Andreessen Horowitz, Lightbank, 7-Ventures – with these big-name VC firms associated with its digital loyalty platform, it’s no surprise Belly made a splash when it announced its $12 million Series B round of fundraising on August 28.
Founded in 2011, Belly has experienced rapid growth, launching in 15 new markets in the past 12 months, and it only plans to build on this progress. Belly says it will use the funding to focus on its product and invest in saturating the markets in which it’s already gained traction.
Still, while Belly’s success is obvious, what’s less clear is why the digital connection specialist decided to attack the loyalty space the way it did. For example, many have speculated as to why Belly chose to forego payments when creating its platform.
“The question was why not start with payments, I would take a slightly different angle to this question,” founder and CEO Logan LaHive said in an interview. “When you’re talking about loyalty or problems in retail businesses in mainstream merchants, you’re talking about what are the core drivers of a small businesses’ revenue.”
With this response, LaHive set the tone for a rapid-fire conversation with Market Platform Dynamics (MPD) CEO Karen Webster.
Webster pressed LaHive on the burning questions those in the payments industry have for the loyalty provider, and the result was a candid conversation that covered a wealth of topics, from Belly’s internal structure and strategy to its expectations for the next six to 12 months.
Why Did Belly Launch Without A Payment Option?
LaHive responded by putting his own spin on this question from Webster, one that did not address the issue of Belly’s payment strategy directly. Rather, LaHive chose to focus on what he called “the three aspects of profitability for retail businesses: “how many new customers can they acquire, average basket size and spend and how often customers come back.”
“The problem we wanted to solve was helping mainstream merchants take the traditional offline experience in store and bring that more online,” LaHive said. “We looked for the best scalable execution of how to solve it.”
How Do Merchants Evaluate Belly?
One disadvantage to the SMB loyalty space, according to LaHive, is the difficulty of creating and executing on deliverables to clients who have little prior knowledge of their performance. LaHive talked about how most SMB POS, inventory management and analytics systems are outdated, which further makes demonstrating ROI difficult.
In response, the company has had to adapt its approach to better measure its own results.
“For a lot of merchants, we’re creating this data set,” LaHive explained. “We look at the first 60-90 days of customer behavior and then measure increases after that. In larger merchants, where we can do back-end matching of transaction, we look at average basket size increases, customer behavior and customer spend.”
Who Does Belly View Its Position In The Market Space?
When framing this question, Webster characterized the loyalty space as one with low barriers to entry. Because of this, she asked how LaHive plans to defend his company against the kind of next-best solution that might be around the corner.
However, LaHive suggested that Belly is already the market leader in the space, and further, that with its level of scale, it has achieved a defensible position.
“The challenge of local is not launching, it’s scale,” LaHive told Webster. “It takes sophisticated sales models, it takes capital to expand, it takes account management, personal relationships, churm management, inventory management, a lot of sophisticated operations.
Still, Belly does believe it faces threats from outside the market. Who does LaHive believe are his biggest competitors in the space and how is Belly guarding against their entrance?
For more insights and analysis, listen to our full podcast with LaHive here.
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