Reinventing decision making for modern retailers

Long before Michael Lewis popularized sabermetrics with Moneyball, I’ve been fascinated by the idea of using data and math to get an unfair edge on the competition. The world’s best poker and blackjack players count cards and compute probabilities in real-time to beat the odds over time. High frequency traders use data science to find and exploit even the most miniscule of arbitrage opportunities to lock-in profits. And as described by Lewis, innovative professional sports teams evaluate athletes using non-traditional statistics to more accurately assess the players’ true worth. Quite simply, smart data analysis leads to actionable insights which leads to better decision-making and ultimately better performance.

Not surprisingly, this idea has large commercial applicability across a number of categories. At Shasta we’ve already made multiple investments leveraging the trend. For example, Apptio leverages data science to enable better decision making among Fortune 500 CIOs, and Anaplan is in hyper-growth mode providing a data modeling platform for enterprises to improve decision making across functional areas such as finance, sales, and marketing. We remain very bullish about this trend, and it is at the heart of our most boomerang_logorecent investment, the $12 million series B financing for Boomerang Commerce, the first guided analytics suite for modern retailers.

In the retail sector, Amazon has leveraged data analysis to grow from nothing to the top retailer in the planet. Unlike traditional retailers, Amazon makes product and pricing decisions based on numbers, not a category manager’s subjective experience and gut-feel. They continually adjust pricing in real-time to optimize for their core objective for any product, be it top-line revenue, gross margin contribution, or market share. In Moneyball, Lewis described how the subjective approach to player evaluation by traditional baseball scouts was inherently flawed. Likewise, the gut-based approach long employed by traditional retail insiders is overly subjective and flawed for the modern retail world.

To the benefit of consumers, this trend is thankfully changing rapidly. Retailers, falling further and further behind Amazon, have woken up to the power of this new way of thinking. Many have hired former Amazon executives to infuse the more modern data-driven decision making philosophy into their companies. However, changing the thinking is not enough. These retailers are not equipped to build the technology themselves. Going it alone would take years to catch up, and even then the results would be uncertain.

In 2012, Guru Hariharan left behind a career in online retail with Amazon and eBay to tackle this big idea. He clearly understood the power of Amazon’s approach from his own experience with the company, but was frustrated to observe traditional retailers losing ground and market share due to their outdated thinking. Fast forward three short years and he’s assembled a world-class team of technologists and data scientists, many coming from tech leaders like Google, Facebook and Saleforce. They have built a technology that provides retailers with real-time pricing recommendations for pricing competitively, yet profitably. It provides powerful insights about which products to stock or discontinue based on the impact to the bottom line. Ultimately, It provides customers an ability to effectively compete in the market in a manner that has been helplessly out of reach.

Most importantly for their customers, it is working. Their customers are not easy to please. They unapologetically demand a significant ROI. Thankfully, customer after customer that we spoke to witnessed a revenue and margin lift from Boomerang’s technology in weeks, not years. Typically that lift translates into a 10x ROI to their bottom line. This consistent and reliable performance has enabled the company to already win deals with nearly 20% of the top 50 internet retailers, including retailer heavyweights like Staples and Office Depot. In turn, Boomerang has grown its business 4x in just the last 12 months.

Yet for all of their early success, Guru and team have just scratched the surface. The foundation is set to rapidly grow their business and further enhance their product suite, and we could not be more excited about joining them on their mission to reinvent decision making for modern retailers.

Reinventing decision making for modern retailers

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