Yahoo Finance TryNow raises $12M to bring try-before-you-buy, Prime Wardrobe as a service to online retailers
Amazon's Prime Wardrobe has been a key way for the e-commerce giant to expand its reach selling clothing and other apparel: giving shoppers an easy way to try on several items, return what they don't want and pay for what they keep has helped it cross the virtual chasm by bringing the online experience a little closer to what it's like to shop for fashion in physical stores. Now, a startup that's built "Prime Wardrobe as a service" to help smaller competitors offer its shoppers the same experience is announcing some funding to expand its business.
TryNow -- which provides technology to online retailers that use Shopify Plus to let their customers receive and try out apparel, return what they don't want and pay only for what they keep -- has raised $12 million, funding that it will be using to continue expanding its business.
The startup, based out of San Francisco, already works with around 50 up-and-coming online retailers doing between $10 million and $100 million in revenues, with Universal Standard, Roolee, Western Rise and Solid & Striped among its customers. Founder and CEO Benjamin Davis said in an interview that it has seen business grow six-fold in the last year as more shopping has shifted online from brick-and-mortar due to the pandemic. TryNow claims that using its service can help brands grow average order value by 63%, conversion rates by 22% and return on ad spend by 76%.
Fashion has been a primary focus for "try before you buy" services online, but the model is not limited to it.
"Apparel is a core category for us," said Davis, but he also said he believes that the model can be applied to improve the unit economics of selling online to other categories, like cookware. "Prime Wardrobe has solidified the power of that model for fashion, but we believe it's much larger. We think that any purchase that is discretionary should be tried before it is bought."
The funding, a Series A, is coming from a notable list of backers that speaks to the opportunity in this space. Investors in the round include Shine Capital, Craft Ventures, SciFi VC (the venture firm co-founded by Max Levchin, founder and CEO of buy-now-pay-later firm Affirm), Third Kind and Plaid co-founders Zachary Perret and William Hockey.
As-a-service, at your service
TryNow sits as part of a bigger wave of commerce and finance services that have emerged over the years to provide technology to entrepreneurs where the commerce technology they are using is not the core of the business they are building.
The thinking goes: Building payments or related features is complex and not something that a company not focused on payments would build itself (much like most businesses would not build their own accounting software, or the computers that they use). And as the biggest competitors -- e.g. Amazon -- continue to grow and build their own technology in-house to keep their competitive edge, a demand for more tech-enabled tools only grows and becomes more sophisticated with the competitive threat. These in turn get delivered as a service, since smaller competitors will lack the funds and human capital to build these themselves.
Davis said that TryNow chose to work solely with Shopify (and specifically Shopify Plus, the version of the service with more features, designed for retailers with more than $1 million in revenues) and its platform for letting retailers build and operate e-commerce storefronts, because of how it has become such an integral player in that ecosystem.
He said that there has been demand from retailers using other platforms such as Big Commerce and Adobe's Magento -- as well as the platforms themselves. And it will look to expand to these over time, but for now, "we think Shopify is the most powerful, and growing the fastest, with the biggest opportunity at checkout," said Davis. "It's a multibillion opportunity."
TryNow has whittled down its core functionality in the e-commerce space to a very specific role.
It doesn't handle checkout -- that's Shopify; nor transactions -- that's payment companies, or indeed by-now-pay-later companies (like TryNow, another kind of tech helping people defray the payment part of procurement); nor returns -- it integrates with Happy Returns, Loop Returns and Returnly; nor email-based communications and marketing with customers -- that's Klaviyo.
What TryNow provides are analytics to manage the risk around any deal, and technology to integrate and manage the payments and returns experience, so that procuring doesn't trigger a payment, returning triggers a payment for what is kept, and I suppose not returning triggers a different kind of payment (plus flagging the customer for future try-now-pay-later attempts).
Within the wider space of e-commerce, apparel has had a particularly tricky ride among those trying to bring the experience into the online world.
It's no surprise when you think about it: shopping for apparel is an inherently physical activity, involving trying things on, browsing around big stores with wide selections and only paying for what you actually take away with you.
That has given rise to a lot of different startups, leaning on new innovations in computer vision and other areas of artificial intelligence, better cameras on phones, new manufacturing techniques and more to try to sew up the gap between what you do online and how you would shop in the brick-and-mortar world.
(And these startups are seeing their own opportunities and demand in the market: just last week, Snap Inc. acquired Fit Analytics, one of the tech companies building better tools to improve how online shoppers can estimate what size they might need to buy of an item: the social media company's interest is to use the technology to expand how it works with its advertisers and to build out a bigger shopping experience on Snapchat and beyond.)
Before try-now-pay-later, the basic idea of selling fashion online has been to assume it's okay to skip all the physical aspects of buying apparel before paying.
"Give me a credit card, and I'll charge you for what you are getting, and if you don't like it, you can get a refund? We would never operate a brick-and-mortar store that way, charging people before going into fitting rooms," said Davis. "It's unnatural and restricts growth." And high-ticket items can be even harder to sell in that environment, he added.
While companies like Le Tote, Stitch Fix and Wantable have built out fashion businesses on the premise of try first and then pay only for what you keep, there are fewer companies out there that have distilled this idea into a standalone, B2B service. (And indeed, the try-before-you-buy service can be a tricky one to manage as a viable business, with Le Tote, now in Chapter 11, and now-defunct Lumoid pointing to some of the challenges.)
“Ben and the TryNow team are taking what they've learned from Affirm and Stitch Fix and launching the ultimate checkout option: try now, buy later. This translates into more order volume and more profit. We all want to try before we buy: it's only a matter of time before TryNow's checkout solution becomes the standard,” said Brian Murray, managing director at Craft Ventures, in a statement.
Still, there are others that compete more directly. BlackCart out of Canada, which raised funding earlier this year, also provides try-now-pay-later as a service for apparel and other goods, and it integrates with other storefront platforms beyond Shopify. (It seems to take a different approach to offsetting the risk for retailers, essentially making up-front payments for goods itself and then reconciling directly with the retails around returns.) And it seems like a no brainer that Amazon might try to offer Prime Wardrobe as a service to more retailers, as it does with so many of its other features.
Along with the funding, TryNow is also announcing a couple of new executive appointments that speak to where it sees itself competing and sitting longer term. Jessica Baier, formerly of Stitch Fix, is now VP of growth strategy; and Jonathan Kayne, a former head of product partnerships for Affirm, is now TryNow’s VP of platform.
The investors in this round are a pretty interesting set of backers that also point to possible directions for the company.
Shine is a relatively new firm co-founded by Mo Koyfman and Josh Mohrer to focus on early-stage investments, with Koyfman previously backing a lot of interesting e-commerce companies at Spark; Craft is another early-stage firm, co-founded by David Sacks and Bill Lee; SciFi VC is Max and Nellie Levchin's venture fund (and Max has a long and impressive track record in e-commerce, most recently as the founder and CEO of another startup in the flexible payment space, buy-now-pay-later business Affirm).
Third Kind, meanwhile, has been a prolific backer of e-commerce tech as part of its bigger investment thesis. And while Plaid's founders are investing here as financial backers, it's notable that they are both providing financial features as a service to third-party businesses: diversification for Plaid might one day come in the form of providing tools for specific verticals, which would likely take them into the realm of more flexible payment and procurement options.
“At Shine, we are attracted to businesses with simple yet powerful insights that can ultimately lead to massively scalable new platforms,” said Koyfman in a statement. “TryNow’s understanding that a lack of tactility restricts e-commerce growth has opened the opportunity to create and scale the Try Now Buy Later category. It is rare to find such a strong team attacking such a simple but big idea. We are delighted to partner with Benjamin and the entire TryNow team as they scale their elegant platform and help e-commerce brands close the conversion gap with brick and mortar retail.”
Early Stage is the premier "how-to" event for startup entrepreneurs and investors. You’ll hear firsthand how some of the most successful founders and VCs build their businesses, raise money and manage their portfolios. We’ll cover every aspect of company building: Fundraising, recruiting, sales, product-market fit, PR, marketing and brand building. Each session also has audience participation built-in -- there’s ample time included for audience questions and discussion. Use code “TCARTICLE" at checkout to get 20% off tickets right here.
