Inventory Data from Retailigence Helps Mobile Users Buy Locally

10/15/12Follow @wroush

You’re standing on a hot street, feeling thirsty, and a bus goes buy with an electronic sign advertising your favorite sports drink. Normally, that would just make you even thirstier. But this sign contains some actionable information: the drink is in stock at the 7-Eleven one block away. The chances that the store will soon be selling you a cold beverage just went way up.

That may sound like a scene out of Blade Runner, but it’s not science fiction. It’s an actual ad campaign being planned for New York City by Vitaminwater, using local product inventory data provided by Redwood City, CA-based Retailigence.

One of the many real-world frustrations that Web and mobile technologies haven’t quite solved is what you might call the “last mile” problem in shopping: when you know you want something, and it’s not the kind of product you’re going to order online, but you don’t know which nearby bricks-and-mortar store has it in stock, and you don’t want to drive all over town looking for it.

A mobile advertisement—whether it’s on the side of a bus, or, more likely, on a Web page that you’re browsing on your smartphone—would be the logical place to convey this missing information. But before that can happen, somebody needs to collect real-time data on product availability, break it down by location, and get the data out to people’s mobile devices based on their latitude and longitude.

That’s exactly what Retailigence does. And though the startup is only three years old, it’s emerging as the leading middleman in the area of geographic ad targeting.

“There are tons of companies trying to make ads more local,” says founder and CEO Jeremy Geiger. “There’s nobody that has access to this data that we have that allows us to show local product availability.”

Backed by $4.3 million in venture funding from DFJ, Quest Venture Partners, and angel investor Dave McClure (among others), Retailigence is a pioneer in what might turn out to be the most important form of “online-to-offline” or O2O commerce. Here at Xconomy, we mounted a whole event on O2O commerce back in August—but the focus was on San Francisco-based Eventbrite and the work they’re doing to connect people with information about events going on in the real world. Ultimately, retailing could prove to be an even bigger arena for O2O.

According to data from research firm Forrester, nearly 50 percent of all in-store purchases are preceded by some kind of online search. And giants like Walmart and Apple are earning hundreds of millions of dollars each year on online purchases followed by in-store pickup. “The thing people don’t realize,” Geiger says, “is that O2O commerce is literally seven times bigger than e-commerce, and growing just as fast.”

Geiger is a former management consultant who spent more than 15 years at PricewaterhouseCoopers and KPMG helping firms fix their supply chain problems. In the consumer packaged goods business, he says, you can’t achieve the just-in-time ideal in supply chain management without access to inventory data from local retailers. So he got really good at helping retailers integrate the myriad databases they used to track manufacturing, shipping, inventory, and pricing.

Around 2009, Geiger got interested in the first generation of barcode scanning apps for smartphones, from companies like RedLaser. Using these apps, consumers could scan the barcodes on products in stores and get online data about the same products. But back then, he says, “you might have been able to find the product on Amazon, or maybe a used one on eBay, and that was it. What would be really useful to the consumer, and drive value to retailers too, would be to see that the product is also available across the street.”

Geiger validated this idea with the co-founder of RedLaser himself, Jeffrey Powers. “He said the number one complaint about RedLaser had nothing to do with the product—it was that there was no local data,” Geiger says. “People wanted to buy locally but they were only seeing Amazon data.” (eBay bought RedLaser in 2010.)

Geiger saw an opening to build a company. But despite his experience helping companies build supply chain management operations, he didn’t know much about starting a venture-backed startup. So he moved to Silicon Valley and joined Founder Institute, the multi-city startup incubator started by Adeo Ressi.

“It seemed like a great way to get introduced to VCs, and it worked out just like that,” Geiger says. After spending nine months funding the company out of his own pocket and growing to six employees, Geiger met 500 Startups founder Dave McClure, who invested after a three-sentence pitch.

The company’s first product, called AppNet, was designed as the fabric linking retailers with developers of mobile product search apps. Retailigence taps into retailers’ point-of-sale and enterprise resource planning systems and sucks data about products, prices, and inventories into a vast, cloud-based database. It then provides an application programming interface (API) that app developers can use to grab the data, based on inputs such as a UPC barcode, a product name, or even just a product category, such as “blue jeans.”

AppNet returns product data filtered by the inquirer’s location. All of the product listings you’ll find in retail search apps like Town Square for the iPhone, ShopWithIt for Android phones, and ShopSavvy (on both operating systems) comes through AppNet. “We have data for 10 million products in 100,000 stores,” Geiger says.

More than 1,000 developers are signed up to use the API, and Geiger says retailers have been happy to contribute their inventory data to the system. “Things are changing in retail,” he says. “A year ago their primary focus was on creating an iPhone app. Nine months ago it was on creating an Android app. Six months ago it was a mobile website. Now they are starting to realize that they spent all this time and money on their own apps and sites, but it’s still less than 1 percent of the population that has ever downloaded any of those apps or used the sites. That’s the sweet spot for us to approach them. We say ‘Look, you have a million third-party apps that consumers are using, and you need to be visible there.’”

This year, the 25-employee startup has branched out in a new direction: providing data for display ads on the mobile Web, through a second service called AdPop. But the product wasn’t actually Geiger’s idea: it was Microsoft’s.

“They approached us and said they were going to be spending millions of dollars on this ad campaign to promote Office on mobile display ads, and they would like the ability to show a consumer who clicks on the ad which nearby stores are selling it,” Geiger says. “We had honestly never thought about that use case. But we did the campaign and Microsoft loved the results, and the retailers loved the fact that we were driving consumers into their stores. That woke us up to the opportunity.”

The North Face "Router Backpack" Mobile Ad, with location data from Retailigence

The North Face "Router Backpack" Mobile Ad, with location data from Retailigence

Through AdPop, Retailigence provides the same data available through the AppNet API to mobile advertising networks, which use it to customize mobile ads on the fly with maps and local product data. The North Face, for example, has used AdPop to alert mobile users in San Francisco about its “Router Backpack,” which has extra compartments for laptops and wireless gear. If you see the ad while you’re in downtown San Francisco, it will come with a map directing you to The North Face’s Union Square store.

AdPop users find that the click-through rates on their mobile ads are 20 to 50 percent higher when they include this kind of local data, Geiger says. And in the future, once mobile payment technology catches on, Retailigence might be able to help mobile advertisers in another way: by providing data on each ad’s payback.

“The reason why so little money is going into mobile advertising so far is because people don’t know the effectiveness of it,” Geiger says. “The way to measure the true effectiveness would be to track the behavior of somebody after they see an ad. That’s exactly the void we are filling. We will be able to see that Mr. X saw the ad using Retailigence data, clicked on it, went into the store, and used a mobile payment solution to buy the product.” This kind of tracking already works in Japan, where many more consumers have payment systems built into their smartphones; it should be up and running in the United States within 18 months, Geiger says.

But the company isn’t betting its whole future on mobile Web ads. As the Vitaminwater campaign illustrates, Retailigence’s data could be useful in any situation where product information is being delivered in digital form and location data is available.

“Think of it this way,” Geiger says. “Brands are spending billions of dollars making people aware of products, but then it stops; there is nothing beyond that. Worse than that, nobody knows the ROI on any billboard or any magazine ad. Imagine if, through Retailigence, we could add to any advertisement a bit of data that not only drives people to stores but lets us track who went and what they bought. That is powerful and that is what we can enable.”

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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