Recommending LightSpeed Podcast

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I’m recommending this podcast with the President of LightSpeed for anyone interested in the company. It’s an easy listen, just 33 minutes and it was the most inspiring Podcast I’ve ever listened to. One of its main focuses is about how their new acquisitions will enable them to profit from and monetize their data. But it’s different than how Upstart uses data (from the past). A lot of it is using data from right now. For example, say they are working with both women’s clothing producers and stores, and they are all integrated into Lightspeed. The producers can learn as the sales happen, which models are selling in what kind of stores (and where), and what’s not selling, and adjust their production right then and there, rather than waiting until the end of the month or the quarter. The store can learn which manufacturers’ dresses are selling in the store’s kind of neighborhoods, and which particular models (or colors) are selling best, and they can adjust their purchases that way. It’s instantaneous information.

Listen to the Podcast! And I would recommend listening instead of reading the transcript in this case, so you can feel the enthusiasm and intelligence of the speaker.

https://www.lightspeedhq.com/news/inside-lightspeed-podcast-…

Saul

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I am only part way though the podcast, but I already have to comment. I was at my local bike shop over the weekend and noticed that they are now using Lightspeed POS, which was new. In the podcast they talked about why their customer acquisition cost was very low within the bike industry. It is because everyone within the ecosystem is selling Lightspeed. They noted that several of their customers, Giant and Specialized, the two largest suppliers in the bike industry, are forcing their network to use Lightspeed. Giant and Specialized want to know what is selling and where it is selling. Where they used to have to wait for end of quarter store by store updates, they can get this data in real time with Lightspeed. Large suppliers are forcing retailers to use the system.

What is means of course is Lightspeed does not have to go store to store and sell their systems. They just need to get a foot in the door, and the network effect will start to snowball. Suppliers will sell the stores. And the stores want to use the system because the suppliers will automatically know what is selling, allowing them to make sure they have replacements on hand. Stores can place orders directly to suppliers though Lightspeed. All of this benefits the customer who finds what they want and need stocked in the store.

It seems there is a real network effect here, and change could happen rapidly.

4wheel

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Thanks so much 4wheelfool. That type of report from the field is incredibly valuable to the rest of us, as it can verify or refute what we are hearing from the company. In your case, with Lightspeed and your bike shop, so nicely verifying. We really appreciate you taking the time to write it up, and your enthusiasm mirrors, that of the company President, that I heard in the podcast…
Best,
Saul

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POS data can be very, very valuable to the suppliers, distributors, manufacturers, and the stores too (obviously).

When I was in doing warehouse optimization work, I would have given an appendage to get that kind of near realtime data. Warehouse managers often optimize product placement for faster picking, they will usually move fast selling items as close as possible to the packing stations to minimize picking times, and they tend to move the slugs to the back or upper shelves to make room for the items that are in demand. The benefits can be huge.

At best we had weekly data, and in most cases only monthly data, if we had any POS data at all. Most times we were working with just ordering data, and at best we were usually only able to run the optimization on a monthly basis. Having that data come in realtime would be very useful to make adjustments more frequently, and be able to anticipate the orders before they even get created.

Kudos to 4wheel and Saul for sharing.

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I had my own vegan cheese business from 2013 - 2016 called Nary Dairy. We sold at several farmers markets in LA and about 25 grocery stores. Restaurants also purchased our product for their menus. Square was a game changer. At the markets, every single vendor had the Square toggle. Before, it was almost exclusively a cash business. I wasn’t smart enough to see what Jack was building and didn’t buy any stock, but I loved the company. It transformed all these little tents into real operations. It helped us keep track of inventory and the amount of data you can acquire has grown enormously.

Eventually, I sold a screenplay and immediately folded Nary Dairy (because it was an enormous amount of work), but I still go back to the markets and everyone still uses Square. A few venmos and whatever that weird Chase Bank thing is, but Square is still processing payments.

I looked up Lightspeed and their site is full of videos tailored to all sorts of retail businesses. The interface looks very modular, customizable and user friendly. I’ve received several texts from their support staff wanting to demo the product. I texted a question: what’s the biggest difference with Square.

“Great question! I would say the main difference is customer support! Lightspeed POS offers free, 24/7 phone and chat support to all our clients. We’re also a lot more focused on the POS side of things whereas Square focused heavily on payment processing.” I think that’s interesting. I wonder if Square has done much with their customer interface. I’m going to dig in more.

There’s another company that I am seeing a lot called Toast. I talked to a restauranteur in Boston about it and he loves Toast. I haven’t looked into them, but I am now seeing them in LA, particularly in food service.

Anyway, I’ll dig some more. Just from going on their site, I’ve received numerous text and emails over the past two days. I read someone said they’re getting a lot of business word of mouth, but they are pretty aggressive on the sales side, too.

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Falling Wallenda et all,

I can speak to this with some familiarity because I work at a Payments company. I had made a post about referencing some of your questions in an earlier post : https://discussion.fool.com/hey-monkey-duffy-i-do-not-have-a-pos…

But I will try to flush it out more below:

Lightspeed initial core area of expertise was in developing software solutions specific to retail point of sale and e-commerce (imagine all the use cases for a merchant with a store such as inventory management, multiple locations, layaway, return management, employee tracking of register etc etc). Based on the information on the podcast I wouldn’t surprised if they really focused on the software for bike shops - because each vertical has unique use cases and the more the software can cater to that - it will be popular in that vertical. Lightspeed has deep penetration in the bike shop vertical (1 in 2 bike shops https://www.lightspeedhq.com/pos/retail/bike-shop/ ). For eg unlike most retail stores bikes shops have a service center and all the associated use cases needs to be part of the software. Over time LSPD expanded into multiple other retail verticals and they expanded horizontally into new areas such as restaurants, hospitality etc.

They made a push into Lightspeed payments starting around 2019 (https://www.theglobeandmail.com/business/article-with-eyes-o… )

Really Lightspeed payments is whitelabeled payments from Stripe (
https://www.retailitinsights.com/doc/lightspeed-launches-new… ) . This has been a major trend in the SaaS and non SaaS space to add integrated payment capabilities into the software with added capabilities that a legacy payment processor would not be able to provide. Stripe is the best in breed for a SaaS Company because of the breadth and depth of API payment capabilities.

In parallel to this trend, companies (legacy - Fiserv/First Data, Chase Paymentech and newer entrants - Square ) who initially just offered payment processing capabilities to merchants saw the trend from the software and they themselves created software capabilities to supplement the payment processing. For example SQ built out square appointments to supplement their payment processing for personal care business such as salon, nail, massage etc, First Data built out/ purchased Clover as a restaurant POS to supplement their payment processing in the restaurant industry.

So similar to some other companies we are following - the areas these company’s play in is more and more overlapping. I do have a small position (1.5%) in LSPD and my primary concern is because of the deep competition in this space . I have not understood what LSPD more special than some of the other players in the industry - so need to do some work to understand that more. The primary objective is capturing the merchant business for the software and payment processing (GMV) will ramp after the merchant start using the software. So , the leading indicator should be the growth in their new merchants.

In terms of your question about Toast - they are POS software that focuses specifically on restaurant POS and they have started offering integrated payment capabilities in the last two years as well. I hope this is not too long winded and is helpful.

What’s the investment ideas here -

  1. if Stripe goes public - it WILL be a bigger IPO than Snowflake and I would buy because of the robust payment capabilities that they offer to software vendors.
  2. Look at software vendors grabbing market share in a vertical because their revenue from payment processing will go up

If anyone is interested in how these software companies make money through integrated payments or how these software vendors really only have a few options for backend processing - let me know.

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Stripe has raised $2.23B in 11 rounds; last round, Series H in March 2021 for $600M raised post-valuation to $95B. Key investors include General Cata-lyst Partners, Capital G, Sequoia Capital, Peter Thiel and Elon Musk.

Instacart has raised more liquidity than Stripe thus far. Stripe has raised more than Databricks, Tanium, Klarna, and Udemy.

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From the(8/19/21)Toronto Star: a pro-Shopify, pro-Toronto take on Montreal’s Lightspeed (so slightly amusing).

The article quotes Chauvet: Montreal-based Lightspeed has been so aggressive in diversifying its client services that Jean Paul Chauvet, Lightspeed’s president, allowed in a June conference call with analysts that “You could say that we have an offering now that is getting us closer to Shopify.”

https://www.thestar.com/business/opinion/2021/08/19/when-it-…

A good summary of Lightspeed’s recent acquisitions:
Lightspeed has spent about $2.5 billion on five acquisitions since last fall, and on a single day in June, announced two takeovers with eye-popping price tags.

It paid $628 million for Ecwid Inc., a San Diego, Calif. e-commerce platform that adds more than 130,000 paying customers to Lightspeed’s existing client base.

At the same time, Lightspeed paid $535 million to buy NuORDER Inc., a Los Angeles firm whose approximately 100,000 retailer clients use the firm’s platform to automate their wholesale product ordering.

In building its “omnichannel” model of providing one of the e-commerce industry’s widest ranges of services, Lightspeed last fall bought two U.S. restaurant management software firms, for a total of $1.1 billion. What’s more, in March it paid $440 million to acquire Vend Ltd., a cloud-based retail-management software provider.

Shopify, Lightspeed and Amazon’s third-party-vendor division are chasing the same customer, the merchant who wants to sell online and needs help in doing so. Not exactly true. Lightspeed is more focused on the bricks and mortar retailer. I think that focus was what initially turned my off of Lightspeed. Anecdotally, inventory being held at stores is suffering–in apparel, wrong sizes, wrong colors … some of it may be hangover from COVID supply chain issues–but shoppers are losing confidence that they will find what they want when they go to a store. Lightspeed has the fix to this–although as Lightspeed says–apparel is hard because there are too many brands and they like a vertical with a few dominant brands.

regards,
Bill

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@neverstoplearn,

would love to know more on this:

If anyone is interested in how these software companies make money through integrated payments or how these software vendors really only have a few options for backend processing - let me know.

I would love if you shared your knowledge with the board.