what we had to do was we had to look at a few exceptions in the U.S. Tax handling in the U.S. is kind of specific for North America. So we had to look at that. We also had to do integrations with shipping vendors in North America, we had to do integrations with payments in North America. It was basically tweaking the platform, to make it a real North American platform, and bringing all the apps on the North American platform, and finally, working very hard on the integration.
Just as a sidebar, Amazon Web Services just opened a data centre in Montreal recently. Does proximity make a difference to Lightspeed, or is that just a morale boost?
It doesn’t really make a difference for us. It’s a virtual world. What’s good about that is that it reinforces Montreal as a tech hub. We’re using their infrastructure because it’s super-reliable and we count on it. But it doesn’t really change much.
What difference will Lightspeed eCom make for retailers?
I started our conversation saying the eCom platform is for serious retailers. And I think that’s what makes this very unique. Even the pure online capabilities, or pure eCommerce capabilities, we’re very strong with matrices. We can do custom fields. The logic of a product and inventory is very strong on our eCommerce. We wanted to be sure that it was very tied in to the typical Lightspeed, which is our strength, which is inventory management and matrices on the offline, the POS. That’s really what we’re doing that’s amazing, and that’s going to make us much stronger than the other vendors. First of all, we acquired SEOshop because they could handle matrices in a very good way. And now we have deep matrices in both products, which is very important for retailers.
Aside from SEOshop’s compatibility with handling various European jurisdictions, Lightspeed also has a history of making inroads into the European point-of-sale market, particularly in the restaurant industry. Does that make a difference towards your product’s scalability?
Absolutely. We are the only POS vendor out there that has real penetration in Europe. We have offices in London, in Germany, in Amsterdam, in Belgium. So when we look for an eCommerce platform, we couldn’t just buy an eCommerce platform that was only supporting North America. That’s because we sell everywhere in the world. We sell in 100 countries today. So we have to be sure that when we acquire an eCommerce player, that it isn’t supporting only the North American model but can support all languages, all currencies, all tax models. So that’s de facto in the platform. It was very easy to take a European platform that already manages all the different taxes and bring it to North America. That was fairly straightforward. For us, what makes this such a big differentiator is that a lot of our customers operate across borders. Again, that’s a huge value proposition when you look at our eCom. That’s what we mean when we say that we have a real full-blown eCommerce platform, is if I’m now an American company, I can use Lightspeed for my eCom and I can now operate in all countries. We support all taxes, we support all local payments, we support the logic of multi-currency and multi-lingual. You can have descriptions on multiple languages, so it is de facto a much more robust solution than what’s on the market in North America because it has all of that extended support. That means, for a retailer that wants to operate overseas, or is already operating overseas in our point-of-sale, they can actually now have an eCommerce platform that is really international, that can support their growth.
For us, the number-one objective is to become the biggest retail platform globally. We want to be the dominant retail player that saves retail in cities, because we believe in independent retailers and we want them to thrive.
Until now, it seems like Lightspeed and Shopify were offering basically complementary eCommerce platforms, with Shopify handling the online presence of digital-first retailers, while Lightspeed specialized in brick-and-mortar and restaurant point-of-sale retail. So this eCom product is being presented in a “Lightspeed takes on Shopify” on its turf. Is that the case?
I think there’s still a market for both companies. It’s a broad market. When you talk about eCommerce, I think there are multiple profiles of customers. For us, the way we’re looking at it is very simple. We think that our customer base needs a solution that is fully integrated, and that the online and the offline is fully integrated with a single inventory management, single customer management, single data management. That’s why we’re doing this. The second thing we know is that our customers are real businesses. They generate at least $600,000 revenue a year, so they’re looking for an eCommerce platform that’s more robust than what they currently have in the market. With that in mind, we think that for our customer base, our solution is better than Shopify. That’s mainly because I think we’re addressing now exactly the same markets, where Shopify is doing the online and the offline, we’re doing the online and the offline. I think the big difference is the profile of the customer. We tend to go with customers that have a much higher GMV (gross merchandise volume), and those guys have more expectations online and offline, whereas Shopify will go with customers that have a smaller GMV, that are what we call starters. In that case, they don’t need international support, they don’t need multi-currencies, they just need to be able to start. They’re more starters, and we’re more, I would say, established businesses. I would say we’re in the same market, where now Lightpseed is just as competitive as Shopify online, but I think the segment of the customers we’re going after are very different. But I think Shopify is a crazy-good company, a crazy-good solution, and very good for their segment. And I think we have a list of functionalities that are very good for our segment. You can see that Shopify are working more with Facebook now, and they’re more in the starter segment of the market, where we will work primarily with people that have a brick-and-mortar combined with an online presence.
Right, and it has introduced the kind of agility that start-up culture has brought to legacy retail.
Lightspeed eCom works very well with small companies, but it also works very well with very big companies. For example, Heineken is one of our customers, and they power however many hundreds of countries, where we already online the eCommerce platform. Also, Philips, they use us for their global eCommerce. So for the value proposition, we bring a full eCommerce platform that is very well integrated.
I spoke with Montreal T-shirt company Poche et Fils, who have tested Lightspeed eCom and are very enthusiastic about it, and also very categorical about why they needed to migrate on to it from what they previously had.
They could have continued on Shopify, without any problems. But their strategy is to expand internationally, to be present in a number of countries. That’s where they started seeing limitations, and that’s why they moved to us. They’re no longer a starter in their garage. They’re a real company. They have employees, they have marketing teams. They’re a booming online company. I think this is a very good model for us, where they’ve in a way outgrown the solution they were using before, and they’re really relying on us to grow internationally. They’re also relying on us because, at some point when you’re growing, you’re talking about not just growing online, but also having some presence offline. And that’s where we can do way more for them. We’ve now got 70 or 80 customers who have purchased the solution. We chose them because we really love their energy. We actually believe in their product. It’s a very good model of a company that’s growing like crazy, like we are. And they’re looking for a much more robust partner, and they want to go global.
So you’re presenting eCom as a product for serious retail, but also as an aspirational product, for companies who want to become serious retail.
Yes. If you’ve been following the trends you’ll know that at some point when you become a bigger online player, you need to start having a physical presence. You see more and more online retailers who are opening pop-up stores. Even Amazon announced the opening of their first brick-and-mortar store. We want to show that there is a model for eCommerce-first that then becomes brick-and-mortar.
While you’re saying that, I’m thinking of Frank & Oak, who’ve probably done more to solidify that integration between the online and offline worlds than any retailer I can think of. They talk about retail as an “experience” rather than just a transactional thing, which is probably more difficult to pull off successfully than it sounds.
Absolutely. If you really want to reach your customers, regardless of where they are and present them with a similar experience, you need to have very powerful systems that are on all media, and you need to have them very tightly integrated. What’s amazing about what we’re doing is that customer and purchase history is going to be fully integrated in one platform. If you look at your inventory, all of your goods, you’ll enter them once and they’ll be 100% multi-channel. And analytics will be across all channels, so you can really now create a very nice experience. Let’s say someone buys online and then ends up in the store, the sales guy can see their history and say, “You bought these socks online. How are they? Are you enjoying them?” You can really start to build a cross-channel experience. That’s what I mean when I say we can go very deep in both environments, we can actually support all these models. At the end of the day, this means we will make our customers more successful.
Factually speaking, we are now the only player on the market in our segment that can offer true omni-channel. If you look at Shopify, they are more on the low end of the market. Their physical point-of-sale is not anywhere close to Lightspeed.
That’s what seems to be missing from a lot of digital and start-up culture, is any kind of attempt to build something for people who exist in the physical world. People want to experience something in reality, and technology should exist to enhance that, instead of trying to replace it.
There are two reasons for that. First, and Ethan Song says this all the time, brand narrative is always better in 3D. You really associate yourself with a brand in a 3D environment, in a much more reliable and long-term way. But the other reality about online is that you have to look at cost of acquisition. Now the cost of acquisition of a customer online has become outrageously expensive. So all the big online players are realizing that just paying rent and having foot traffic is a very inexpensive way to do customer acquisition. That’s really what’s driving a lot of these big online players. Finally, if you have a system that would enable you to register or acquire the customer in a store, exactly in the way that you would do online, with your email, and owning that customer and their purchase history, you can most probably do it in a less expensive way in the physical world than the online world nowadays. That’s what’s driving all these guys to look at the physical. It’s pure economics. What is the cost of acquiring a customer versus the lifetime value of a customer? And the price has gone up and up and up online, where now it’s unbearable for a retailer to sustain growth.
Okay, that’s fascinating. We could probably talk about retail trends for the next hour, but let’s bring things back to Lightspeed eCom. When you acquired SEOshop in November, that added a large existing customer base to Lightspeed’s overall customer base. Where do you see that going during the next year?
That’s why we made that investment. That’s the exciting part. Factually speaking, we are now the only player on the market in our segment that can offer true omni-channel. If you look at Shopify, they are more on the low end of the market. Their physical point-of-sale is not anywhere close to Lightspeed. Then if you look at Vend and Shopkeep and all these guys, Vend has an online presence that is not good. It’s not a real online presence. And then Shopkeep and Revel, all these guys depend on third-party integrations. So de facto, when I’m a salesperson at Lightspeed and I’m presenting omni-channel, I’m the only one on the market. So we think this is actually going to accelerate our growth. We are the biggest player right now on the market, numbers wise. We have 36,000 customers. We’re onboarding about 1,200 new customers every month now. We think this is going to make the gap between us and our competition even wider. Eighty percent of retailers now want to integrate online. We do a lot of studies of our customer base. That means that anyone coming our way who, like any of those 80% who want to have an online presence, will be totally integrated, will have more functionality than the others, and with no compromise. It’s the best eCommerce meeting the best in-store, fully integrated. Nobody is anywhere close today to what we have. And we think that will widen that gap big-time. Secondly, we are looking at having an attach rate, at least 50% of all new customers are going to buy eCom now. For us, this means it’s going to double the MRR (monthly recurring revenue), the money we make on each customer. And for our customers, in one trick they’ll have an online presence.
At the end of the day, this means we will make our customers more successful.
You’ve talked about how Shopify serves the low end of the market, but you also can’t help but notice that Shopify IPO’d last year and appears to have done pretty well out of it. Dax Dasilva has talked about his desire to make Lightspeed the next great Canadian technology unicorn story, with roots in Quebec. Where do you see all that going for Lightspeed in the immediate future?
As you know, we had a pretty significant round of funding about six months ago. So right now, we’re very well funded. The business is going well. What we’ve put in place is a long-term strategy for success. Obviously, we planned every move we made. We planned the acquisition, combined with the funding. We’ve been working very hard for the past six months to get the omni-channel Connector working amazingly well. For us, the number-one objective is to become the biggest retail platform globally. I say this every day, but I want every street in every neighbourhood in every country using us. We want to be the dominant retail player that saves retail in cities, because we believe in independent retailers and we want them to thrive. An IPO is just a cash liquidity event. It’s a way for us to get more cash to maybe acquire more companies and grow even faster. We have plans to go public in the next two years, but it’s going to depend on the markets. The markets aren’t as good as they used to be. So we’re just excited right now that we have the best product on the market, we have the right level of funding, we have the best product coming out in eCom, and this is just going to further accelerate our growth. And then when the time is right, we’ll do what we need to do for investors and for our shareholders, but for now we’re really just focused on the execution of the business.