The rise of retail apps: why we invested in Poq
Smedvig Capital recently led the £9.5m Series B investment in to Poq, the UK’s leading retail app development platform.
We had been observing the emergence of ‘app-commerce’ in retail for a while, and believed that this would present an opportunity for a new wave of platforms to dominate apps in the same way that the likes of Magento and Salesforce Commerce Cloud have come to dominate e-commerce.
We had been tracking Poq for over three years and we were confident that the product was far ahead of the limited alternatives in the space. Having waited patiently, we could now see sufficient evidence that the market was ‘ready’, and that the business was poised to define and lead this emerging category.
We are excited to have backed the awesome founding team of Oyvind, Michael, Mike and Jun, and their vision of bringing retail into the age of apps. Here’s why.
The future of retail = mobile
The rate of change in retail is staggering, and the two unstoppable trends that are shaping the industry are the growth of e-commerce and the shift to mobile.
Globally, e-commerce revenue is growing 22% YoY and is currently 11% of all retail sales. The US is a bit behind the curve at 10%, whilst APAC (28%) and the UK (26%) lead the way.
Within e-commerce, mobile has been growing 29% YoY and now accounts for 60% of all e-commerce. Although there is room to grow (APAC is at 76%), the shift to mobile is not new news.
Apps are transforming mobile commerce
When creating a mobile shopping experience, retailers are faced with two options: build a native app, or build a responsive mobile website.
This is really about the trade-off between ease of discovery vs. user experience.
Mobile websites are great for discovery and landing
Mobile websites are simply websites which adapt to a mobile screen. As a result they behave in a similar way to websites. They appear in search engines and render in-browser without the need to be downloaded. The browser is a continuous environment where the user can seamlessly move between sites.
Apps on the other hand need to be downloaded, and this creates friction at the discovery end of the journey. Until recently, apps were also not readily discoverable by search engines (although this is changing). Each app is its own environment, so moving between apps is typically less seamless than moving between websites (again, this is improving as there is now much more ‘deep linking’ between apps).
But apps offer a far better user experience
Although mobile websites are more easily ‘discoverable’, the user experience of a native app is far better.
Whereas websites are written in traditional web code not designed for mobile, apps are written ‘natively’ for the specific mobile operating system. This code base is completely separate to web and is designed for mobile. Where websites render in-browser, apps render on-device.
Apps are therefore far quicker, slicker and more responsive than websites, with more seamless interactions (e.g. swiping). They offer richer design opportunities and work better with interactive content. Apps can make full use of the device functionality, allowing for richer user experiences through features such as geo-location, augmented reality (AR), ApplePay, push notifications, address book, bio-metric authentication, and much more.
Apps perform better than mobile web
As a result of the better user experience, retailers who have invested in a high quality app are now seeing far greater performance from apps in terms of conversion, Average Order Value (AOV), repeat rates, and engagement.
On average Poq’s customers see 4x higher engagement on-app vs. mobile web and 3x Average Revenue Per User Per Month.
In the wider market, a recent Criteo report showed that apps deliver 3x the conversion rate of mobile websites and 3x the Average Order Value.
Poq have a wide variety of use cases for which their apps have demonstrated ROI. They have helped high frequency fast-fashion brands to increase retention, frequency and AOV from their loyal customers, but have also helped furniture companies to increase conversion and engagement of single purchase customers. Another example is department stores and food stores who use apps to capture in-store consumer data and drive engagement, promotions, and loyalty across channels.
The best mobile retailers need both an app and a mobile website
Both channels are developing fast. Developments such as Progressive Web Apps push the speed and responsiveness of web forward, but at the same time new device features such as AR extend the realm of native-only experiences, and concepts such as search-indexed apps, app-streaming and instant apps remove the barriers to app discovery.
We spoke to over 25 retailers all of whom shared the same view. You need a high quality mobile website to drive search and discovery, and you need a high quality app to drive conversion and lifetime value. A mobile website to find new customers and an app to convert and retain them.
Apps and mobile web are completely different experiences aimed at different customers. The best retailers view them as two separate, but vital and complimentary channels.
Retailers are behind on app-commerce
Having spoken to many retailers, we are confident that both apps and mobile web are here to stay. However, most retailers are behind the curve when it comes to apps.
There is a huge opportunity ahead as retailers start to realise the potential of apps, and the performance improvements they can drive in terms of conversion and life time value.
Most of Poq’s clients are leading innovative retailers and on average they have seen app go from 0% to 22% of sales in less than 2 years.
High profile retailers such as Asos, Amazon, John Lewis, Argos, and Starbucks are examples of app success stories. But the app revolution is only just getting going.
Most retailers are heavily under-invested in apps compared to mobile web, but the tide is beginning to shift as a new wave of mobile-first retailers are leading the way in demonstrating the power of retail apps.
The best way to build an app is Poq
In e-commerce we have seen the rise of platforms such as Magento, Salesforce Commerce Cloud and Shopify. The e-commerce platform market is $5.3bn globally with some of the world’s largest retailers opting to build on top of a platform rather than build from scratch in-house or via an agency.
Platforms typically offer a faster time to market than an in-house or agency build. They also offer a cheaper full cost of ownership and cheaper cost to get up and running. Most importantly, they make it easier for retailers to stay cutting edge with regular releases and updates. At the same time, enterprise grade platforms such a Poq allow retailers to customise on top of the core platform, to deliver a highly bespoke and unique end product.
The platform model makes sense for apps as it has done for websites. In fact, the case for platforms is even stronger in apps due to the higher cost and complexity of development.
However, possibly due to these same complexities, the market for app development is nascent with surprisingly few vendors, all of which are essentially agencies or agency-derived.
Thus, when we came across Poq we were very excited. All the retailers that we spoke to confirmed that Poq is the only “true platform” solution, certainly of enterprise grade, and is leading the way in terms of time to market, and rate of innovation. Poq apps consistently achieve top app store ratings of 4.5–5 (out of 5) across the board.
The future of retail = app = Poq
Poq is finally bringing down the barriers that have prevented the wide-spread adoption of high quality shopping apps, and is making superior digital shopping experiences accessible to any forward thinking retailer and their customers.
In only a few years Poq has grown a client base of 20+ blue chip retailers in the UK, US and Northern Europe including some of the biggest names in fashion, furniture, food, health, gifting, and department stores across both pure-play online and multi-channel retailers.
With new code every week and major new releases every quarter, this is only the beginning.
We are now moving from a mobile-first, to an app-first world. We expect apps to ultimately account for 50%+ of e-commerce as the wider retail market catches up with the leaders who are already well North of this.
The future of retail is app, and Poq is leading the way in shaping that future.
Watch this space!
Joe Knowles is an investor at Smedvig Capital, a London based VC investing at Series A and B stage.
Sources: eMarketer, Criteo, Gartner
