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|
 Company
Profile:
www.revionics.com
Revionics, Inc. delivers the
industry’s most powerful End-to-End Merchandise Optimization solution,
enabling retailers of all sizes to execute a fact-based, shopper-centric
merchandising strategy resulting in enhanced financial performance with
improved customer satisfaction. Revionics’ solutions leverage advanced
predictive analytics and demand-based science to ensure retailers have the
right product, price, promotion, placement and space allocation for optimal
results. Offered on a scalable, high performance Cloud-based SaaS platform,
these solutions future-proof retailers from Big Data/Fast Data challenges,
while providing speed-to-ROI. Over 31,000 retail locations and $95B in
annual revenue across grocery, drug, building materials, convenience,
general merchandise, discount and sporting goods stores and online sites are
optimized with Revionics. Revionics has been recognized as a Red Herring’s
Top 100 Americas and JMP Securities’ Hot 100 Software Company.
Interviewed by CEOCFO Magazine:
Marc Hafner, President and CEO,
Brian Hansen, Chief Financial Officer and Karen Dutch, Senior VP Marketing
 Executive
Bios:
Marc Hafner
President and CEO
Marc Hafner is an
accomplished executive and CEO with over 20 years of successful leadership
experience. Prior to joining Revionics, Hafner was Vice President and
General Manager of NEC Corporation of America, with responsibilities for the
server and systems software organization. Prior to NEC, Hafner was CEO of
PerformanceRetail (PRI), a Software as a Service, business intelligence
solution for retailers that was subsequently sold to both Oracle and
Dresser, Inc. His background also includes leadership roles at technology
companies including Broadcloud, Westell, and On-Demand Technologies.
Brian Hansen
Chief Financial Officer
Brian Hansen has 25 years of
experience as a financial executive and has spent the last 10 years working
with software development companies. As the former CEO and CFO of Foodconnex
Worldwide, he has extensive experience with venture-backed organizations and
start-ups. Prior to Foodconnex Worldwide, he was the Founder and CEO of
International Digital Imaging Solutions, which merged with Foodconnex
Worldwide. His background also includes senior financial and operational
management positions with various retail organizations. Hansen began his
career in public accounting and spent 6 years working for an international
public accounting firm in the Silicon Valley.
Interview
conducted by: Lynn Fosse, Senior Editor, CEOCFO Magazine, Published – July
23, 2012
CEOCFO:
Mr. Hafner, would you tell us the general focus at Revionics?
Mr. Hafner:
Revionics focuses on helping retailers create a competitive advantage with
improved profitability through advanced predictive analytics and
demand-based science. We are using the big data model. We analyze large
amounts of data, some of it is the retailer’s data and some of it is
third-party data to integrate shopper-centricity and localization into their
merchant decision making process. The company’s initial focus was on life
cycle pricing – base price, promotions and markdowns. With the recent
acquisition of Retail Optimization, we’ve expanded into assortment and space
optimization and our offering now spans the entire merchandise planning
process, optimizing all of the key tactical levers. Our cloud-based
solutions ensure our retail customers have the right product at the right
price or promotional offer, at the right place within a store with the right
space allocation to increase margins, sales and customer loyalty.
CEOCFO: Are you typically looking for a
long-range type pricing over a month or two, over a season, or is it
something that can be adjusted week by week?
Mr. Hafner:
When we go into a retailer, we actually collect around two years of point of
sale (POS) data, which allows us to understand price elasticity down to the
item/store level. Our science takes out seasonal effects, from weather, and
so forth. We blend price elasticity information with a retailer’s category
strategies, rules and constraints and competitive positions to make
fact-based pricing recommendations. Our retailers typically send us current
POS data weekly, which is used to update our demand models so that our
recommendations always incorporate and reflect the latest shopper trends and
sentiment – which is critical in today’s market. Most of our retailers make
pricing adjustments on a weekly basis.
Mr. Hansen: Our solution also prioritizes the pricing
recommendations to account for store-level operational constraints. This
ensures that the price changes with the biggest impact are implemented.
CEOCFO: What was the biggest
technological challenge in putting all these various elements together?
Mr. Hafner:
It is all the various data elements coming together, which requires a great
deal of processing resources. The science behind the results is very
sophisticated and our retailers want results quickly, at the point of
decision. We have a very large computing infrastructure and proprietary
software that allows us to fully utilize all of our compute resources as a
grid.
CEOCFO: Revionics has been around for
ten years; so what has changed most in what you are able to do now and also
in the market penetration for you in that time?
Mr.
Hafner:
One of the things that comes to mind is the fact that when the company was
founded ten years ago by Jeff Smith, his focus was on making sure that the
smaller retailers, the ones that were being overlooked by the big vendors
would be served. Jeff knew from his experiences that to succeed with the
medium to small retailers, Revionics’ science had to be sophisticated yet
usable. The company delivered on this vision and was very successful serving
the smaller retailers. The greatest evolution for us is that we have
expanded the technology and capabilities such that we remain a perfect
solution for the smaller retailers, but we also now serve Tier-1 retailers.
The second major change is that until recently, the company was focused
heavily on North America, and base pricing. We now have an international
presence, new modules around promotion and markdown optimization, and most
recently, we acquired a company that has proven assortment, macro and micro
space optimization solutions that are offered in the cloud. The one thing
that has never changed is our culture, which is about being transparent with
our customers and backing our solutions with a long-term partnering
commitment. When customers want to try things, we are very transparent and
let them know if we have done it or not, and they very much appreciate that.
Our partnering approach is deep, genuine, consistent and supported by our
SaaS model – we know we need to earn their ‘renewal right’ every single day.
Our culture is something that is very important to us and we have had a
great deal of positive feedback on it from our customers and the market.
That is one of the things that sets us apart in addition to our science.
Mr. Hanson: One of other things that has
made us successful over the last ten years has been our value proposition,
our customers are getting on average a 12 fold ROI every year. When Jeff
built this system, he had the vision and foresight to build it so it was
very usable. One of our key usability capabilities is transparency, which
means our customers have visibility into the why behind every
recommendation. We’ve found that this accelerates recommendation adoption,
which in turn accelerates value and ROI. This is another key differentiator
between our competition and us.
CEOCFO: Would you give us an example of
what you are able to do, and what are some of the easy to understand changes
they were able to make using your system?
Ms. Dutch:
Every one of our customers has experienced enhanced profitability through
our optimization solutions. Typical gross margin increases for base price
optimization are in the 3-5% range with sales increases in the 2-3% range,
but we do have customers that are seeing significantly higher results. We
have several public customers such as Tractor Supply Co. and Family Dollar
that regularly talk about Revionics and price optimization on their earning
calls. And our customers using assortment and space optimization are seeing
4-7% increases in same store sales and 2-5% increases in same store profits.
Equally important is the overall ROI. We have measured our customers’ ROI
and know that on a yearly basis for every dollar that they spend on our
solutions the return is in the range of eight to eighteen dollars with an
average of about twelve dollars in improvement for every dollar spent. That
is a pretty substantial year after year return. Our customers call it the
gift that just keeps on giving.
CEOCFO: When you are working with a
chain, is it typically the whole chain once you are established, or is it
broken into segments?
Mr. Hafner:
We typically work with HQ. Now depending on the retailer, there are several
different rollout methods. Some retailers’ rollout price optimization to a
selected set of stores initially, others choose high impact categories
across all stores and some choose an all categories, all stores approach.
Mr. Hansen:
Our SaaS model really gives our customers the maximum flexibility in
choosing the rollout strategy that works best for them. Most of our
customers end up using our solutions across all stores. We have some
customers optimizing across over 8000 stores.
CEOCFO: What about the competitive
landscape; why are people choosing Revionics?
Mr. Hafner:
The reason retailers choose Revionics is because we are the only vendor that
provides sophisticated yet usable science. Our solution provides complete
transparency and explains the ‘why’ behind the recommendations. Our
retailers, for example, always know exactly why a price changed. Our
competitors provide a new price but cannot explain why they suggested a new
price due to their black-box approach. We are also the only solution that
automatically updates the demand models weekly to reflect current and
emerging shopper sentiment. This allows retailers to leverage our
optimization across product categories not possible with a competitor’s
product. It also lowers the total cost of ownership as our competitors
charge substantial professional service fees to update their demand model
several times a year. And lastly, we deliver results in minutes to hours vs.
days to weeks. Our customers have all of the information they need at the
point of decision.
Mr. Hansen:
We have the largest number of customers on price optimization, more than any
other vendor including Oracle and IBM. We are very proud to have over 31,000
stores utilizing our products. With more sets of eyes than anybody else in
the marketplace using our product, we get a lot of feedback daily. Some of
it is good and some of it is constructive criticism, but their feedback is
critical to making the products better and stronger to ensure we remain
best-of-breed.
CEOCFO: Would you tell us about the
recent acquisition and what types of additions do you see?
Mr. Hafner:
Our recent acquisition of Retail Optimization means we now have all of the
predictive analytics and demand-based science to deliver a proven End-to-End
Merchandise Optimization suite. Our customers can now take a shopper-centric
approach to merchandise planning, leveraging science to optimize all the
tactical levers for improved margins, sales and customer loyalty. Armed with
a comprehensive view of their shoppers’ behavior, they can tailor the
variety of products offered to best-fit each local market, optimally place
products in a store to increase basket sizes, and price and promote products
more effectively. We will continue to focus on making our retailer’s
customers’ experience better.
Mr. Hanson: As a SaaS-based retail
platform company, this acquisition also positions us to be the first vendor
that can offer retailers a fully integrated end-to-end merchandise
optimization solution. By infusing real-time price and promotion information
into the assortment and space decisions, we can deliver a coordinated master
demand plan – one version of the truth.
CEOCFO:
Have you encountered customers that do not follow the advice?
Mr. Hafner:
That happens. Retailers have been using spread sheets and ‘gut feel’ to make
decisions for a long time and then something else comes in and tells them
that they should do it differently. This is why our recommendation
transparency is so important. It helps a retailer understand what factors
drove the recommendation. We also provide what-if scenario simulation that
allows a customer to see the financial outcomes of different strategies and
rules so that they can compare them and make better decisions that align
with their business and financial objectives.
Mr. Hanson:
Our performance measurement reports also help with adoption
by showing the uplift in sales, margins, profits, and unit counts due to
taking recommendations. We also track the impact of not taking a
recommendation so that our customers have visibility to that as well.
CEOCFO:
Revionics has won a number of recent awards, would you tell us about that
and how important that is and what it means for Revionics?
Mr. Hafner:
Being recognized by the marketplace is a great endorsement. We were recently
recognized by both Red Herring and JMP Securities as one of the best
software companies with the strongest innovation, technology, financials and
management team in the industry. We are very proud of what we have achieved,
and were very grateful to have been nominated. The fact that we won these
awards validates what our customers have been telling us. We will continue
doing what we have been doing because that is what got us to this point.
CEOCFO: Are you looking for funding and
investment in Revionics?
Mr. Hafner:
We do not need funding; financially we are very strong and not actively
looking for additional funds. We had one round of funds in 2007, which has
allowed us to fuel our rapid growth. Having said that, as the steward of the
company I look for opportunities to continue to accelerate growth. If
funding needs are required, then we have it available. For example, a key
area we are looking into is international growth. We have already planted
the seeds, and we have already had success internationally, which has told
us go faster.
CEOCFO:
Why should investors and business owners look at Revionics?
Mr. Hafner:
We are the example of what a well-run SaaS company can be. We are also a
great example of building the right kind of team and having the right kind
of culture for that team to excel in. The result of this is we are able to
compete effectively against the IBMs, Oracles and SAPs of the world. I ran
into a competitor at a trade show, and the compliment they gave me right off
the bat was that they hear such good things about the culture in our
company. I thanked him for his comment but that was here when I got here. In
addition, when a publicly traded company, such as Tractor Supply Co.,
mentions you on their earnings calls and cites their price optimization
efforts as one of the four drivers of their margin initiative, that really
says it all.
Mr. Hansen:
Our strong execution has resulted in exceptional growth, 69% Compound Annual
Growth Rate (CAGR) over the last three years. We are going to continue to
grow, and we are always looking at additional acquisitions and ways to
strengthen our partner eco-system to support and drive that growth.
CEOCFO:
What should people remember most about Revionics?
Mr. Hafner:
Optimization technology has just entered the broad adoption phase and
Revionics is recognized as the proven leader in this billion-dollar market.
I think the process and path that we are on is the right one and we will
continue our flawless execution.
Mr. Hanson:
We are proud of what we have accomplished, and financially, we are a very
strong company. We have been around for ten years and have achieved great
success with very little capital, providing a great experience for the over
sixty customers that we have today. We will continue that trend and create
more value in the future.
disclaimers
Any reproduction or further distribution of this
article without the express written consent of CEOCFOinterviews.com is prohibited. |
Technology
Merchandising
(Private)
Revionics, Inc.
2998 Douglas Blvd., Suite 350
Roseville, CA 95661
www.revionics.com
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