There’s an accepted sentiment in e-commerce now that success can only be found by either being the empire or the rebels. The empire consists of Amazon, Walmart, Target, et al where you can buy anything you want. The rebels are powered by Shopify, an association that may be second best only to Apple’s “Think Different” ad driven association with the greatest leaders of our generation.
But there is a growing resistance from the middle. Companies that are neither the empire nor the rebels. Companies that are big enough to do without bending their knees for the empire but don’t want to hang out with the tiny rebels.
Put another way, there are long tails and fat head. But there’s also a big belly of brands to be powered.
This belly might ignored by analysts, but it is not ignored by industry operators. One such operator is Amit Sharma, the CEO of Narvar.
First, #beardgoals. Second, Amit founded Narvar in 2012. It is an enterprise SaaS platform that aims to increase long-term brand loyalty at every step of the post-purchase experience for the customer.
What does that mean?
Let’s say you lost your favorite Patagonia jacket last year at a party and now that the temperatures in the Northeast are dropping, you want to be blanketed in the cozy-but-not-too-warm goodness of an ethical brand. So, you order a new jacket from patagonia.com. You get an email like this:
That email is powered by Narvar.
Once you receive your order, you get an email like this:
That email is powered by Narvar.
You want to return the product? That process is managed through Narvar. Visiting an in-store location and want to earn points for your purchase that accumulates on the points you earned on the purchase you just made on the website? Narvar again.
Narvar manages all that post-purchase complexity for the company. It’s a company that you have probably interacted with but don’t think about. In this essay, we’ll think about it – including the broader trends that it seeks to leverage, its business model, its risks, and the opportunities it should grab.
Let’s get into it.
Narvar could not have existed outside of the last ten years. Timing is important for every company, but Narvar seeks to ride the wave of a number of enormous trends:
- E-commerce: Bezos, Amazon, and the advent of the “divinely discontent customer” with their one day delivery expectations opened the floodgates of online shopping for millions of consumers. Every year, that floodgate widens. And as if that widening wasn’t fast enough, COVID-19 brought down the gates entirely. Narvar enables this transition for the largest legacy brands in the world.
- Unified experience: As retail has gone omnichannel, it becomes important to have a unified online and in-store digital experience. That includes branding but also things like uniformity of loyalty programs, returns processes, and feedback mechanisms. By outsourcing these, companies can ensure that they don’t have competing teams within themselves that advocate for different solutions for different channels. It also ensures that they keep up with industry baseline in terms of best practices.
- Managing Complexity: As the number of nodes of touch points for the customer increases (from just a store and a receipt to website -> order email -> shipping email -> delivery -> return -> in-store experience), com- plexity increases and the greater the value for managing that complexity. Narvar is an excellent example of this. They string together physical and digital parts of the experience – most apparent in their returns offering. This complexity ensures stickiness.
There’s perhaps another broader trend that Narvar is a part of. The trend of infrastructure companies – or as I like to call them, bullets and bandages companies. Think Stripe, warehouse conglomerates, Shopify, etc. This is a pretty good spot to be in. Insulated from the vulnerability of a single company, you can build amazing products that scale across an industry.
As mentioned above, Narvar is a B2B (Business-to-Business) enterprise SaaS offering.
The contacts they sign are long term contracts in the 6 to 8 figure range. Since they are focused on the big belly, the number of clients they have are limited – likely around or just under 1000. They can offer some add-on experiences like their Simple Returns program (currently free due to COVID-19) which enables extremely easy returns for the customer and Narvar’s client. I’m guessing that they can usually charge some upfront price plus per return cost with a small premium on what it costs them to their client.
Their key costs are upfront development costs for the platforms and some ongoing costs for maintenance. They probably also offer competitive packages for the first year or two for clients which might mean that they don’t make money on those clients for those years in exchange for their long-term business.
Put this pretty standard but highly competent SaaS command module on top of an engine powered by e-commerce fuel, and you get a rocket ship that would make Elon Musk proud.
In the ever-changing world of technology and retail, there are no sacred cows and no one is immune to disruption. Here are the risks that I think Narvar faces:
- Dependent on sector performance: While Narvar is immune to the success or failure of a particular client, most of its customers are in the legacy retail space. This means that anything that affects these customers will affect Narvar. At best, these effects with come with a time lag (remember: long term contracts) across different clients with a warning. At worst, they will come all at once.
- Limited and decreasing TAM: The widening of the gap between the empire and the rebels means that legacy brands are decreasing in numbers. See the downfall of Brook Brothers recently. The total addressable market for the company is pretty limited if we think about the scale of its existing clients. Going down the market would make it too expensive for younger companies and going up the market would bring it into collision with the 800 pounds gorillas like Amazon. They are being squeezed from both ends.
- Developing new clients: One way to counteract this limited TAM problem is to either attract clients who are graduating from the long tail to the big belly or clients who want more independence from the empires that comprise the fat heads. Those are two fundamentally different target customers with differing needs. Which one does Narvar aim to focus on? These risks mean that even with all the tailwinds between them, the company has to execute well and constantly innovate to always be best in class.
So how can Narvar move past these risks and become the one stop shop for any retailer within a certain scale threshold? Here are a couple of ideas and frameworks that come to mind:
- Introduce assets from the world of atoms to increase stickiness: Looking at different vertical points in the post-purchase customer journey, can Narvar introduce assets from the world of atoms to increase stickiness? An example of this might be investing in its own micro-warehouses in high demand areas. This would allow Narvar to offer some arbitraged pricing to its clients for a better end customer experience for delivery and returns. Win, win, win.
- Partnerships across clients: Building off the previous point, how can it leverage its existing clients to help other clients. For example, what if Lululemon offered every Walgreens store as a pick-up or drop-off point? Can a unified experience be created with Narvar as the linchpin holding it all together? Can it build bridge the gap between the empires and the rebels? For me, that would be the most fascinating version of the company.
Narvar is a really interesting company that has succeeded in silence for the past half a decade. They have some incredible tailwinds behind them and have executed on their strategy very well. Most importantly, the vision of them becoming a bridge between the empires and the rebels is fascinating. I’m really excited to see where they go next.
Note that I didn’t talk to any Narvar employee or expert in the space about this article, so all mistakes are my own. On the same note, if you or your friends work there, feel free to share this article with them or share more broadly on Twitter, LinkedIn, etc. Also feel free to reach out to me with any comments or feedback at sidhartha dot jha7 at gmail dot com.