Large retailers and brands are all investing heavily in technology (apps, beacons, analytics, etc) to engage and retain customers. Independent SME retailers and restaurants (two-thirds of retail outlets) need the same access to technology, but do not obviously have the resources to keep pace.
With hundreds of merchants across the UK and USA, over 280,000 loyalty transactions processed to date and recurring revenues having grown an average of 11% month on month over the last 8 months, Loyalzoo is an established loyalty service for small/medium sized retailers and restaurants. With Loyalzoo, retailers of any size can run their own in-store loyalty card programme, based on points or stamps. All digital and mobile/cloud enabled, no paper/plastic cards necessary.
In 2014 and 2015 we have raised seed investment on Seedrs and angel networks to prove the concept and the growth model, and now we are raising growth capital, with the objective to expand our team to the USA and reach 500 paying customers.
This is a match funding campaign aimed at raising £500k of capital for the company. An existing investor has already committed £260k as debt capital, on the condition that the Company raises an additional £240k in equity capital. Here we are raising additional £240k to reach our £500k target and to draw down on the loan.
Almost every large retail chain has moved their loyalty card to a digital medium (apps, web, etc), either in parallel to traditional loyalty cards (Costa, Nando's, Tesco, The Body Shop), or as their only loyalty system (Starbucks, GBK, Giraffe, Harvey Nichols, etc). They do it because it gives them better information about their customers and it makes them more competitive.
The goal of Loyalzoo is to help small/medium sized independent merchants and smaller groups achieve the same results, offering them a technology service that’s affordable and designed for them.
Our case studies suggest that, on average, SME merchants running in-store loyalty programs using Loyalzoo can see a revenue increase of 11%, from customers they already have, and without reducing margins.
Substantial accomplishments to date
- Over 300 shops/eateries using Loyalzoo to run their loyalty card programme across the UK and USA (170+ are on recurring billing);
- Over 60,000 consumers collect loyalty points/stamps from Loyalzoo merchants.
- Over 280,000 loyalty transactions (purchases) processed to-date - currently processing an average of over 1,000 transactions daily;
- Recurring revenues have grown an average of 11% month on month over the last 8 months.
Most of the growth over the last 12 months has been fuelled by partnerships with EPOS (Electronic Point-of-Sale) terminals, such as Clover and Epos Now. These new generation cash registers allow merchants to install 3rd-party add-ons to expand the functionality of their tills, and Loyalzoo's presence in their marketplaces is proving very successful.
After a couple of years running as a beta service, since 2015 we have established our pricing model as a subscription based service (SaaS).
We charge £37/month per store ($57 in the USA), with a growing number of paid extras, such as branding and extra marketing messages.
In terms of exit opportunities, we believe that Loyalzoo would be an attractive acquisition target for large loyalty marketing companies that traditionally only service large retailers and brands, or for payment companies and similar.
Use of proceeds
Besides continuing to expand our core service, with this new investment we will:
- recruit a sales/partnership manager in the USA, which will be supported by a member of the London team moving to work with him/her;
- hire an additional software developer (up from the current 3) to accelerate our deployment across popular POS platforms;
- consolidate the London team with an additional marketing person.
The company has £60,000 outstanding loans and will draw down a further £200,000 in debt on closing of this funding round (making up the £260k mentioned in the introduction), however none of the proceeds of investment are intended to be used to repay this.
The Loyalzoo service is targeted at small and mid-size retailers, including small chains. The largest demand for loyalty card programmes comes from: quick-service-restaurants, bars, cafes, hair/beauty salons, vaping stores and boutiques. But we have success stories in most retail sectors.
Characteristics of target market
With over 250,000 independent retailers in the UK, and over 3 million in the USA, and over half of them running loyalty programs using paper stamp cards, there is a significant opportunity, in a market that's still quite unserved.
Demand is particularly sparkling in the USA. Despite being a much more competitive market compared to the UK, many US merchants want to operate their own loyalty scheme, and going digital is becoming mainstream.
The UK market is still in its infancy, with many retail/hospitality operators still working with traditional paper loyalty cards (stamps based).
Our sales and marketing strategy is based on the combination of a strong online presence and key partnerships, which means our growth is entirely organic, and geographically spread.
Online channels such as organic search, referrals, and PPC still account for a good proportion of our merchant signups.
More recently, however, our growth strategy has focused a lot more on key partnerships with EPOS vendors and their resellers. This gives us easier access to a large number of SME retailers, without the costs associated to operating a traditional direct sales force.
In particular, our listing as a 3rd-party add-on service in the Clover App Market is responsible for most of our growth over the last 12 months (Clover is a very popular point-of-sale system within the SME retail space in the USA). In June we have done a soft launch on the App Store of Epos Now (a British EPOS provider), and we are about to launch in the partnerships page of Lightspeed POS.
In the coming months, we expect to integrate (and get listed on) Shopify POS, and some payment terminals from companies such as Ingenico.
We consider that competition is still limited in the UK. This market is still in its infancy, and although there is a substantial market already in mobile loyalty for big brands/retail chains etc, there is very little on offer to independents/SMEs. We believe there is a good reason for this: yes, the independent sector is a huge market, but it is also a tough market to sell into, and the requirements are different compared to retail chains.
On the other hand, the market in the USA is a lot more competitive. Notable competitors in North America are fivestars.com, bellycard and appcard. Loyalzoo's main selling point against many of them is the integration into point-of-sale terminals, and the ease of use.
A number of USA based retailers have switched from Fivestars to Loyalzoo, migrating all their loyalty card users (with their points balances) to our service (the other way around has not happened!). This has proven to us that we have a very strong proposition and product, and that our growth strategy based on incoming leads and partnerships works.
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