Sydney-based Damien Cantelo has spent the morning conducting interviews with potential customers in a local food court before catching up with FLT to explain what’s been happening with Wynbox, the company he co-founded with Sebastien Langton.
Wynbox is a technology which allows a retailer to offer a customer a chance at a cheap (or free) product, rather than opting for a traditional sale promotion. It’s a new way for retailers to attract customers, in a market known as ‘ratio buying’.
It follows the pair’s experimentation with Wyngle.com.au, their online retail platform based on the same technology. The pair launched the site in early 2011, and used it to trial the concept. Since then, they’ve decided to focus their attention on licensing the technology to other retailers. It seems that’s where the money will be.
“We launched Wynbox late last year,” says Cantelo. “The reality is that existing retailers are where the traffic is. By licensing the technology, our CPA (cost per acquisition) is virtually zero.”
However, this two pronged approach has had its benefits. He says it meant the company could test its technology, refine its communication, and better understand user behaviour. “We’ve learnt a number of things from Wyngle which we’re now using with Wynbox.”
Cantelo says the pair were able to double conversions in the first three months by experimenting with the Wyngle user experience. Some of the most effective changes included displaying the ratio upfront (e.g. telling the customer they’ll have a ‘one in three chance’ at a $1 purchase), using lightbox pop-ups to guide people through the website, and displaying clear price explanations at checkout. Further, 18% of transactions are now from repeat customers. Around 19% of shopping carts are ‘uplifted’ too, whereby a customer might buy three of an item to ensure they get one at a low price. There are now more than 90 brands listed on the site.
Wynbox is midway through closing its Series A round (Image: Zach Kitschke)
In mid-2012, Cantelo and Langton travelled to the U.S. with the Advance Innovation program (see FLT story). He says the program accelerated the process of organising meetings with relevant investors and mentors in Silicon Valley and San Francisco.
Initially, the pair were hoping to raise money in the U.S. Despite some positive interest, Cantelo says two weeks was never going to be long enough. He found while there was plenty of interest while over there, once back in Australia again, it was hard to maintain the momentum of investor conversations.
More recently, the pair has been focussed on trying to close a Series A round. They’ve so far locked in $450,000 — half what they’re hoping for — in a round led by Dominic O’Hanlon, who was previously Chief Strategy Officer for accounting software company MYOB (which sold to Bain Capital in 2011). The money will be used to bring in sales and web development resources. This follows an earlier seed round raised from investors including David Kowalski of Green Lane Digital, and the Sydney Angels.
“We knew we had to be raising money last year. We were in two minds whether to raise in the Valley or raise here, although it was helpful for the capital raising effort here to have had some success with our conversations in the Valley.”
The food-court version of the customer development interview hasn’t been quite as effective as the preferred location: the pub. Cantelo calls it the ‘bar exam’. With Wyngle, he found it a great way to get useful feedback. The pub is best because you can pull people aside, shout them a beer and test new concepts with an iPad. People tend to be pretty forthcoming, sometimes surprisingly so, he says.
“They say ‘I don’t get it’, ‘it doesn’t make sense’. After a number of one-on-one sessions you start to hear the same feedback.”
His advice is to give people clear instructions: tell people to act as if they are definitely going to buy a particular product, and ask them to talk through what they are looking at and thinking as they navigate a mock-up of the site. Taking notes while they speak can put people off, so scribbling notes afterwards can work best.
The concept of ratio buying (and Wyngle specifically) has been criticised by some anti-gambling advocates including Responsible Gambling Fund chairman Harry Herbert who told the Canberra Times people may get the wrong impression when using the site, and questioned whether it was gambling. Cantelo is pragmatic about this sort of media coverage, saying that the media are always looking for different angles, and as long as press isn’t too bad, it still helps to publicise the concept.
Wynbox is currently being trialled with portable speaker manufacturer X-Mini, in a split test alongside its usual checkout process. There are a number of ways the technology can be provided to existing retailers, including leveraging the company’s API, or building a standalone microsite which intercepts the standard cart process. The integration process can still take a few weeks, and this has been a hurdle for some retailers. Wynbox charges a 2.8% fee on purchases made using ratio-buying. Cantelo found the Sales Learning Curve a useful read to help develop the company’s sales strategy.
The target market appears to be companies with a multi-channel retail strategy, as in a brand with its own bricks-and-mortar stores and branded online store. With Wyngle, the average price for a purchase is $142. Theoretically, says Cantelo, if there is price parity (standard pricing) across retailers on a particular product, then the more expensive it is, the more successful it will be using Wynbox.
Cantelo isn’t able to provide data on ratio buying conversion rates compared to a traditional percentage markdown, as the data is not yet available. Although research for Wynbox has found roughly 40% of people would opt for a chance at a free product rather than a guaranteed mark down. Gaining more detailed information, and testing the technology, will allow the company to be better placed to scale. The focus for now is building some user case studies.