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Punchh raises $40M in funding to augment AI capabilities

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In a bid to bring digital transformation to the brick-and-mortar retail space, startup Punchh has raised $40M in Series C funding, co-led by Adams Street Partners and Sapphire Ventures

The company creates data-driven, AI-powered customer experiences for retailers. Funding will be used to accelerate the development of its customer AI technologies while expanding into new verticals.

Accompanying this funding is news of a partnership with Casey’s General Stores, one of the largest convenience store brands in the United States.

“Consumers expect ubiquity of experiences online and off,” said Shyam Rao, CEO of Punchh in a press release. “In-store retail remains extremely popular and is one of the most powerful relationship building channels ever created. Our platform gives retailers an unparalleled understanding of how customers engage with their brand in the real world, along with the ability to use that understanding to create AI-powered experiences that keep customers coming back for more.”

As VentureBeat reports, Punchh’s products work to “supercharge same-store sales by integrating with existing point-of-sale and ecommerce systems, enabling them to collect in-store and online data that inform customer profiles.”

AI algorithms then optimize these profiles into targeted marketing campaigns and promotions. 

The goal is to promote loyalty which has always been at the core of their business.

While Punchh isn’t the sole venture within the cloud-based customer data management space — SessionM and CleverTap come to mind — Sapphire Ventures’ managing director, president and co-founder Jai Das is keen on the “holistic” nature of the startup.

“Analysts predict ecommerce will account for just 10 percent of total retail sales in 2019, which means about 90 percent of transactions are still taking place in store,” said Das.

This means big-time opportunity in brick-and-mortar retail, with brands consistently looking to better understand their customers, using data to build relationships that translate into lifetime loyalty, and in turn, value for the brand.

“Punchh’s solutions allow retailers to do that in a highly scalable manner, which is why they’re trusted by so many leading brands, and why we’re so optimistic on their long-term growth,” Das said.

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Retail

Retail’s response to a global pandemic? Digital transformation

COVID-19 caused retailers to pivot to digital, and adjust operations like never before. What’s worked?

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As branding expert Denise Lee Yohn wrote for Harvard Business Review this past summer, “even before the [pandemic] and economic crisis, brick-and-mortar retailers had been fighting a fierce battle against Amazon and other e-commerce players.” 

And in a story we’re all familiar with by now (read one example about Bed Bath & Beyond), she wrote, “those challenges have now accelerated at staggering speed.”

Expanding on this point, “a retail organization’s ability to react quickly to changes in consumer behavior has become a key survival skill,” wrote Ryan Talbott (Chief Transformation Officer at Altimetrik) for Total Retail Report in August.

“Regardless of how good their business contingency plans were, once the pandemic hit, many retailers found they were in a difficult spot and simply couldn’t move at the pace their customers needed them to.”

Now, in a special report called The Pandemic Rewrites Retail Experiences, software company VMware has outlined strategies specific companies have used to manage this rapid transition, and what’s worked. 

The transformation of retail

At the top of their list was how priorities were shifted, with a new — or, in many cases renewed — focus on omnichannel ordering and multi-location fulfillment. Brands that found the most success relied on contactless pickup, free shipping, and updated/better-designed apps.

This goes hand-in-hand with their second point: the need to get fast, efficient e-commerce right by the customer

One related topic that wasn’t always at the top of mind, but VMware pointed out, was the issue of the in-store experience — think makeup sample stations at Sephora or personalized shopping services.

“Now, many retailers are trying to stand out for the opposite reason,” the report explains. “They’re making it easier for consumers to avoid shared surfaces and limit interactions with employees or other customers. This shift is particularly imperative for grocery stores.”

One case study VMware shared was about US grocery chain Albertsons. After modernizing applications, the chain hit 450% growth in digital and e-commerce sales and a ten-fold increase in e-commerce traffic with zero downtime.

Another point made in the report is key in the world of retail: the customer experience. “Successful retailers stand out by optimizing online experiences to include immersive and personalized digital capabilities,” the report says.

Behind much of the retail transformation has been technology. What’s going to stick around, post-pandemic? The report identified four trends that’ll remain in place: 

  • Staff-free and cashier-less stores
  • Augmented experiences like ‘try-before-you-buy’
  • Personalization via data 
  • The role of voice recognition in e-commerce

“In a digital ecosystem where new niches are waiting to be monetized, there are many chances for companies focused on digital transformation,” the report concludes, emphasizing that organizations centering data will succeed.   

“And winning brands will deliver experiences that consumers find engaging, accessible and valuable.”

Get the full report from VMware.

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Inside Bed Bath & Beyond’s Digital Transformation

Digital wasn’t a priority for the retail chain — until COVID forced it to be.

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In April, as much of the world’s population retreated to their respective homes — and makeshift kitchen table workspaces — home goods retailer Bed Bath & Beyond had to get a digital strategy fast.

As reported then by The Motley Fool, the biggest question by the end of April — once digital demand and sales had increased — is whether the retailer could keep up the momentum that was thrust upon them by COVID. 

The before

A late-2019 leadership change was prompted by the chain’s lack of digital strategy, explained Motley Fool reporter Jennifer Saibil. New CEO Mark Tritton had his sights set on moving to a better omnichannel strategy. The 2019 holiday season was marred by inventory management problems, non-competitive pricing, and a lackluster use of should-be-standard-by-now features like online purchasing and in-store pick-up.

In May, with many locations still closed, the chain expanded fulfillment services, initiated contactless pickup, and expanded in-store pick-up to half of its locations. By the end of the month, they reported an 82% increase in online sales.

As Tritton explains:

“Digital growth was also favorably impacted by the way we pivoted our merchandising and marketing plans and how we engage with our customers, including more frequent updates through our website to stay current and relevant. A key highlight for us was the strong growth we saw in new customer acquisition through our digital channels. Nearly 40% of our online orders were placed by customers who are new to ordering online with us, and over 10% of them were also completely new to Bed Bath & Beyond.”

What’s next?

The chain announced on September 17 that they are expanding their relationship with Google Cloud — which began in 2017 — committing to a five-year agreement in an effort to realign with digital-first priorities to better serve customers. As described in the retailer’s press release, solutions deployed will help “to further personalize the shopping experience for customers, enhance fulfillment capacity, and optimize merchandise planning and demand forecasting.”

Google Cloud technologies they’ll leverage under this expanded partnership include BigQuery, Spanner, Google Compute Engine, and Google Kubernetes Engine, with Deloitte serving as a strategic transformation services partner.

“Retailers are sitting on an incredible amount of data today, but this data is often siloed and lacks real-time processing. And high-traffic events like Cyber Monday or the COVID-19 pandemic only put more stress on systems,” explains VP of Retail & Consumer at Google Cloud Carrie Tharp. “By migrating to Google Cloud, Bed Bath & Beyond expects to be able to reduce cost and drive business value through real-time analytics across marketing, merchandising, supply chain, and more.”

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What digital transformation looks like coming out of the pandemic

59% of executives surveyed say that COVID has created a motivation to accelerate their DX initiatives.

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COVID-19 has disrupted just about every faction of our world. So where and how does digital transformation (DX) fit into the picture now?

“Recalibrating investment priorities to mitigate the risks associated with COVID-19 should continue to be the first priority of any company,” writes EY Canada partner Anthony Rjeily. “But pushing forward with your digital transformation program should still be a priority for the organization.”

Businesses face a wide variety of challenges — shifting customer engagement models online, enhancing digital capabilities of customer service, remote work, an increase cyberattacks and so on, and so forth. Rjeily says long-term successes will come from those driving innovation programs. 

Let’s look at two examples:

When COVID-19 first hit, the retail sector moved online at a near-breakneck speed to drive commerce online. It makes sense that it was easier for businesses with already-existing, scalable digital infrastructure to pivot to the pandemic realities. But as Ryan Talbott writes, this is the new norm for retailers. “A retail organization’s ability to react quickly to changes in consumer behavior has become a key survival skill. Regardless of how good their business contingency plans were, once the pandemic hit, many retailers found they were in a difficult spot and simply couldn’t move at the pace their customers needed them to.”

Within architecture, engineering, and construction industries, COVID-19 accelerated digital transformation plans but many companies still have a long road ahead. Industry experts predicted that 2020 would be a watershed moment for DX integration in these industries and this did, in fact, come to fruition. But going forward, James Dean, CEO of Sensat, says companies in these industries will need to “create a more holistic approach to the entire asset lifecycle, ensuring technology takes prime position in their approach, supporting revenue generation and ensuring continued business success,”

A focus on emerging technologies

According to a new report from KPMG International and HFS Research, 59% technology executives surveyed say that COVID-19 has created an impetus to accelerate digital transformation initiatives. The report, titled ‘Enterprise Reboot,’ found executives have shifted their focus to must-have technologies and more than half (56%) say cloud migration has become an absolute necessity due to COVID-19.

(Source: KPMG/HFS Research)

At the same time, COVID is also a caveat. Approximately four in 10 say they will halt investment in emerging technology altogether as a result of the pandemic. 

“This crisis isn’t affecting all industries equally, but for many of the industries facing crisis, managing the transition to a digital business model is imperative,” explains Cliff Justice, KPMG global lead for Intelligent Automation and US lead for Digital Capabilities. “However, doing so is made more complicated in a time where investments are critical, but cash must be preserved.”

(Source: KPMG/HFS Research)

 

Investment for business survival

“Emerging technologies and new ways of working can play a significant role in the transformation to a more digital economy,” said Justice. “These technologies are helping companies maintain customer and stakeholder trust, keep remote workforces connected, ensure their business is resilient and prepared for disruptions, and build a strong foundation for future product and service innovation.”

Ultimately, the pandemic has placed straight-up business survival as the primary objective for most emerging technology investments. 

“Now more than ever, companies need to make smart investments in emerging technologies if they are to prevail in the medium- to long-term,” said Justice. “Companies who don’t, risk threatening their own survival.”

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