When it comes to commerce innovation, physical retail often feels like it gets the short end of the development stick against newer, faster-growing, more quantifiable (and still far from perfect) digital channels. But physical retail is far from disappearing altogether, and today a company that’s built a solution very specifically targeted at improving data around in-person merchandise sales is announcing a big round of funding as it moves ahead on some major rollouts it has inked with retailers – a sign of how things are changing, and the appetite that the market has for that.
Nexite, which has developed a radio-powered tagging system and corresponding data platform to read and parse information related to those tagged items, has raised $ 67 million in a Series C round of funding, and $ 100 million overall, money that it plans to use both. for R&D as well as to roll out services to its first customers.
“We solve our customer’s biggest pain point, which is a lack of real-time data in physical stores,” Anat Shakedd, the CEO who co-founded the Tel Aviv-based company with her husband Lior, said in an interview. She describes Nexite’s solution as the “only tech in the market” that does not require a battery to be able to transmit substantial data at a long range.
This latest tranche of money has been co-led by Pitango Growth and Saban Ventures, with previous backers Battery Ventures, Intel Capital, Pitango First and Vertex Ventures also participating. Prior to this Series C, Nexite has been relatively under the radar while working on its technology and deals with its first customers.
PitchBook notes that with this round, before it was fully closed and only at $ 53 million, Nexite’s valuation was just over $ 340 million. Now with the Series C at $ 67 million, that would give the startup a post-money valuation of just under $ 356 million. (The company declined to comment on the figure when asked.)
Nexite’s early customer list speaks to a strong start in selling its concept and product to the market. Shakedd said the startup has two major retailers signed up with “full roll-out agreements” that will cover more than 1,000 stores and 80 million tags on items annually when they are implemented. She added that Nexite has further signed agreements with “four of the largest retailers in the world” – no names disclosed – that are in different phases of development, and is having discussions with 20 other large retailers.
The gap in the market that Nexite has been targeting is that physical retailers today operate in a kind of data desert – they set out items and sell them, hope for success, and have often huge amounts of stock that doesn’t sell; it’s a lot of trial and error with a few bits of observation and historical data thrown in to understand why – and yet by being physical locations they are essentially sitting on a mother lode of useful data if they can tap into it better.
Retail stores are like a black box, ”Shakedd said. “Other than sales, they have no data at all. Now they are looking for that. ”
Nexite has developed a tagging system that is attached to individual pieces of merchandise, as well as a network of radio nodes (via Bluetooth beacons) that can be set up in a store to pick up the item’s movement and how one item might be moved at the same time as another. These tags can either be incorporated into a clothing label at the point of manufacturing, or a retailer can attach them by way of a sticker after that point. They are no bigger than washing instruction labels, Shakedd said. The tags can transmit their data as far as 10 meters but more typically seven meters – a distance that the company is working on extending so that even less nodes need to be used.
In the way that Shakedd described it to me, the system sounds somewhat like more versatile and functional RFID; RFID on steroids, in a sense. The tags track not only where an item happens to be in real time, but where it has moved over time, and what it has been moving around with (for example, if someone picks a top to try on with a certain pair of trousers) . Data from the tags is processed in the cloud, making the tags themselves efficient when it comes to energy consumption: they are powered by radio waves coming from the beacons.
And because the system is based on existing radio standards, they also work with the gates that retailers already have in place to track when someone takes an item out of the store without the radio tag getting removed (eg in the case of shoplifting, or an error at checkout); this means that they also potentially replace those more clunky radio tags.
This also means that the tags can be used in a contactless-checkout “just walk out” type purchasing flow. One advantage that using these tags would have in a contactless checkout environment over other technologies that are being developed is that Nexite’s tags do not rely on any camera technology: this makes them not only cheaper to implement but more functional, since camera-based “just walk out ”tech couldn’t be used for, say, tracking how clothing items can be tried on.
Then, after an item is sold, the idea is that the tag can continue to “live” in the form of an app that a customer can opt into, to get more information about that item, other related items that the retailer or brand is selling, and other related information. That, too, potentially becomes another source of after-sales data for the retailers, information they’ve had almost zero access to before now.
There are some potential hiccups in Nexite getting its business to fly. If incorporating the tags at manufacturing is the ideal, then that means getting a lot of other stakeholders signed on to the idea and proving to all of them that it’s worth their time and investment to bring in this extra step into the process. There is also the issue of these tags perhaps being too powerful: Shakedd emphasized that people needed to opt in to continue getting data from the tags after a purchase, but some will inevitably see this as more big-brother-style tracking, when all they really hope for by shopping in person is to get away from that massive data specter.
And finally, there is a big question of how and if retailers have the infrastructure in place to run with whatever data they do amass: real-time is only effective if you have teams in plance, and IT in place, to parse and read that data and action it. Digital transformation has definitely become a catchphrase of the day, but that doesn’t mean that every company is ready to go through with it, or will be successful in actually implementing it.
In any case, there are also a lot of possibilities of applying the tech that Nexite has built to a much wider range of IoT and other use cases – any scenarios where it’s now seen as useful to be able to track the movement and operation of of previously “unconnected” things.
“We went to retail first because they already tag everything, with 90% of items in categories like apparel already using security tags, so we didn’t need to educate them as much,” Shakedd said. “Also our overall solution is cheaper for their current needs than other solutions.” The Nexite system is priced based on full rollouts of beacons and the data platform managing it, with more or less tags around that nearly a negligible factor, she said.
“The continuous flow of data from merchandise reinvents physical retailing into live digital solutions. Nexite’s cutting-edge technology is gaining tremendous traction in the market, ”said Isaac Hillel, managing partner at Pitango Growth, in a statement. “It’s clear that Nexite is creating a new, well-needed category, and we are excited to continue from our initial investment with Pitango First through to this latest round.”
“Continuous data flow from merchandise and the resultant analytics are transformational for retailers globally,” added Barak Pridor, managing partner at Saban Ventures. “Nexite’s cutting-edge solution is driving significant commercial results that have never been achieved before in this space. We are very proud to be joining this incredible team on its journey. ”