RetentionX
Early-stage startup analysis for a new AI Analytics for e-Commerce startup
Hey,
So this our first early-stage startup analysis for LaunchDaily and we are going to be looking at one of ProductHunt’s “Product of the Month” for December that caught me eye. If you are new or need the recap you can check out why LaunchDaily exists and the description of the categories in the welcome email.
This is the first one I wrote and I’m hoping they get better from here. I’m going to leave on comments on the post if you want to talk about anything in this mail or just give general feedback (or even encouragement for me!) as a comment.
Tomorrow I’m going to cover video collaboration startup Rewatch.
Best,
Stuart
RetentionX launched on ProductHunt on December 22, 2020, hunted by Chris Messina and made by Alex Jost. It claims to have been 3 years in development and is bootstrapped by its founders.
How They Position It
The tagline for RetentionX is “AI for Shopify” with tags for Analytics, SaaS. Artificial Intelligence and E-Commerce. The longer description is “RetentionX translates your data into clear actions. Take the best business decisions based on AI-driven data analysis and replace the power of an entire data science team with just one, easy-to-use tool.”
The website puts a real emphasis on how it's for “Decision Makers” and how you can replace (or will never need) a data science team. The website seems to de-emphasize that it's for e-Commerce and transactional businesses. The primary features RetentionX are highlighting are the hundred plus types of report as well as capabilities in predictions, segmentation and exports.
How I Would Position It
RetentionX is a specialist business intelligence solution for eCommerce in the style of Custora, OrderMetrics or Conversific that easily integrates with Shopify. The primary differentiators for RetentionX are the range and sophistication of the out of the box reports and a focus on AI/ML driven predictions for forecasting. This differentiates it from those competitors who focus on more basic reporting such as traffic analysis, conversion, cart abandonment.
The Bull Case (Why is this going to be the next big thing)
RetentionX product strategy falls into the category that I call the democratization of technology. They are bringing more sophisticated analysis tools that have previously only been accessible to large organizations that have data science teams and packaging it into an easy-to-use, easy-to-install SaaS application. This is a tried and true method for adding and extracting value in a market as long as the downmarket segment has similar problems to bigger organizations and can get value out of those tools. I can see RetentionX really working for the lower-end of the Mid-Market, in the $10m - $100m annual revenue range. These organizations are too small, or early, for a data science capability but can get value out of good forecasting and optimization.
The Shopify market is a fantastic place to find transactional merchants in this segment and the Shopify Analytics API makes it incredibly simple to install and tap into the data needed to make these Analyses work. Shopify is the fastest growing e-commerce platform and occupies a sweet-spot for RetentionX between lower transaction volume solutions like WooCommerce, Wix, Squarespace and Enterprise solutions like DemandWare (owned by Salesforce), Magento (owned by Adobe).
If RetentionX can get awareness in this segment and provide something with a direct connection to increasing revenue they should grow very quickly.
The Bear Case (Why is this going to fail)
The challenge for any democratization of technology startup is about the product risk and the market risk. The product risk is can you make the technology accessible enough and cheap enough for a smaller company that does not have access to the same level of skills and capital. The market risk is, does a smaller company have the same or similar problems to larger companies even at a smaller revenue and number of transactions such that they can extract value from implementing the technology.
Assuming RetentionX has done a great job on the product implementation, and it looks like they have, the big question will be if the sophisticated analysis is actually useful to a small mid-market organization over and above what similar priced competitors offer. Additionally given RetentionX doesn’t offer the complete gamut of analytics required for an e-commerce site, it is very much a supplementary tool that provides additional features rather than a replacement one. This means RetentionX is susceptible to one of those competitors adding the same sophisticated reports and providing the all-in-one solution. This is a typical problem for democratization startups to build a defensible moat based entirely on feature differentiation.
The other big challenge with all analytics products is connecting the analysis to an action that can drive results. The actionability problem means that customers can’t directly connect spending on better reporting to driving better business results without having an intermediary process to create an optimization action. This is why products that can bridge this gap with functionality like sending optimized customer segments to marketing automation tools or automatically optimizing pricing have an edge.
Grading for the Launch: A-
This is a good example of a well done ProductHunt launch and has all the elements that make a PH launch work, hunted by a big influencer, special PH deals and beta users engaged in the comments. It has a really good single-page website and a clear proposition.
The only real big negative in my book is the call to action is to “Request a Demo'' rather than sign-up directly and connect your Shopify site which you can actually do on the Shopify App page; This misses the opportunity to engage qualified visitors with a free trial or free version that RetentionX could run a product led growth playbook on to convert. A mid-market target customer is more inclined to engage this route while “Request a Demo'' is an Enterprise sales route (although it’s easy to argue that even Enterprise buyers want to see the product first). I can understand though the desire to try and get in front of someone to demo and sell early on when maybe your onboarding isn’t fully built out.
Grading for Potential: C+
Sophisticated Analytics for e-Commerce is a great growth space with lots of potential so RetentionX has a great tailwind behind it but it might be hard to compete with better funded competitors like Custora based on feature differentiation alone. The larger market of business intelligence is extremely crowded and well capitalized so it is hard to expand out to other use cases that are underserved.
Unsolicited Advice for Founders
The RetentionX CEO mentioned on ProductHunt their intention to launch a version for B2B SaaS businesses. I would recommend against this to concentrate on the e-commerce segment. While it’s easy to imagine how similar analysis tools could be applied to SaaS, it is an order of magnitude difference to acquire and convert two entirely different customer segments.
Instead focus on e-commerce as a segment and try to build a moat around the business based around anonymous benchmarks of data for similar customers. Expand the easily addressable market with integrations into other mid-market e-Commerce solutions such as BigCommerce and even Magento to remove more barriers for customers.
Finally work with your customers to find the killer use-case they have used to increase revenue and then try to make it as easy as possible to bridge the gap from analysis to action for other customers. Once you have this killer use-case you can market the case-study for increasing revenue. There is no easier sell than “implement X and your revenue will increase by Y%”.