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When it come to ecommerce efficiency, for more than a decade now it’s been Amazon, and everybody else. Sure the sheer scale of Jeff Bezos’ operation gives it major advantages in terms of operating logistics, but it’s just as far ahead of its rivals in terms of analytical horsepower as well. But that brain-trust is starting to splinter, if ever so slightly, with former Amazon engineers leaving the mothership and taking with them years of experience and hard fought wisdom,

“When I stepped out of Amazon and looked around at the rest of the market, it wasn’t hard to realize there was a big analytical divide,” says Guru Hariharan, a former Amazon manager and engineering lead. “There are multiple orders of magnitude between their capabilities and those that other retailers have.”

Hariharan, who also spent several years as a director and GM at eBay, left the world of ecommerce behemoths with the goal of democratizing Amazon-style analytics across the entire industry. He founded Boomerang Commerce in 2012 to do just that, and today announced $8.5 million in Series A funding – the first outside capital into the previously bootstrapped company. The round was co-led by Trinity Ventures and Madrona Venture Group, who collectively have backed Amazon, BlueNile, Zulilly, Care.com, and Julep, among other ecommerce successes.

Boomerang’s first product, its Dynamic Price Optimizer, allows online merchants to collect and analyze real-time price competitive data and 100 other discrete data points from across the Web and use that information to set the optimal price at an individual SKU level.

“Amazon has the ability to change prices every 15 minutes. Most other online retailers change their prices ever one to three months, if at all,” he says. “The entire brick and mortar marketplace wasn’t susceptible to 15 minute price changes, so the entire system – things like ERPs – weren’t designed to accommodate this. Most of that has translated online.”

Hariharan calls this era the biggest shift retail has seen since the transition from a barter-based economy to one powered by currency. “Retail is one of the largest markets in the world – it’s worth $2 to 3 trillion in the US alone,” Hariharan says. “How often do you see such a large change in format within such a massive market?” And like this earlier shift, online commerce has made many of the tools and best practices of yesterday’s marketplace obsolete.

Price optimization means more than simply matching or even beating Amazon or another single competitor’s prices, according to Boomerang. The company’s debut application allows the user to set targets for gross and contribution margin, lead conversion rates, and other parameters to arrive at a pricing recommendation based on their business objectives.

The company also uses game theory – specifically the Nash Equilibrium model for non-cooperative game play made famous within “A Beautiful Mind” – to predict the likely reaction among competitors to each other’s pricing changes. For example, by observing how competitors react to small changes in pricing over time, the system can make intelligent recommendations about how to make future changes to drive a desired result.

After roughly than six months in private beta, Boomerang’s Dynamic Price Optimizer is now in general availability. The company’s early customers include Staples, Sears, DHGate, Groupon Goods and RadioShack. Hariharan reports helping these clients, many of which already operate multi-billion dollar businesses, increase their online revenue by an average of 5 percent.

Given the value of such growth, it’s not surprising that Boomerang’s clients are willing to pay, on average seven figures in annual SaaS licensing fees. According to Trinity partner Karan Mehandru, the company is already generating multiple millions in revenue.

Boomerang is targeting clients with a minimum of $40 million in annual revenue, most of which have tried (typically with limited success), to solve this problem themselves. For the first time, there is now a democratized solution offering Amazon-caliber pricing intelligence in an easy to deploy SaaS solution.

“It’s not every day that you see a bootstrapped company generating this caliber of revenue,” Mehandru says. “But it’s not surprising, because competitive pricing has become an increasingly key factor in consumer purchasing decisions in the mobile era. With a smartphone in every pocket, the cost of price-comparison has dropped to effectively zero. In this environment, retailers can no longer afford to make manual decisions or move at an offline pace.”

“Our relationship with Amazon is surprisingly good,” Hariharan says. “They actually promote us as a vendor of choice for their Amazon Web Store customers. I actually never worked with the pricing team at Amazon. I would have had more domain knowledge, experience had I launched a supply-chain platform. But that’s besides the point. Amazon didn’t invent price elasticity. That’s microeconomics 101 from business school. They’ve just applied it to their business better than anyone and gotten an advantage. We’re looking to democratize that across all of retail.”

Boomerang describes Dynamic Price Optimization as a single app and has plans to launch many others on top of the same underlying analytics platform. The product roadmap calls for an inventory optimization app to follow shortly and then a marketing-oriented solution about which Hariharan was hesitant to reveal more details.

“We’ve built is a powerful analytics platform with two core components: competitive intelligence, and profitability optimization,” he says. “If you have a good stranglehold on these two things, you can really do magic with this data.”

Longer term, the company has a lengthy roadmap of solutions it thinks it can deliver on top of this platform. It’s a classic “land and expand” strategy. Eventually, Boomerang may also open up its platform to third-party developers, a la Salesforce.com’s Force.com, according to Hariharan. But first it needs to earn credibility and trust among the retailer community, then it can think about courting developers. Hariharan does tease of a potential (and very hypothetical) Google Glass app built on top of a future Boomerang API that would allow consumers to view pricing comparison data while viewing products on a store shelf. Now that’s super-showrooming.

With the sensitive data of large, often directly competitive retailers flowing through it’s platform, security and privacy are of the utmost importance, Hariharan says. The company silo’s all client data and maintains strict Chinese firewalls between each of its customers. All market intelligence, therefore, is derived from publicly available data scraped from the Web. It’s a position that somewhat limits the intelligence that Boomerang can deliver, but does so for an important reason.

“If anything’s surprised me, I’d say it’s how much we still have to educate these large retailers on best practices. Our adoption is still coming from what I would describe as forward thinkers,” Hariharan says. “We still need to convince them of the importance of price and the importance of having your own pricing goals and strategies. It’s not about the loyalty points or rewards or these other basic data points that many execs like to talk about. Ecommerce comes down to three things: price, selection, and experience. We’re helping with the first two.”

Boomerang is officially headquartered in Santa Clara, where the company has its sales and operations team. But the company’s R&D operations are entirely based in Bangalore, India. Furthermore, the company’s customer success team is forward-deployed into its clients’ facilities, working closely with these user to optimize each implementation and develop early case studies on the product’s effectiveness. With the new round, the plan is to grow the company equally across all three groups, Hariharan says.

Growing a SaaS business is a notoriously labor and capital intensive task. As such, it’s likely that Boomerang will need to raise several more rounds of additional capital if it wants to deliver on its market democratization mission. That said, the fact that its target customers are a relatively small and well-defined group of sizeable online merchants means that its cost of customer acquisition is likely to be lower than a more general-purpose SaaS solution, according to Trinity’s Mehandru. But still, the company needs to prove that it can build an efficient sales and customer success machine to deliver this solution at scale. It’s a challenge that’s entirely different than building a scalable technology platform.

“We’ve realized for some time now that ecommerce analytics was be a big opportunity and haven’t seen anyone really come in and own it,” Mehandru says. “We wanted to find a team that had some unfair advantages to tackle the problem. This problem is an eight or a nine on the difficulty scale, while most problems we look at are more like a three. Guru’s background could not be more perfect. He’s going to democratize ecommerce for everyone that’s not named Amazon.”

  1. Boomerang Commerce
    Dynamic Price Optimization for Online Retail.
    Follow on AngelList

    Boomerang Commerce powers competitive pricing and assortment decisions for next-generation retailers. Through dynamic pricing, we have driven millions in revenues and margins

    We were one of the 6 finalists @ TechCrunch Disrupt 2014

    Customers: Staples, Groupon, Radioshack Ongoing Paid Pilots: Sears, DHGate Pipeline is very strong - 4 customers in IR50 close to signing pilots "Boomerang's real-time price optimization tools have allowed us to drive a 20-30% improvement in online conversion", VP Omnichannel, major US electronics retailer

    Boomerang Price Optimizer enables Category Managers, Pricing Analysts to 1. Balance competitiveness and profitability while optimizing revenue and profit goals 2. Test, measure and implement competitive pricing strategies System leverages advanced Data Science to make pricing decisions for each SKU on an hourly basis, by modelling over 100 variables.

    1. Scott Jacobson
      Board Member
    2. Groupon
      Customer