Mister Beacon Episode #155
Reinventing Apparel Retail with Real Time InventoryAugust 09, 2022
We’re joined this week by Simon Molnar, who is the founder of Flagship, which is a company that is working to bring to physical retail the science of merchandising and inventory management which they perfected from running Australia’s largest online jewelry store.
How will apparel retailers survive in the face of online competition and challenging headwinds? We talk in-depth with Simon about the relative benefits of the different technologies that can bridge digital and physical retailing: RFID, machine vision and Bluetooth tags. He shares the insights and changes that the newest technology in this space can deliver.
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Steve Statler 00:00
Welcome to the Mr. Beacon podcast, we have an amazing show for you, the CEO of retail technology, startup Flagship, I call it a startup, but Simon Molnar is a veteran of E-commerce, and has some amazing contacts in the retail world. And I highly recommend listening to this. It's a great conversation where he pieces together, the solution that Flagship have built using battery free Bluetooth tags. So this is a Wiliot technology edition of the show. But it's really him describing the problems they're solving how they've solved it, everything from the number of infrastructure items they've used to all of the pain points that his company Flagship a solving. So do check this out. And, as always, there's this easter egg at the end where we were talking to Simon a bit about his background, how he got this amazing job that he's got and his music choices. Stay on for that. If you want to hear a bit about SEO search engine optimization, he reveals some real interesting nuggets on what you can do to benefit from SEO some techniques that he honed when he was running Australia's most successful online jewelry store, which was the business he was running before starting flagship. So enjoy this episode. The Mr. Beacon podcast is sponsored by Wiliot, Intelligence for Everyday Things, powered by IoT pixels. Welcome to the Mr. Beacon podcast and Simon. Welcome to the Mr. Beacon podcast, I am really looking forward to this conversation, you have started up pretty remarkable country, not country, maybe it'll be as big as a country. But it's a company at this stage, which has got a lot of buzz going on at Willie, and just how fast you've hit the ground and our greatest job you're doing. So I love these interviews because I actually get to learn a lot about the people and the things that are the subject of the interview you founded Flagship was called eTale. Briefly so people may see a few fragments of that. Tell us what Flagship is, if you wouldn't mind.
Simon Molnar 02:37
So Flagship is a solution that gives bricks and mortar retailers more visibility in their stores. The goal is ultimately to allow retailers to treat their stores in the same way they would an E commerce site, being able to pull different levers which will make the changes or notify the store to make those changes, and then being able to use data to understand what the impact of those changes were. So they give retailers more visibility, more control, and ultimately allow them to make better data driven decisions, which will increase revenue, reduce costs, and in the long run and reduce wastage to increase sustainability.
Steve Statler 03:21
Well, I don't know how many retailers will be listening to this. But I can just imagine a set of them bristling saying, so you're saying I don't run my business based on data? How dare you? You obviously have something in mind that this and I think, at the end of the show, we have a chat about your background. So you've run ecommerce businesses, you've kind of gone through the gamut of learning from the bottom up about SEO and so forth. What are the things that retailers missing, or generally missing that you are providing with function?
Simon Molnar 04:02
Yeah, so when I ran my E commerce site, when I speak to anyone who runs an E commerce site for any omni channel retailer, their focus is always around data. They're looking at Google Analytics to make decisions. They're looking at what products are being clicked on to make decisions. They're looking at every single email, open rate, AdWords performance, they're looking at so many different data points to make their decisions. Yet when you get to the bricks and mortar world, historically, and generally they shoot blind, and they'll look at sales data to make decisions, but sales data only tells you half the story. What happens before the sale is ultimately as much if not more important than the sale itself. The data that I was looking at when I was running my E commerce site, was what's happening before that sale is made, so that I can increase sales, not just what Selling so that I can sell more of that because there are opportunities in what's not selling to either increase that conversion of that item, or make a better but a better buying decision going forward so that you don't end up with so much excess stock at the end of it. So our goal is to create more visibility around what happens before the sale, the browsing the what's happening with items in fitting rooms, what's, how is a store performing best and how it's merchandised, all of these different data points will allow retailers to better understand their stores to treat their stores like they would an E commerce site and ultimately make better data, data driven decisions.
Steve Statler 05:44
So how can you do that? You know, what's what's changed that allows you to do that that doesn't allow? There's a lot of very big retailers in the world who have websites and presumably have people that understand websites, how are you able to do that.
Simon Molnar 06:02
So we where this all started originally was and where where the thought process started was, every time an item moves in a store that information. If it gets the longer rack, that's information, if it's taken off a rack and put back on that's information. If it's taken off a rack and taken to a fitting room, that's information. And then if it goes from the fitting room to be sold or fitting room back to the rack, that's information. So all this movement of a garment or an item throughout a store ultimately gives that information. So that was that was kind of the end goal. And then we reverse engineer to work out how we get to that point where we originally started was developing smart coat hangers. So building that technology into the hanger itself. But that brought a whole world of challenges that we just weren't equipped to face. And then through our investigations, we came across Willie, which very easily and very natively solved that problem for us. By rather than focusing on the hanger, we focus on the item itself, we attached the Wilier pixel to the swing tag of an item, which then tells us exactly what that item is. And then we can track that pixel throughout the song to get the exact same learnings we would have had we develop those coathangers
Steve Statler 07:20
for people don't know these pixels are basically like stickers. They're roughly the size of a postage stamp, and they talk bluetooth two things. So what are some of the problems that the Kodak is briefly I don't want to dwell too much on that. But it's interesting.
Simon Molnar 07:38
Yeah, the the biggest challenge was, I mean, there were a few challenges biggest challenge was cost. So because we have to build the technology to every coat hanger, suddenly, the cost of the hanger becomes far more expensive than a standard hanger that a retailer would purchase. Plus those hangers would get damaged because customers normally don't treat them too well. So you'd have to be replacing them pretty offers often. So it just doesn't become cost effective. It meant that we were reliant on industries that hung their clothing. So anyone who, who folded or any thing that didn't rely on a hanger, we couldn't serve that industry. And then the last biggest challenge that we had was, we became very reliant on the stock in the store to get the most out of our solution. Because every time an item came off a hanger, they would have to pare it back to that hanger when it went back on. And from speaking to retailers, they told me that they can't get their staff to steam their garments, they're not gonna be able to get their staff to pair it every time it goes on. Just so yeah, so we just, yeah, so we decided, rather than, rather than the hangers, let's focus on the item. So the goal for us was how can we have that item arrive to the store already tracking so that it doesn't matter? The staff in the store don't need to worry about it at all. They don't need to do anything. They just receive it and that's it.
Steve Statler 09:02
Well, I come across this really big retailer who's been particularly successful online that has been trying to do seems like pretty much what you're doing only they've done it with cameras. You may be able to guess who that is, I don't know. Not focused on clothes focused on you know, quick service, not quick service, buying at a convenience store type of things, but so why not? Why not cameras?
Simon Molnar 09:35
So there's a few reasons for that. First is that when you're looking at product or grocery items on the shelf, it's very easy for a camera to deduce what that is. However, when you're looking at when you're looking at a garment, a camera will have a very difficult time of necessarily deducing what the size that garment is. The second thing is that if you're in a grocery store, it's going to be quite structured, your shelves are always going to remain where they are. So you always know you're going to put produce on the on the shelf and, and the layout of the store won't change too much, they can very strategically place your place those cameras, whereas in an apparel store, especially, a lot of those fittings aren't fixed, they'll move around the store. So it'll be very difficult to strategically place those cameras to get full coverage of the store. And then, on top of that, if I'm reading between the lines, this retailer has their own app, which means once someone picks up that item and walks around the store with it, they can use the device to work out where they've gone. Whereas 98% of retailers don't have their own app. So they don't have that ability to so our goal is to level the playing field to be able to provide that kind of technology to retailers of all sizes. And the one of the main reasons why we're focused on the item and not the person is because there's so much talk and so much more awareness from the customer from a privacy perspective. And I know here in Australia, there's there's been quite a big uproar recently of retailers that are using that, that camera technology to identify people moving throughout a store. And by focusing on the item and not the person that that privacy goes out the door. I mean, if you're thinking, if you're thinking about installing that camera technology into a retail store, and in order to know what's going into the store, you need a camera pointed at the fitting room to see what's going in there, there's going to be a lot of people that are very concerned about their privacy. So we want to try and play in a space that's kind of agnostic and plays outside of the consumer themselves. So that we don't it we don't breach or we don't impede on anyone's privacy or anyone's ability to shop anonymously.
Steve Statler 11:59
So that totally makes sense. And I do want to get more into the use cases and some of the data and the findings and how far you've got. But this sort of what about all these alternatives is fascinating to me. So the maybe the last alternative until I think of another one is RFID. So you know, those tags are very similar to these, they're made with exactly the same machines. And why not just put RFID because that's, you know, your apparel space is probably the most successful segment for RFID. So why, why not just go with that?
Simon Molnar 12:38
For sure. So there's been a lot of innovations or as much innovation that can exist around RFID over the last few years. Whereas the innovations around Bluetooth, are kind of almost at the at their infancy. So RFID at the moment is near its ceiling, whereas Bluetooth is at is closer to its base. And everything that RFID can do Bluetooth can do if not better. So the advancements that will be made from a Bluetooth perspective far outweigh the RFID perspective. The other big kind of factor is the cost of the hardware to be able to read RFID is quite expensive. So if you want to be able to zone a store using RFID, you're going to need a lot of these sensors, which becomes a very expensive exercise to fit out a store. Whereas the beauty with Willie especially is the cost of these sensors are relatively low. So the cost of our store is much lower. And again, similar to the point that I made before around kind of the fixtures and being fixed. A retail store is changing so often. So if you want to try and install the sensors to Zona store for one day, in a year's time, the entire layout of the store could change fundamentally, in which case, you lose a lot of those insights because the zones of change. So the great thing about our ability with Bluetooth is we can actually be dynamic, and we almost create a digital geofence over a floorplan in a saw. And what that means is if things move in the store, we can just change that geofence to be able to create those new zones. So and then the last biggest benefit of Bluetooth, over RFID is the fact that RFID needs to actually go through a gate in order to know that it's moved, whereas Bluetooth you can use the strength of the signal and there's actually improvements and enhancements that are being made to get to centimeter level accuracy in Bluetooth. So it means that an item doesn't need to go through a gate to know that it's moved. You can actually just track its movement in real time to know where it's gone. So it's I mean, in my mind, it's almost like a typewriter versus An iPhone. It's just it's not a contest. I mean, the typewriters served a purpose for a period of time. But there are just advancements and enhancements that are coming out of the Bluetooth world that just RFID won't be able to keep up with.
Steve Statler 15:14
Yeah, I actually have a typewriter just behind me, and I love them. But I wouldn't, I wouldn't run my business. I think so many really interesting nuggets there. And, of course, you know, RFID in one phase, there were a lot of interesting experiments with ceiling mounted readers and you know, Marks and Spencers famously blanket, they're quite large stores with these things. So it's clearly possible to do this, but it's just incredibly expensive to do it. So not impossible just kind of cost prohibitive. And we all know that retailers are just, you know, dancing on razor thin margins. So it seems like, you know, what the industry did was they said, I'm not going to spend a million dollars by having phased array, angle of arrival RFID and my ceiling, I'll just buy half a dozen of these handheld readers may cost one or $2,000 each. And, you know, why is that not good enough? Why can't we just because, you know, I think it's some of the biggest, most successful apparel stores in the world. And that's what they're doing. And I remember kind of talking to some of those companies. And they were like, Yeah, we don't have a problem, because we do an inventory check every other day, or maybe every day, you know, what, why is that not good enough?
Simon Molnar 16:40
Yeah, so there's kind of two points that you touched on there. One is that the big guys the Marks and Spencers desirous, these big retailers of the world have the budget to be able to do it. And the the teams to be able to implement and build a solution on top of that. Whereas the as you start to get to the smaller guys, not even the smaller guys, even the middle, the guys that are just that next tear down, don't have the infrastructure don't have the budget, like you said, to be able to implement a solution like that. So the great thing about Williard and and flagship in turn is that ability to create that solution that's cost effective for a retailer of any size. Now the point that you made around the handheld kind of radar, so that handheld reader will tell you what's around. So we'll tell you what's in the store what's in stock right now. However, that still requires human interaction in order to do that. So you still need someone walking around the store or walking through a stock room holding that handheld radar to pick up those RFID tags to tell you what's in the store right now. Whereas with Willie up, because the pixels are always sending a signal, you actually kind of dynamically and automatically have an inventory stock feed without any human intervention required. So what that means is every night for these retailers, we can generate a stock feed for them without their staff needing to do anything. And I think that's the biggest benefit. I was speaking with a quite a large retailer here in Australia. And he was saying that, I mean, they've got a store network of 100 stores. And once a week, there's still someone that needs to walk through that store for an hour with that handheld reader to count stock. And it's like, Sure, okay, it's better than manually counting stock, but you're still paying someone to walk around the store and you only get that visibility once a week. Whereas by utilizing Lilia, you don't need that person and you get that feed every day.
Steve Statler 18:50
And how often do I really want to get an update of where everything is? What's the, you know, sounds like we're heading to real time continuous visibility of where everything is which I'm a computer scientist, this is so cool. But um, if I pretend to be a hard nosed, CFO at a retailer, it's like, I've already got so many problems. And you just told me, I should invest in a system that gives me a real time view of where all the Sox are. Do I really need to know where all the stocks are
Simon Molnar 19:27
doing? Yeah, again, it's a great, it's a great point. But when you're speaking to a retailer, I mean, we spoke yesterday with a retailer who has 27 stores in their network. And from speaking with them, they told us that they released a certain style of that style. 26 of those stores performed really, really well in that style. And one store really poorly. They actually didn't have any sales for that style. And so they went out to the store to try and work out what was going wrong when they got there. They realized that it was still in the stockroom and hadn't been merchandise on the floor. Now, the great thing about our solution is that the stores that the the no one from head office actually needs to go to the store to know that they can jump in our system and see, oh, all of those units are still in the stockroom. They're not yet on the floor. So we're able to, like you said in real time tell retailers when and how they need to replenish their floor, how accurately the floor is merchandise and if any stock needs to be sent to the store, or if any stock needs to go from the stockroom out onto the floor? Or if it's in the wrong part of the store. So all of these different insights, yes. Okay. If you do it once a week, you're going to find out that once a week, you have all the units in the stockroom in that hour on the floor. But in that time, you've potentially lost four days worth of sales of potential sales of that style. So that real time understanding and that lack of a need, again, of human interaction, and you can be that ability to completely automate that is really beneficial. Because, again, we don't need we don't even need anyone at head office to know that we can say, Oh, well, we saw that this side was on the floor yesterday. It's not on the floor today, because it was sold. But you still have more in the stockroom. So go and bring more from the stockroom out onto the floor. So that ability to have a have a store as optimally, merchandise as possible with no human interaction is really beneficial for the retailer.
Steve Statler 21:29
So one of the challenges, I think that if so many of our retailers, they're doing this incredibly difficult job. And they are used to data analytics initiatives where they do something and they get all this data. And then they're like, yeah, the data team looked at it and they did a few things. How does this really move the needle having all of this data? And how am I going to not just be overwhelmed by a whole bunch of dashboards that I really don't want to look at anyway? And can you help join the dots between? You know, for some of us more data is great. For others. This is like the last thing I want. I just want to sell more stuff. How's this gonna help?
Simon Molnar 22:21
100%? Yeah, 100%. So. So while I was at afterpay, I was providing some incredible data and credible reports to some of the biggest retailers in the world. But if there's no one on the other end of that data to actually make sense of that data, then it's almost completely wasted. There's no point in pulling that data anyway. And from speaking of retailers, like you said, there is a real sense of death by data, where they have access to so much data, but they don't know what to do with it. So again, it ends up getting wasted. So a big focus for us. And again, being a retailer, I understand that. And I've seen that in action. So our focus is not just providing the data, not just providing the dashboards, but actually providing the insights and the recommended action items on the back of that data. So being able to use AI and machine learning to compute the data, to overlay our own retail expertise and our understanding of retail to know if we see this, then you should do why. So that the retailer, if they want sure they can dive into the data, they can dive into the dashboard to make sense of it. But if they're not that way inclined, they can jump on and they can see the actual action item, and will give them the rationale behind that action item to say this is why we suggest it. And then based on that suggestion, it's up to them whether they implement or not. But then the great thing is that once they decide to implement it, we can then see, because we have visibility of the store, we can see exactly that point in time when the store implemented that change. And then once that change is implemented, we can then internally compare the results before and after, to tell them what the what the outcome of that change was. So if we said to them, this item is selling really well. This part of your store generally has the highest level of engagement. But that item is currently in the lowest level of engagement part of the store, we recommend you move it to the high engagement part of the store. And then it's up to them great if they want to do it great. If not, no worries, they decide to implement it. We can see when that item moved there. And now we can compare what the sales outcome was before that change. And after that change to let them know exactly how that performed. And what
Steve Statler 24:43
are the other some other examples of patterns that you have seen or expect to see. You mentioned the changing room. And it may be obvious to some people but can you spell out for us why we care about what's coming in and out of the changing
Simon Molnar 24:59
room. Yeah, so, again, historically, retailers have only looked at what's been selling, we were working with a retailer who had a site who had a style that ran from extra small to extra large. And in the small to extra large, that style converted at 40% once being tried on, and the extra small converted that 15% was being trialed. Now, if you were just looking at your sales data, you would probably think the extra small is not step not selling extra small people don't want that style. But when they explored it, they realized that when it was printed, when it was produced, the print wasn't printed correctly on the style. So when the extra smalls were trying it on, it didn't fit, or it didn't look the way it was meant to which was affecting the conversion rate. Now, historically, they probably would have scrapped the sale future releases, they might not invest as heavily in the extra small, whereas now they've got this data point to make a better decision for the next release to bring that extra small up in line with the rest of the the other sizes. To be able to tell a retailer that people who are bringing in a size six of this style are also trying on a size eight in that style. So there could be a difference in actual fit between two different styles where people who are size six are trying on the size eight. So we're able to give that insight to the retailer's to so that they can tell the staff for this style, if someone tries on a size six, take a size eight with them, because we're confident, they're going to want to try that on as well. So all of those little insights can help the staff make a better decision, they help the visual merchandiser make a better decision, they make the buyer make a better decision, and allows them to maximize that sale opportunity.
Steve Statler 26:43
That's great. And then what about outside of the changing room? Any other things that, you know, really helpful when you're doing this continuous visibility? It just in terms of the analytics?
Simon Molnar 26:56
Yeah, so one of the big pieces is around security. So there's, there's a few is a few different types of shoplifters. There's internal staff driven theft. There's, there's really sophisticated external shoplifters, and then there's everything in between. Now, if you look at the internal theft, we solve for that straightaway, because we'll be able to see what items are being stolen is there, that consistency in the person who's working, we were speaking with a retailer here in Australia, and they were saying to us, they keep sending shipments to the store. And as soon as the store counts, the counts the stock, they say, the stock missing, and they have no way of validating or verifying, whereas we completely solve for that, because we know straight away exactly what's in the store.
Steve Statler 27:43
Yeah, just because it's very presence in the store. It's been counted. So there's, yeah,
Simon Molnar 27:48
exactly. And then you've got the sophisticated shoplifters, where, what they'll do is they'll go into a store with a pink slip, they've essentially got a list of items they know they need to take, because they've got their own orders that they need to fulfill. And what they'll do is they'll have one person in the store who's moving stock around constantly. And what they'll do is they'll move the items that they want to sell that they want to steal to the rack closest to the exit to the point where that rack is full of that of that purchase order. And then there'll be a second person who comes in from the exit with those items that are right there. And they will take that items, take those items and walk out the door. Now again, we'll be able to identify when that pattern is in motion. So we see this item that is most commonly shoplifted has just moved to that rack that's near the exit. So we can proactively notify the staff to go and retrieve it and be more aware or notify security or whatever the the outcome of that is to ensure that as few garments as possible that being stolen.
Steve Statler 28:52
So we're kind of moving into the operational space, maybe we should explore that more fully. How does how does store operations change? So okay, there's amazing insights. And there's probably a whole bunch more that we haven't even touched on. But how does the way I operate the store change if I have continuous real time visibility of inventory.
Simon Molnar 29:15
So my brother always used to joke, if you want a manual task, automated, get Simon to do it, because I hate manual repetitive tasks. And my goal for this for the guys in the store is to never have to count stock ever again, to never have to make a manual repetitive task ever again. So they don't need to think about where stock is going. They don't need to think about what needs to be replenished. They don't need to count stock. All of those decisions are either made for them or the actual action is done for them. So what that means is the guys in the store can just come in and sell product. And in Australia especially If wages are so high that you can't afford necessarily to be paying your staff to be constantly counting stock, if you're paying your staff you want to be paying your staff to sell stock. So that ability to remove the the need of the staff in store to actually perform that action or make that decision is really beneficial. The other side of it is that for visual merchandisers, especially the way stories visual is merchandised is a visual merchandiser will go into the store, they will merchandise that store, and then they'll often send a photo back to head office who will approve or reject it. And there's two ways that it can go from there, either that visual merchandising report gets sent out to the entire store network to merchandise that way, or there'll be multiple visual merchandisers who will go out to each of the stores to do the same thing for each of those stores. Now, if you have a lot of visual merchandisers, you're paying each of them a salary to handle a certain faction of your of your store. It's a very costly exercise, whereas the ability to run the needing to have someone come into the store, okay, sure, maybe they go into one store. But that ability for them to be able to merchandise a store from head office, or make those decisions from head office to flow through to the stores, is really valuable. So, yeah, ultimately, the goal is to give more control back to head office so that less work actually needs to be done in the store. And every retailer is so different and so unique from one another. And not only is every retailer different, but every store in a retailer's network can be so different. So if you're on the America, if you're in America, a store on the West Coast could be very different from a store on the East Coast in terms of what sells best. But if your merchandising errors, when your store is exactly the same way, then you could be missing huge opportunities. So being able to know what triggers that West Coast customer versus that East Coast customer. And we're going to merchandise accordingly to make sure that those customers see the product that they're most likely to align with, again, helps get that customer through the door helps get them to try that item on and then in turn helps get them to complete the purchase.
Steve Statler 32:18
And does this system impact the amount of inventory that I have in the store? Or I have in the front of the store? What what does that look like?
Simon Molnar 32:28
Ideally, yes. So what we're seeing more and more with retailers is this idea of a showroom store. So it's a store that you don't actually take the item away with you when you purchase it, you come to the store to try it on. And you purchase it for click and collect or you purchase it to have it shipped to. So the goal here is to allow retailers to be more refined in their product offering. So one of the retailers I spoke to here in Australia, said to me that whenever he's walking down the street, he keeps hearing from people you need more extra large, a more extra large, you need more extra large. Now he's hearing it. So he actions. And suddenly he invests in these extra large styles, which ended up being all the styles that he gets left with at the end of the month. Now, if instead he can look at diary, you can see the extra larges are actually being tried on 1% of the time compared to mediums, it helps them make a decision. And sure they'll invest in in a handful of extra larges. But they're not going to go overboard and the extra larges. So being able to really understand and use that data to to enhance that that stock offering so that the story is as concise as possible. And these retailers are planning their purchases, in some cases 10 months in advance. So if you think about how much you need to forecast and how accurately you need a forecast, 10 months in advance is is huge. So to be able to help them make those better buying decisions or being able to re align some of their budget or cut their budget potentially, so that they don't have to invest in these styles or rather than investing in the extra larges, they're going to invest more in the mediums. It will it will help them reduce their wastage and increase revenue.
Steve Statler 34:20
You talked about spending less time on stock checks and and so forth. But that, you know, that's a fairly small part of the staff stage. Do you think this can make an impact on staffing levels in the store?
Simon Molnar 34:37
Yeah, I mean, you you think it takes up a small part of their day, but some of these retailers are spot counting daily. Some of them are counting whole collections weekly. And every retailer is doing a full count twice a year. So again, that's been a staff. If they they're talking about that half yearly stock count there they're ordering pizzas in, they're coming in at seven o'clock. They're blasting the music in the store, because they know they're going to be in the store until 3am with a team of seven of them counting. And that's just for one store. One of the retailers here in Australia, I was actually in the store with them when they received their stock because I wanted to see what happened. It was the same thing. They shut the doors, they ordered food to the store. And it was just one of those like kick the shoes off because we're bunkering down to count this new stock that's arriving. So it's yes, it might happen. It might happen infrequently. But that process is incredibly draining. So and daunting for these guys like this for the staff. So they know they're receiving stock tonight, they don't have the luxury of being able to make plans tonight because they know that they're going to be here for for longer hours. So yes, there might be an opportunity to cut staff hours. That's not my goal. My goal isn't to isn't to remove the need for staff entirely. My goal is to allow staff to enhance the customer experience as much as possible, rather than being stuck in the stockroom, counting stuff.
Steve Statler 36:11
And how would how is this going to improve the life of the shop, but what does, how does the Store of the Future look, or maybe the store of today you look for people that invest in your in your solution.
Simon Molnar 36:26
I mean, there's nothing worse than when you're trying something on your kind of half dressed, you realize you need a different size pair of jeans and you decide whether I'm coming out and the jeans getting changed back into into what I was wearing before and do that half awkward head poke out the door to request something else. The goal for us ultimately is to enable the customer to actually communicate with the staff from inside the fitting room. Or better yet, being able to use that that artificial intelligence to tell the staff what to proactively been bring to the fitting room. So again, we if we know that people that are trying on our size 32 pair of jeans or so on the size 34 Bring it to them, or someone who tries on this dress often wants to try on this pair of heels bringing it to them, or yeah, all these different opportunities to really enhance the customer experience is ultimately really beneficial for the customer and some customers. The biggest thing for me is is blurring the lines between the online and the offline world. There is a really savvy, Omni channel customer these days, some customers will start their journey in store and finish online. Some customers will start their journey online and finished in store. The really important thing is for either of those customers making sure if they're coming in store, they're finding what they're looking for as quickly as possible. And if they're going online, that they're finding the items that they try it on in store as quickly as possible. So really enhancing again, that customer experience.
Steve Statler 38:05
And I mean, what I see in some stores is you're just craving this interaction with this expert, and you know, the person serving you knows a lot about their domain. But if they're spending all their time looking for the thing, then they're not spending time with you and I, I told this story before basically to reprise it. There's this amazing store around here Rei as the best camping gear, it's just a, it's a co op, it's a joy going there. And I went in the other day with my wife who wanted to buy a sleeping bag. And we had the best discussion. It was just, it was just like, you know, felt like we'd found another friend, we were getting a lot of insights into different sleeping bags. And it was just the best thing we then went to buy the shoes. And it was purgatory, this poor shoe salesperson spent 80% of their time not they're running backwards and forwards beads of sweat. And you know, everyone's just really annoyed. So it wasn't, you know, this retailer had the right idea in terms of consultative selling. But when you have when you're trying to figure out, do I have a size 11 In your, the color that you want, and then you're trying to find it, you're not building the relationship and upselling and cross selling. So to me, that's a big part of what you guys can offer is that fair to say?
Simon Molnar 39:36
100%. And I mean, that's a really valid point. So one of the great things is not only being able to know is this item in stock, but this is exactly where it is in the store. So if you have a big store potentially with 10,000 units in the store, and there is one left of a particular style left, and it's not where it's meant to be and suddenly you're running around the store trying to find one stall, like you said, you're potentially even a customer. Therefore, while while you're trying try and go and find it. Whereas if, while you're there, before you even go to the stockroom or look around the floor, you can actually see, okay, we have one, this is exactly where it is, I'm going to go retrieve it really quickly, because I know it's there, or I know it's not here. So I'm not even going to bother going, going to look in the first place. Again, speaking of retailer here, quite a big department store, they were saying that for them to fulfill a click and collect order, when there's one unit left, and that one unit isn't where it's meant to be, it can sometimes take them an hour to find that item. So if you're thinking about any potential margin you had in that item, and now suddenly, you've you've sent someone that you're paying, you're paying a wage to to look for that one item, suddenly that roads that margin that the retailer could have possibly had.
Steve Statler 40:54
Yeah, and you've got this person who's bought online is expecting to pick up in store, and they're probably getting pretty frustrated that they're having to wait, you know, they want to the instant gratification that they used to be able to have to buy online. Yeah. And the whole thing of, yeah, you can come and pick it up, and then you can pick it up and you can't find it. There's so many opportunities to improve the service. So this all sounds amazing. Is it just a pipe dream? Or what? Well, how far have you got to?
Simon Molnar 41:26
Yeah, we've kicked off with the number of retailers here in Australia. And we're seeing really great results. Obviously, we came across Willie, when they were at the part of their journey where they were deploying the starter kits. So we got our hands on them, built and tested the solution to make sure it worked. And so when we kicked off in our first pilot retailer, we realized that the tasks performed better than we could have expected, which really validated our product offering, which prompted us to deploy into our to other pilot retailers to make sure that it wasn't just for this one retail, and it worked across the board. And we're seeing really great results. So now we have the confidence to us. We're in the part of the journey where we're signed to actively speak to other retailers to build out and deploy this really sophisticated network in their stores.
Steve Statler 42:16
What does the deployment look like if you come into the store? What should we expect open heart surgery or quick trim around the edges.
Simon Molnar 42:29
So the goal for us is to implement an entire installation outside of store hours, so that there's no disruption to the store itself, the way the process works is we get a sense of floorplan from the retailer, we send someone into the store with the same camera that's used for Google Maps. And what that does is it creates a 3d render of the store for us. And then we use that 3d render along with the floor plan to understand exactly where we need to place all of the Wilier bridges or the charging bridges. And then once we have those bridges plotted, we send it back to we send that floorplan back to the retailer marked where the where we plan on installing. And then once we get the green light for them, we work out a time to come in and and actually install either before the store opens or after the store closes. And then yeah, once once that's all in we're kind of ready to roll.
Steve Statler 43:30
You know these bridges for people that haven't seen them about like the quarter the size of a full size frisbee and they're not super spendy. They're pretty low cost. It's a it's Bluetooth in Bluetooth out and so forth. So how we're getting into the weeds here, but I'm interested in how many bridges do you deploy in a store typically to get coverage.
Simon Molnar 43:52
So we're constantly working to optimize the number of bridges that we need. Our mindset is to overkill a store just to make sure that we reduce any possibility of any dead spots. Those bridges are also used to zone in the store. So we also strategically placed them so that any stock that sits near it, we can tell you where it is in the store. So for a typical sized store, we we generally deploy around 10 to 15 bridges. The one of the stores we deployed in a couple months ago was on the larger side, it was a large store. It was their flagship store, it had very high roof. So we ended up deploying 29 bridges. So it's on a store by store basis, but I would say it's anywhere from kind of 10 to 30 bridges that we deploy.
Steve Statler 44:41
Very cool. So do you think strategically, stores are going to change as a result of this technology? I mean, the retailers are battling all sorts of costs, staff costs, but also real estate costs. So they're any opportunities in terms of placement of store or size of store, when you start to get the amount of data that you're talking about
Simon Molnar 45:09
100%? I mean, if you you can gauge store performance to actually know, are we getting the foot traffic. So if we're getting foot traffic and no sales, there's an opportunity. If we're not getting foot traffic and not getting sales, then it's like, okay, well, maybe this, maybe this store isn't going to perform for us. So helping retailers make those better, kind of store placement decisions. But what we're finding more and more is these historically pure play ecommerce retailers, one by one coming in store. So what we're seeing is that this bricks and mortar world isn't dying, it's not going anywhere, it's just going to be a much more concise strategy, rather than just opening up everywhere, it's going to be really strategic in where you open is going to be really thought through so that every store performs as well as it can in an area that it needs to perform. The other thing that we're seeing across retail is, is there's no longer this notion of dollars per square meter, but rather dollars per square mile. So if you have a physical store or treating that store as a marketing channel, and not just a sales channel, because you might be getting people into that store, who are then converting online later. And let's say for argument's sake, 100% of those customers aren't shopping in store but are shopping online, then, if you're just looking at sales data for the store, you might think it's not performing, we're going to close the store where in actual fact, the store is performing really well, from an E commerce perspective. So retailers, the focus for retailers is really taking that holistic approach. There's always historically been this econ versus offline. And what we're seeing more and more with the retailers that are doing it really well. It's, they're, they're one in the other. So read the retailers that are coming in store, the the actual strategic list, who is bringing the store in store is the E commerce Manager, which is really, really interesting, because they're opening that store with a really clear strategy and really clear data, really clear data that's helping them make that decision, which they are then going to use reverse to their e commerce strategy. So yeah,
Steve Statler 47:32
that's a fascinating point. And I just thinking about my own experience, I am six foot five. So it's a nightmare finding trousers that fit me. Although much better in America than England, England caters for people with short legs, Americans tend to have longer legs, it seems. But anyway, I digress. The the shopping mall near us had a pop up store it was I kind of feel a little embarrassed to serve as a Lululemon store, I'm into yoga, I thought, Well, finally, I can find some yoga shorts that fit me but I ended up just buying trousers. And, you know, kind of expensive, but since I bought them took them out, and I love them. And I've like been buying a ton of the same trousers online, because basically, I had this showroom experience in the pop up store. That pop up store probably didn't cost them anything or not very much at least, it was very small. But it allowed me to experiment with size and things that I wasn't quite sure about. And since then I've converted to be this, I think a lucrative ecommerce customer. So I my experience, I think bears out your hypothesis for a good 100%. So, Simon, you're the founder of flagship, how do you how do you get to be the CEO of a cutting edge retail technology company? Is that what you were planning to do when you were growing up? Where did you grow up?
Simon Molnar 49:06
I grew up in Sydney in Australia. I've been here my whole life. So not too interesting in terms of moving around. But yeah, born and raised. I always went through school, quite fascinated by technology. I in my final subjects at school, I did a couple of computing subjects. And then right as I finished school, probably a week after finishing. I wasn't 18 Yet I had started working at a software development company. And I was really fortunate there to work with some incredible minds. At the time, they were probably eight to 10 engineers and all of those engineers have gone on to become CTOs and very successful company. So as a 17 year old I kind of took for granted answered who was around me. But looking back on it, it definitely shaped who I am, professionally and also shaped my professional journey. I mean, I started working there before I was 18. And in Australia, the drinking age is 18. And everyone was going out to the pub at lunch and I couldn't join because I was underage. Or that stopped at the bottle shop on the way home on the way back to the office seek to get some Friday afternoon drinks and had to wait out the front for them. But
Steve Statler 50:32
that brings back brings back memories. I, when I first started, one of my first jobs was working at a startup that had a lot of student labor. And we would all go out drinking because it's England and everyone drinks constantly there. And yes, three pints of Abbot ale and then you go back to writing COBOL programs, your productivity is absolutely tested. So I think you've probably actually had an advantage on everyone else by not drinking.
Simon Molnar 51:00
That's that's a really fair point. And like, it was great working with these people, I got to almost learn by osmosis just by watching them and observing. So that built up some software development skill sets. And then from there, I worked with, with my brother to found ice jewelry, which was Australia's largest pure play E comm jewelry retailer. And that must
Steve Statler 51:28
have been kind of challenging getting people to, I guess it's no more challenging, maybe thinking people to buy shoes or, or clothing but not the most obvious thing to buy online.
Simon Molnar 51:39
Yeah, it's really funny. So we, we started by selling Pandora on eBay. And based on the volume and the interests that we're getting through eBay, prompted us to realize that ecommerce at the time was largely focused towards shoes and apparel, like you said, and no one really tapped into the Econ jewelry space, like you said, because it's a product that people want to touch people want to feel. But just like any other brand, when you know what you want. And when you have seen it in person, just to be able to jump on and buy and have it shipped to you is really convenient. So we were really fortunate to get into the E commerce space before a lot of the other jewelry players. So yeah, I was able to take a lot of a lot of what I learned from a software development perspective, bring it to an E commerce perspective, taught myself SEO. So there was a point in time where 80% of our traffic was coming to us organically. And we had a really structured data driven approach, which really helped us scale and helped us grow. And we didn't have deep pockets. We didn't have huge investors. So we had to be really smart with our strategy. So if
Steve Statler 52:50
you had to distill into like three points, what were the biggest revelations because you said you mastered search engine optimization, SEO, what were the kind of three biggest aha hours for you on SEO?
Simon Molnar 53:04
The biggest is that it takes time. So you'll have a lot of SEO agencies come and try and do it for you. And while a lot of them sure they do a great job, it's very difficult to see overnight results. So it's, it's something that you have to be patient with. I really I focused on one page, I said, I'm just going to make this one page rank. And once I know that this one page ranks, then I know I'm doing it right. And once I'm doing it right, then I'll do it for all my other pages. The next revelation was that that historically, there was a big focus on off site, SEO, not as much on on site, and it shifted very largely towards on site. So making sure that page was optimized from an SEO perspective was really important.
Steve Statler 53:53
I didn't understand that. What's the difference between on site and off site.
Simon Molnar 53:57
So off site is getting links to your website, it's people outside the website, referring to your site and driving people to the site. And on site is the page structure. It's how you essentially tell Google what the page is about. Because it's being picked up by bots, you need to tell Google exactly what the page is about. Yeah. And then the last is that, once you master it yourself, you can save a lot of money, and you can get a lot of free traffic out of it. Because if you don't have to pay for traffic, you ended up getting a lot of free sales. And it was a really good learning for us because we drive people to our site. And then based on the conversion rate of those pages, it would then prompt me to decide whether or not it's worth putting money into that page. So if a page performed really well, I would say okay, well if I put money behind this, it's going to keep performing well then we can scale the page. And if it's page that didn't perform well then I said okay, well, it's it's a difficult category, so we'll just let it run. From an organic perspective, but we weren't really putting money behind it.
Steve Statler 55:03
So be an example of a category that Did you know, you were surprised at how well it did versus another category that you were surprised at how it didn't do so? Well.
Simon Molnar 55:14
Yeah, so the often branded product performed really well expectedly because people know what they're purchasing. But when people come looking for an eternity ring, or an infinity ring, generally they have an idea in their mind. And the difference in design isn't too great that when they come, you're likely to convert them. Whereas when someone's coming, looking for an engagement ring, or someone's coming, looking for a blue topaz ring, or someone's looking for a ruby ring, it's so broad and so vast that you can get 1000 people to your site, and you might only convert five of them. So it's there, there are categories that are tougher to convert, because the what someone could be looking for is so diverse and so broad. And to really kind of hone that, in is, is challenging from an SEO perspective. That's amazing.
Steve Statler 56:06
We can have an entire show, probably a whole series of shows on this. And in fact, I want to talk to you about where else website after. But anyway, we should move on. So ice sounds like it's amazing. Why Yeah, why move on.
Simon Molnar 56:26
So, so from ice, we got to a point where I'd rolled out our entire SEO strategy, we optimized and built technology to streamline all our processes. And because we didn't have huge dollars, there wasn't that much that I could actually do with it. So I decided as well as running ice, which was running on essentially one and a half people, I decided I'm going to get a job on the side at the same time. So my my mentality throughout my life has always been, I don't know what I don't, I don't know what I don't know. So I always wanted to surround my people who are experts in the field who could teach me about the field. So I had the I had the software, the software engineering, understanding, I had the business ops, warehousing, understanding, one of the big gaps that I knew that I had, in my mind was digital marketing. So I joined a company and I was really fortunate in that company to be working one on one in a team of two directly with the marketer who launched Netflix into Australia. And he was still is one of the most incredible people I've ever worked with. But he really helped me understand that whole digital marketing flow. So suddenly, from understanding the software side of it, to the data side of it, the marketing side of it to the SEO and on site and conversion side of it, it helped me put all the pieces together to understand, okay, if I serve this ad to this person, this is what the final result is going to be. And it was one of the last pieces of the puzzle for me to really finalize that end to end understanding of a customer's journey. At the same time, I was also I never sure of things to do so at the same time, I was also working at afterpay I was for the most part driving digital marketing and data, which in isolation are two very big categories. But on a small team, you have to take what you you have to own as much as you can for
Steve Statler 58:38
those people that don't live in Australia after pay is
Simon Molnar 58:42
so after pay is market leading Buy now pay later paying for provider in, in Australia and in it's in the US it's also after pay, but in the UK and Europe, it's known as clear pay. So we Yeah, I was able to kind of, again, take that digital marketing and direct knowledge to roll out some really cool campaigns from an afterpay perspective and see those results. So it kind of gave me that validation to know that what I had learned and what I thought was right. And the goal for me now was to try and work with as many businesses as possible to help them streamline or understand where their where their black spots are, where they're where their blind spots, our blind spots are rather to help them optimize and get as much bang for buck as possible. So that's really what got us to flagship was that understanding end to end, our customers journey and what still needs to be done. So one of my biggest strengths is being able to understand a problem and then Ida the solution for it. And realizing that bricks and mortar retailer historically was this massive blind spot, and no one really knew what was going on in their stores apart from what was selling. It really got me got the gears in motion to work out how do we create more data points in that bricks and mortar world?
Steve Statler 1:00:20
Last thing about your career, you know, what was the moment where you decided to found the company was that story.
Simon Molnar 1:00:33
I mean, I've always, I've always struggled at for better or for worse, I've always struggled to work for someone else. So I always knew that I wanted to drive and build my own thing. And I mean, honestly, I tried probably five or 10 different things on the side. And all of them flopped, for various reasons. But every time something flops, you learn something to do better next time. So I always had it in my head that I was going to start a business, it was just what that was going to be. And, again, I was really fortunate that I observed and saw my brother start and found a really successful business. And it gave me the confidence to know that it is something that's achievable, and something that's doable. And that if I put all the right pieces together, I can actually make something work.
Steve Statler 1:01:30
Cool. So I can completely relate to that for Willie. I decided I'm never going to work for another person. But then when this idea came along, I like this is just too good. I and my boss was you know, very long flight away. So that was actually very good. So you found out at the last minute about our musical tradition? What? What three songs would you take on a trip to Mars?
Simon Molnar 1:02:04
So it's gonna sound I don't know, maybe I don't know if it's cliche if it's a bit too sappy or sensitive. But I've got I've got three songs that I literally listen to on repeat to remind me of my daughter, one for my wife. So if I was going to Mars and if I was going myself I would probably the same three songs. So for my for my daughter, it's Daddy's Little Girl by only halter and would have loved to by Chris b&e would have loved to, ironically, is a really, really strong country song. And country is not that big in Australia, but it's hooked me in. And then for my wife, it's this woman's work by Maxwell. Awesome,
Steve Statler 1:02:53
awesome, great choices. Thank you for sharing the rationale behind that. Well, Simon, I wish you luck. And I do encourage people to go to your website, what is your website flagship.ai. And you can also go to the willie up partner site and there's actually a really nice video that you guys provided us, which I enjoyed watching and I actually one of the reasons I like it is we have a you know, I looked at the ecosystem and there's other IoT companies that address retail. I've always thought you know, some of them have these beautiful websites. And you know, we're covering so much we cover energy harvesting technology and all these, the ecosystem that we have different verticals that I looked at your website and it's just fantastic. It's really a beautiful website. And I think, you know, for me, it makes me excited about this