Kristjan Hiiemaa, founder and CEO of retail business software ERPLY, and Sander Sebastian Agur, VP at ERPLY Retail, talk about why retailers all over the world should use Point-of-Sale (POS) software created by their company instead of the cash register.
There are thousands of business software developers in the world. What is special about Erply? What makes it a real management platform which, as you claim on your company webpage, ‘makes your customers buy more’?
Kristjan Hiiemaa: Erply offers retailers a single integrated platform, which is web-based and enables users to sell through various different channels – store, online store, warehouse etc. We are independent from any particular platform, which means that you can run our software on an iPad or in Windows. Whereas it used to take a couple of days to set up a point-of-sale, our software enables customers to do it in five minutes. There is no need to install anything. We offer retailers software which they can adapt and connect to their existing hardware. Our software solutions makes us competitive with the global giants, but we have still been active in taking on new customers.
Why have such global players opted to use the Estonian-born Erply?
Kristjan: Whilst we are also active and successful in other countries including Australia, we consider the USA to be our ‘home’ market. We have over 300 000 customers, meaning different stores, in total. It is commonplace in the USA that one brand has 300-500 stores and, in order to manage risk effectively, each store is treated a separate business.
Clients often prefer us because we offer more functionality. There are not many cloud-based software providers like us with such a long list of clients and references. We have perhaps around ten big competitors, notably Microsoft, Oracle and SAP, with whom we regularly compete at tenders.
Erply software has many different functions. What are some of your latest additions and future plans?
Kristjan: In Estonian folklore, there is a mystical creature kratt, which collects treasures for its master. We aim to create a software system kratt which helps the retailer sell the right goods to the right customers. Retail management is a complicated task and it could be done much more efficiently than it often is.
For example, it is a common problem that often once a product is sold, replacing it with another one from the warehouse is neglected. Or another issue arises, namely that retailers do not understand which products are popular and end up selling things which people don’t really want to buy. In other words, if you see that red T-shirts are bought more often than blue T-shirts, do not order more blue T-shirts! Simply put, sell what people want to buy!
Our software also collects data which tells the retailer which products to order and which to ignore. Here is another real-life example of how information sharing does not work: a store of a large furniture retailer put some left-over chairs on sale at the end of the season. These were sold, with the central warehouse assuming the popularity of the product and sending some more chairs to the store, which they then could not sell even at a much reduced price!
Stores generally tend to have at least five replacement products for one item with each one having a different cost price, but as a rule of thumb c. 20 per cent is marked-up in the store. In reality, the selection should only include products where the retailer can add the mark-up which is profitable for him because, at the end of the day, this is what pays the bills.
It does not make sense to put too much work into more expensive products as this does not bring in sales, and product turnover will also remain low. We try to help retailers to sell the so-called key-products, which people also want to buy.
How much does it cost for a company to transfer to your system?
Kristjan: The monthly fee starts with €50. The data can be checked at home via a server, there is no need to keep an IT-specialist on watch or use a local server – that means a real saving in costs.
What else can be done with Erply software?
Sander: I would also mention our loyalty program and the fact that we accept payments from cash to bitcoin. This creates more opportunities. We offer a customer program in collaboration with the Estonian start-ups Svipe and LHV Bank. It enables retailers to collect customer data straight onto an iPad and also enables the customer to make his/her presence known already upon entering the store (for example by doing a check-in) and thereby to receive a great service.
Kristjan: We joined the Svipe project because other customer loyalty systems seemed so expensive, complicated and lacking. Customers are not treated well enough, the services offered are often lacking in individuality and the marketing does not take into account the customers’ wishes. I can give you an example from personal experience. We went to buy a toy for my child from his own savings of €50. He selected a Lego which cost just one Euro more, but he had unfortunately left his customer card (which would have entitled him to a sufficient discount) at home. The sales assistants stated it was not possible to offer a discount based only on the client’s name. So this somewhat expensive toy remained there – we didn’t buy it but found it in another store instead.
The main point is if €50 just ups and walks out of your store because of a rigid customer loyalty program, it can represent a big problem for the retailer.
How many competitors does Erply have?
Kristjan: Thousands. Maybe even tens of thousands and this number is growing, which is great, as it shows that the sector is alive.
Erply is a start-up which has attracted US$4m in investments from investors since the founding of the company in 2009 – not a huge sum
in comparison with other start-ups and considering that you continue to grow fast.
Kristjan: We are earning money – we have always operated at a profit and grown our funds. We have enough money to pay for our future mistakes and experiments. During the course of our next expansion, we will definitely organise the next round of investments. There have already been several efforts to buy us, but at the moment we have so much excitement and we enjoy our work. Whilst you may think we have been in existence for long enough, we have not really conquered the whole world. We would ideally like to grow large enough to make companies like Microsoft at least a little but nervous!
There are always certain expectations involved in raising a lot of money in one go, which changes the face of the company. Second, our software platform is quite specific and detailed – it is complex content as we need to create correct mathematical formulas which would in reality help retailers. We are totally aware of the fact that real lives and business success depend on us.
In the last few months you have been testing your new partner program. How does it work?
Sander: The idea is dead simple. If you’re an entrepreneur or a company with software development experience, you can get all the ERP tools, training and 24h customer support from Erply, and can start selling a ready-made set of retail software products without vesting years on development.
It is really fresh and new as we only developed it last summer. It is based on the principle that we franchise out our software just like McDonalds, for example, franchises out its restaurant chain all over the world.
We provide our local partners with the chance to resell our software, because they know the local market and have the necessary contacts, hence they are able to sell our best POS solution from day one.
In Mexico, we teamed up with an experienced company who had released their own accounting software. They want to expand their services and instead of spending a whole lot of effort on building new tools, they just built an integration with Erply suite. Erply has invested 10 years and millions of development and live testing hours into the products, and a partner has these practically instantly.
We organised some web-training from our Tallinn office for them and created accounts for them. The beauty of the whole thing is precisely that our set-up is so easy that we don’t need days on travel and consultations. What we do need to take into account, however, is local tax regulations, setting up bank connections and translating the program into local languages.
So tell us, where’s the catch for the partners?
Sander: There aren’t any! The only risk for a partner is that, if they drop out, they lose the one-time commitment fee. It’s the first year of operation and we haven’t had cases like that.
The commitment fee varies according to the partner exclusivity requested. We see a huge value in Erply’s products, especially in emerging markets, where our partner can instantly become the market leader. Furthermore, the partner can use our customer support people until there are resources available to keep up local support. We have all the time zones covered 24/7. What I’d like to emphasize, too, is the zero maintenance cost with Erply. With our product, you won’t get a certain software version, as is the case with most of the solutions. You get Erply that is constantly and seamlessly updated.
Oh, and did I mention marketing tools? We can help in setting up a local customized web page, as well as branding, logo, tips and idea how to get to the clients. The technology itself is amazing. Reports that used to take a couple of months to build, now take just a few clicks.
The e-Commerce platform offers a very wide range of integration with third-party software. To be honest, we haven’t had to advertise the Partner Program very much at all.
The commitment fee is several times lower than the startup fee of a McDonald’s restaurant. Unless the partner wants exclusive right for a large region, the fee can easily be just a few thousand bucks. Basically we just charge for the time we invest in partner training. So the commitment fee and working hours is the only possible loss, if the partner does not make it.
Are there any risks with using Erply?
Sander: We are extremely careful in selecting our partners. If they come with a homepage from the last century, we will not talk to them. And there are also a lot of little businesses who are not able to pay the commitment fee. There are many daily requests for partnerships coming from Africa, Asia and the USA. Even during the course of this interview I have received two offers! But it makes no sense for us to establish partnerships with companies who do not know how to make ends meet a month later; at one point they will not be able to offer quality.
Where do you already have existing franchise offices and why have you decided not to set up the offices yourself?
Sander: In addition to Mexico, which I already mentioned, there are resellers in South-Africa and Australia. In Finland our partner is the technology corporation Elisa, who sell Erply software under the private label Elisa Kassa. I have just come back from negotiations in India. We have signed the contract in Botswana and the contract with the Nigerian partner is currently being reviewed. Asia is the only region we haven’t entered yet.
We have offices in New York, Sydney, London, Copenhagen and Tallinn, of course, but the answer is in scalability. Local partners bring in their experience and contacts, so the business grows at an amazing speed. Erply went global quite a few years ago, and we know how much value is in the deep knowledge of the market. The services must be top notch for the end users, and this demands a personal approach.
We cannot spend time on entering new markets the classic way, by opening a local office, hiring people. We want to work with people who already know how to do business in the particular environment. This is the value we are looking for, and that is why we are keen to share the profits.
After our interview you will fly to Florida for a couple of months. What plans do you have there?
Sander: As we already have an office in New York, I also want to run some operations in Florida, to open a small office and employ some people who will sell Erply. The US market is so huge that we can expand.
Sander Sebastian Agur (24):
Sander Sebastian is an aviation manager by education. He graduated from the Estonian Aviation Academy and the Amsterdam University of Applied Sciences, majoring in Aviation Management.
‘I was warned that managing an airline company is the toughest business in the world. So I thought this is exactly what I should do, because everything else is much easier compared with that,’ says Sander. ‘For some years, I worked as a business analyst at the Estonian national airline Estonian Air. An airline has to work like a Swiss watch, the difference being it’s really about the masses of people who just cannot be late. But I was looking for a challenge to take a business global. An airline can grow five, ten, maybe hundreds of times, but the market has physical limitations. So that’s when I discovered retail software, and realized that business software in general can be scaled million times, and there still will be space left for growth.’
Kristjan Hiiemaa (36):
Kristjan was born in a small village in Estonia and his business-gene was revealed already in early youth. When he was only 14, he created his first inventory software with his 386-processor computer. He sold the software to the local store and bought himself a new and more powerful computer.
In 2009, the Erply team won the Seedcamp competition for startups in the UK, regardless of the fact that they were not the only entrants to the competition with the same idea. ‘We had the courage to dream big,’ says Kristjan. ‘Already in 2009 just after the iPad had come to the market, we wanted to create point of sales software for it.’
Erply has raised over US$4m in financing from premier venture capital firms and private investors. The first two million dollar investment came in 2010 thanks to the Seedcamp competition. At the same time TechCrunch called Kristjan’s company ‘the Skype of business software’.
In 2013, US$2.15m were raised. The round, which is Erply’s Series B, was led by Redpoint Ventures with the participation of Index Ventures and Dave McClure’s 500 Startups.