Gus: Welcome to the Inside Lightspeed Podcast. Powering the world's best businesses, Lightspeed is the Unified POS and Payments platform for ambitious entrepreneurs to accelerate growth, provide the best customer experiences, and become a go-to destination in their space. This podcast may include forward looking statements that are based on assumptions and therefore subject to risks and uncertainties that could cause actual results to differ materially from those projected. We undertake no obligation to update these statements except as required by law. You can read about these risks and uncertainties in our filings with U.S. and Canadian securities regulators. I'm Gus Papageorgiou, Lightspeeds Head of Investor Relations. 


Okay, welcome, everybody, to the Inside Lightspeed podcast, today, I'd like to introduce my latest guest, John Shapiro, who has recently been appointed our Chief Product and Technology Officer — John welcome to the Inside Lightspeed Podcast.
 
John: Thanks so much. Really excited to be here.


Gus: We're happy to have you here. So, John, I don't think a lot of investors have had the chance to meet with you yet. So maybe just give us a little bit of background on your work experience and your new role here at Lightspeed.


John: Absolutely. Yeah. I mean, it's been about six months here. So quite the whirlwind in a very fun and exciting way and I'm also very eager and happy to connect with folks both today and over time. So as I look across my background a little bit, the best way to describe it is that what I found really energizes me most is deploying technology to solve customer problems. So if you kind of go all the way back (more years than I care to admit at this point, my life and career). I started on the software engineering side. I started computer science. I was in kind of building those solutions and that realization I just described earlier was really about understanding, diagnosing and solving customer problems really energized me. 


So after my CS degree, I got an MBA. I spent, you know, kind of a number of courses and took a lot of classes on the psychology side to really help me understand what motivates customers and what makes great products. I got the chance to work for IBM and Google on the engineering side post-MBA. I have spent time at Adobe, Intuit, Wayfair prior to coming over to Lightspeed, as I mentioned, about six months ago.
And as I look across those different parts of my career, Adobe was a great learning experience on how to build products, how to inject customers in that development process. At Intuit, I was on the small business side, kind of really kindled my passion for helping small businesses succeed there and help them thrive and really help them address the unfair advantage that lots of big box retailers and big box restaurants have.


So how do we give small businesses a fighting chance to win and compete? That was very much the mindset at Intuit. At Intuit I worked on QuickBooks, I for a while kind of came over and led the QuickBooks Payments and point of sale businesses; around invoices, invoice payments, point of sale, and then eventually was leading the overall QuickBooks platform prior to making a stint out to the East Coast.


I live outside of Boston now, and that's kind of the move that took me to Wayfair. At Wayfair, I spent time on both sides of the platform. Wayfair is a two-sided platform where on the one side it is about consumers and helping those consumers shop for their homes and create homes and spaces that they want to spend time in, spend time in with their families.


And then on the other side, it's about suppliers, because Wayfair does not take ownership of inventory, it really is a platform where it's connecting the suppliers to the buyers. So for about two and a half years, I spent time on the consumer side. For about two and a half years. I spent time on the supplier side helping them manage, grow, and run their business on Wayfair.


So when this opportunity came up at Lightspeed, it really hits across a lot of those kind of points, that I had a chance and the opportunity to work through across my career where as we think about within retail, they're kind of really three pieces to retail. There's a point of sale in-store experience that we enable merchants and retailers to have and offer to their consumers.


There's the e-commerce experience, which is how do we help those same merchants engage with their consumers when those consumers are online? And then finally, there is B2B, and that is, how do we help brands, medium size brands and nationwide national brands to manage their wholesale channels because they are in many ways selling to the very same prototypical merchants who we're serving on the point of sale side.


So those being three pieces, as you know, hopefully my intro helped convey that between Wayfair on the e-commerce side, Wayfair on the supplier side, Intuit on the small business side, it really hits across a lot of these. So when I was having some early conversations about the opportunity. It just seemed like a really, really strong and solid match to take those kinds of experiences and bring them together in a network.


And so far I've been describing it as three different components in three different pieces and multiple different personas. You have brands, you have merchants, you have consumers. And the reality is they're not separate. The reality is, it's a very interconnected ecosystem. And Lightspeed is uniquely positioned to bring the different assets that we've built out over time together into a Supplier Network where we're going to, have been working to, and will continue to work to, enable merchants to deliver the best, most amazing experiences to consumers as possible by tapping into the brands and the brand relationships that we can help them manage, grow, and deepen over time.


Gus: I think the reality is, though, those three pieces that you mentioned, I mean, they should be combined, but practically today they're not, right? They operate very much as silos and the connection between them is, well, it's pretty broken currently.


John: Oh, I would absolutely agree. I mean, I think if if you think over the last handful of years, the progress that's been made is taking wholesale commerce kind of maybe out of the dark ages is probably the best example where it would literally be people writing down on notepads or, you know, at best filling out an Excel spreadsheet that then gets emailed in or faxed in between a buyer and a sales rep.


Gus: Do people still use fax, really?


John: They surprisingly do. Not so much and probably unlikely these days, but you know, funny enough, in the home goods space where I came from at a Wayfair, there was actually fax still part of the process. Not everyone is up and running on email.


Gus: But that just I mean, that just demonstrates how archaic the current system is and how it is just ripe to be revolutionized by ourselves.


John: Absolutely. And, you know, we've made quite a bit of progress today where we've brought those experiences and those interactions online. But there are still so much to go. And so far we can and have the opportunity to start chipping away at those silos that you described because it is still very much separate experiences.


Gus: I mean, I think what we're trying to do with Supplier Network really is, you know, give brands better visibility as to what's going on with the end consumer, what's selling through in real time, give the retailers better access to a greater variety of suppliers, and then hopefully that improves things for the consumers because, you know, the suppliers and the retailers can source what consumers want and the suppliers can sell more of things that are selling and less of things that are not. It improves their margin, improves the consumer experience, improves the retail experience.


John: Absolutely. All of those angles are how we're looking at it of, how do we approach the problem to really link together the data that we have, the experiences that we're uniquely positioned to offer, to really enable merchants, consumers and brands to all interact and transact? We are in a lot of ways bringing and creating that place where commerce happens and Lightspeed is positioned to power and drive that.




MUSIC INTERLUDE 


Gus: So for the merchant, once Supplier Network is up and running, how do you envision the merchant's life becoming better through Supplier Network?


John: So if we think about the Supplier Network as where commerce happens in the verticals and the geographies that we operate in, then from a merchant perspective, for them, it's really about buying, managing and stocking inventory.


Gus: Which is their biggest use of cash.


John: Exactly, exactly. And often the, it's one of the biggest kind of highest anxiety introducing moments because you don't want to have too low inventory because that means you're going to miss out on sales. And you also don't want to have too much inventory because beyond just tying up that cash, you're also going to likely have to mark it down, especially if it's something that's seasonal, let's say you are working and operating in an outdoor category and you have summer gear and it’s fall you're going to have to markdown and take a loss on those. So the idea of how do you have the exact right amount of inventory is really critical and usually not something that our SMB merchants have a ton of experience in or tons of tools to help them make the right decision.


So it's largely around that. Our vision is to kind of alleviate merchants from having to worry about their inventory purchasing, meaning they'll always have the exact right amount of inventory. Never miss a sale due to lack of inventory because you can always, drop ship directly from a brand. You can tap into maybe other retailers in your area or others who might be able to fulfill a product for you and kind of like tap into the network from that perspective.


And then on the flip side, you're never going to be sitting on excess inventory either because others are going to be able to pull from your inventory and help you make those sales. But also because the data that we've been able to give you access to and the recommendations that are powered from that data, just minimizes the chances that you're ever going to have to take a markdown because you're just making much better and much more informed inventory pricing decisions. So it's really about kind of like maximizing the volume of sales and maximizing the profitability that you're able to drive from the sale.


Gus: But it's also reducing the time and effort required to get this inventory in store, as you were mentioning previously. Right now, it's a question of, you know, you're filling out forms, maybe faxing it. Whereas with the Supplier Network, the vision is that these retailers will have direct visibility to their suppliers. They'll see the inventory that they have. They can order directly through them. So the whole process of ordering inventory, getting it in-store is really kind of improved drastically.


John: It certainly is. And, if you kind of play it out to the end state in the kind of ideal state of the vision that we're all working towards, it basically goes to zero effort. Something that might take you hours and hours and hours a week should be seconds at best where you review a recommendation, it's credible and you've learned to trust it because it's been right over and over and over and you just press a button or even at some point might put on autopilot and say, “Lightspeed, you take care of inventory ordering for me, I don't have to worry about this. This is a big chunk of time that I'm spending on my business right now that I no longer have to.” So that's an absolutely substantial value that we believe we can deliver to merchants over time.




Gus: And I think the other point I just want to hit on, too, is so there are, at the beginning of season, you make some decisions. There are products that sell, there are products that don't sell. You know, currently, I think most retailers for products that don't sell, they can kind of get rid of them at huge discounts.
But if what's not selling in Boston might be selling in Vancouver. So by tapping into the network, you can actually probably get rid of that inventory at much better prices rather than just slashing the price to get it off your shelves.


John: You certainly can. You know, you picked Boston and Vancouver. Another one is, you know, Florida. So I'd say let's say it's that summer example. It's getting to be winter in Florida. Sorry. Well, I guess it's getting to be winter in Boston and Florida. But, the weather's turning much more in Boston than it is in Florida.
So outdoor activities that you might not be doing, folks in Florida are! So being able to sell the kayak you have in stock or the shorts that maybe haven't sold in Boston; being able to sell those in other parts of the country and other parts of the world are a huge part of that value proposition.


Gus: And I think we've made some great progress there. And allowing merchants to order directly through the NuORDER platform.


John: We have. So one example is if you're a merchant, you need to enter a purchase order. That's how you communicate with the brand or the supplier that you want to buy from. And what we've done is we have linked together NuORDER and the Lightspeed point of sale. So if you are making a purchase from a NuORDER brand and you're making that purchase in NuORDER, now that purchase order, which is a document can flow very quickly and seamlessly directly into your point of sale, inform your inventory positions and your point of sale across your different locations and be available to sell as soon as it comes in physically. So that is something that used to take hours in some cases, you know, 8-10 hours a week, now can take as little as 30 seconds by using the integration, validating the information that comes through and kind of working through your purchase order so much more quickly.


Gus: I mean, that's tremendous progress. And I think the merchants love the features that we released for them.


John: They certainly do. And we kind of talked about from a purchase order and order standpoint, there's also the foundational catalog piece to it too, which is as a as a merchant, one of the biggest activities that takes a lot of time and in fact, a lot of expertise as you think about these descriptions that are in your point of sale as we continue to build out, our omni offering will flow through to your e-commerce experience.
So this means your consumers are actually seeing the descriptions that are in your point of sale, making sure that you have high quality imagery, high quality product descriptions, really important. So either that's something they're going to be entering manually or something that you can pull in from the brands who have invested a lot of energy and effort into creating high quality descriptions, high quality images.
So when we talk about linking data, it's not just about the orders themselves, it's also about the product data, the catalog data that can now flow down into your point of sale as a merchant and then flow out to your consumers through your e-commerce offering that's linked inside of your point of sale.


Gus: I mean, that's very important for local retailers, for product discovery, right? Because I think Google only renders certain images if there's a certain quality. So if you're getting the images directly from the brand and you're putting them on your e-commerce site, the odds of a local consumer discovering it are much better if you have that high resolution, high quality image.


John: That's exactly right. It's critical for small merchants in that way. It's also actually, you know, might be a surprise, but it’s a problem that the biggest retailers in the world face as well. So through the NuORDER acquisition, the NuORDER product, we serve some of the largest fashion apparel and big box retailers in the world with folks like Nordstrom and others as part of our platform.


And that's also something that's challenging and frustrating for them as well. So being able to link and pull down high quality content from brands and serve it to everyone from small all the way up through enterprise scale is a substantial value that we are beginning to deliver against. And it's a huge opportunity.


MUSIC INTERLUDE 


Gus: So let's now switch to the suppliers of the brands, you know, in terms of what the value proposition for them and maybe you can touch on here, the one thing that I think these guys are really going to be excited about is the sell-through data, right? There are a lot of verticals where the bulk of the volume moves through small independent retailers and having visibility as to what is selling in real time, to me is, I mean, if I were a brand, I would definitely want that kind of data.


John: You absolutely would, because the data is critical for them to understand kind of all the way through their manufacturing. As you think about up and down the supply chain. And we've all become more and more aware about supply chain scenarios as COVID has happened and the recovery from COVID and then Suez Canal is a place in the world that many did not realize existed until it makes the news for being the reason that that the supply chain continues to get startled up.


The reality is that for brands, it can often be a multi-month process to have something work its way all the way through, from kind of idea to concept to manufacturing and out to the retailers that they want to sell through. So having data around consumer trends, consumer behavior, and consumer purchase habits is very important to them for them to be able to make smart and intelligent choices and decisions throughout that whole process.


Gus: And especially the key here is it should give them enough data so that depending on how agile they are manufacturing that they can shift production in season, which is a huge benefit for the supplier. Right. If something is selling in this particular season, you want to make as much of it as you can rather than stock out.


John: You absolutely do. One of the big trends in manufacturing and brand wholesaling in general is that much more rapid turnaround where historically you might have had markets that happened 6, 9, 12 months ahead of the particular season. You're now seeing much more of that volume going into, both in shorter pre-season purchases, but especially in-season and in-season replenishment where whether it's because manufacturing can spin up or happen more quickly in season or brands want to get more efficient at allocating their inventory and that piece around sending something to Boston versus Florida versus Vancouver, being able to know where those products should go and be able to cross-sell them in those environments is really important for brands as well.


Gus: And I think the other (and we'll talk more about the data), but I think the other benefit for suppliers is, trying to find the right retailer that can represent your brand and that can sell your product. Right now, and I'm not really sure how it's done, I guess the retailer comes to you, but if you're part of the Supplier Network, we would have that profile. We have data that gives us a profile on the retailer. We have data that gives us a profile on the brand and we can match make, for lack of a better word, we can kind of introduce the brands to more retail outlets.


John: We definitely can. As a brand, picking the right retailer to work with is a very high anxiety moment because you are extending a lot of trust to that retailer. Part of it is the brand trust that you mentioned is that retailer going to represent your brand effectively and efficiently or is it going to be kind of thrown into a corner somewhere and someone's gonna walk along and see your T-shirts or your bike or whatever the product is that you're selling as a brand, not representing the experience that you want.


John: A second piece is financial, because in most cases on the wholesale side, it's the brand extending credit to the retailer. So literally being paid for the goods that went out the door is not guaranteed. So in both of those cases, tapping into the trusted Lightspeed Network gives brands a lot more confidence that the retailers they work with are vetted, in some cases financially underwritten, as we continue to offer payments to more and more of our merchants, then not only do they know it's a credible Lightspeed merchant, but in those cases, Lightspeed has actually gone through the process of financially underwriting those merchants, which is going to make it a lot faster for them to be able to start buying from a new brand. One of the experiences we hear about often is, whether it's at a trade show or in a new experience, a new relationship, a retailer will show up to a brand and say, I've got $5,000 to spend, I want to buy from you. And the brand may then say, "Well, great, fill out our 50 page set of underwriting documents."


If that doesn't turn off the retailer right away, then they may come back a week or two later. And when they're finally underwritten, the brand will go back and say, great, “come spend your $5,000 with me”. And the answer will be, "Well, actually I went to your competitor down the street and I've got maybe $1,000 to spend."


So by exposing that kind of financial verification and underwriting to brands and really kind of both doing the matchmaking and enabling that trusted relationship, then we can really help a brand maximize their sales. 


Gus: Basically, we're pre validating who they're selling to, right? This is a real retailer and we have the data to back it up and it just makes the process of commerce that much smoother.


John: Absolutely. If you think about commerce, it really comes down to friction and trust. And how do you eliminate friction from commerce and amplify and increase trust and Lightspeed by being a part of and knowing both sides of that relationship can really help maximize those two factors.


MUSIC INTERLUDE 


Gus: In the end, really, the Supplier Network is all about data, right? It's about trying to give to brands and retailers a level of data that they've never had before, finding products, seeing the sell through, seeing the trends in real time. We're talking about delivering real time economic data to both retailers and the brands. So if you kind of look at the data potential of a Supplier Network, maybe we can just discuss that for a while because I think this is where the real value of the Supplier Network emerges.


John: I think you're right. So we've talked a lot about the time savings. We've talked a lot about increasing sales. Those are certainly and definitely values of the Supplier Network. The data that flows through it and the data that we can then empower both on the merchant side and on the brand side is quite substantial. If you think about a lot of the economic data that is used by merchants, by brands to make business decisions, it is not real time in any manner.


And it's also not often all that accurate. Usually it can be based on surveys. Consumer sentiment is often based on, you know, asking people how they feel about the economy, asking people what they predict they're going to shop and spend in the holiday season. And I think we all know how unreliable we ourselves are and everyone else is on predicting our own behavior.


That data that a lot of these business decisions are based on is not nearly as accurate or as real time as it can be. Versus if you think about within and across the Supplier Network that we build out, we will have transaction level extremely accurate in real time data and obviously will take the steps that we need to to anonymize it, to protect personal information but being able to convey those trends, whether it's consumer trends, might be retailer trends, might be market trends to all the parties and participants in the network is going to be extremely powerful.


Gus: So, okay, so it's this great vision. And, you know, we have been discussing Supplier Network for a couple of years now. If you look at the assets that we have, what have we accomplished to date and where do you think we stand on completing this vision?


John: I'll say we're barely starting to scratch the surface, partly because that grand vision I described, I mean, we're all going to be working on for the better part of multiple decades because it really is a transformation of how commerce happens, both on the wholesale side between businesses on the B2B perspective and on the consumer side, because we didn't really hit on consumer behavior; and consumer buying can also be, over time, plugged into and influenced by this network. 


So lots of work to do. The good news is there are very substantial assets that we at Lightspeed bring to bear at this. Some have come in through acquisitions. About a little over two years ago, we did an acquisition of a company called NuORDER that brought the brands and the brand wholesaling capabilities and the enterprise retailer side into the picture.


Lightspeed on the point of sale side, on the merchant side has thousands of complex merchants who are already transacting across 12 of the largest industries in retail in North America and around the world. So if you take the 3,000 brands that came in through NuORDER, take the complex merchants and think about starting to connect and bridge those experiences, that very quickly presents a number of very intriguing opportunities.


The catalog piece that I mentioned, that is already connected and up and live across our products within point of sale. So today a merchant could go into the point of sale experience, start typing in the products they want to add and have that pop in with high quality imagery and high quality product content that works across all of the different verticals that we focus on and serve across, we have a set of about 12 that we look across. 


We have also with NuORDER I mentioned the retailers, Saks, Nordstroms, these are the you know, in their industries, they carry, as you can imagine, a lot of clout and they have a lot of ability to encourage or mandate how the suppliers or brands that sell to them need to operate.


And they have chosen to go with NuORDER and have asked very directly that the brands they buy from are using NuORDER as well. So that gives us a real leg up in order to bring these brands more and more over time into the ecosystem and into the network that we're building. The brands that show up in turn, turn around and ask and encourage the independent and smaller merchants that they work with who are prime point of sale targets to come onto Lightspeed because they want and value and over time will value more as more and more data comes and flows through that, pipe, if you will, to them.


So it's really about having the best brands and the best retailers and bringing those together into creating a vibrant, strong and powerful network.


Gus: And I think having the big box retailers is crucial to our flywheel, right? Because basically, you know, they're going to dictate to the brands. Like if you want to sell to us, you have to get onto NuORDER. The brand then goes on to NuORDER and then, you know, if you're on NuORDER, look, we can introduce you to hundreds of thousands of retailers that can also carry your product.


You're going through the effort of going onto the NuORDER platform anyway so this is no incremental cost to you. And then if they start to see success with the independent merchants, they can then turn around and tell other independent merchants, if you want to buy from us, we need you on the Lightspeed POS because we want to see the sell-through.


John: Exactly. I think you covered what I said in a lot more words much more eloquently. But that's exactly right. It powers our flywheel that we're looking to and working to build.


MUSIC INTERLUDE 


Gus: Okay. So we have NuORDER. We have thousands of complex SMB retailers. We've got the catalogs going, we're building the integration into NuORDER through the POS. Obviously, you're a busy guy. I’m sure your to-do list is pretty long. What do we need to complete this vision?


John: I think the way that you described it is probably the best way to look at it. There are a lot of assets that we have, but what we need to do is really interconnect them in ways that drive far more value for all the participants, because today they are much more separated than they need to be and can be to create that future state vision that we talked about.


We started using the words a little bit like there's islands of value, there are islands of value, and kind of some of these linkings that we've created like that purchase order import. That kind of breaks across and it pulls together to islands of value. But it is not yet that vibrant network that we are working to create.


So it really is about continuing to bring all these pieces closer and closer together, moving much more towards real time, live syncing of data between at the far end and eventually upstream to the brand's manufacturing capabilities and bringing that all the way fully downstream to a consumer purchase trigger and having that action and behavior and product and product information flow entirely up and down the chain, whether it's about the catalog information from that product, inventory position, ability to order immediately and directly in the point of sale, having some of those orders happening automatic, auto triggered or at very least recommended and using that data to drive that increased capability and speed. So I think it's really taking all these different pieces and assets and weaving them together into a network as opposed to historically what we have done and made a lot of progress on is starting to connect them.


But to stick with that example, to create that weaving, you know, it's more than a strand. It's not three strands, not ten. It's really creating that very vibrant connection point between the participants, between the product experiences and across all the data on the network.


Gus: I think for us, central to this is building that capability directly into the POS, right? Ordering through NuORDER. I think currently we might have it in some verticals, but what we want to get to is you go into your POS and you do the ordering directly through the POS and it integrates into what is currently the NuORDER network.


John: That's right. The POS is how the merchant and the retailer thinks about running their business. So why ask them to go to a separate place to do a critical business activity, which is procurement, inventory management, inventory ordering. So we are working towards making sure that all of those capabilities over time are enabled directly into that POS by the merchant.


Gus: So a lot of work I mean, we have done a lot so far, but if you look at over the next few years, when do you think we'll be able to deliver something that investors can kind of get their hands around and get excited about?


John: Yes. I think the best way to think about it is that it's really easy to think about network effects at scale. There's something like an Uber or a Facebook and well, that's a network effect. But network effects exist, you know, even very early in a network's life. So if you think about Uber and Uber launches in San Francisco, it doesn't exist anywhere else in the world. So the network is very small and not very powerful. But in San Francisco, it gets that density and you can press a button and a car shows up, you know, in minutes. Revolutionary experience that never before was possible, you know, same thing about Facebook and Facebook started on college campuses. So again, now, not ever out in the world, but very quickly, all the users, seeing as a new user, joins their value because network value is basically that, the value to any participant, the network goes up as more people join.


There's single side and multi-sided. In our case, we're talking about a multi-sided network where you have brands, you have the merchants, and you have the consumers. So basically that's a very long way to say we are delivering network value already. We have, particularly in a few of our key verticals in bikes where we've historically been strong in apparel, where NuORDER was strong.


And as we are bringing together those experiences, we are already seeing density happening, ordering happening between merchants and brands. Catalog information and catalog data flowing in. I would say as we continue to build that up, as we continue to add in additional verticals, as we add in new capabilities and value, I'd probably say kind of over the coming year or two.


Investors will see more and more merchants choosing to use Lightspeed point of sale because of the experiences they offer. And the experiences they're able to get through Lightspeed point of sale, which shows up in lower customer acquisition costs, higher conversion rates, higher retention rates because merchants can't imagine going anywhere else becomes less about the strong feature set that the Lightspeed point of sale offers. It becomes even more about the network and the relationship building and the relationship connections that they're able to get to through the point of sale.


Gus: I think that's crucial, right? I mean, competing on features is great and our features are especially for complex SMBs, are far superior to, I think, any one of our competition. But feature sets, it takes money and time and at some point maybe the gap can be closed. But building a network is a different obstacle altogether.


If I'm a supplier in that Lightspeed Supplier Network, why would I consider a separate network when Lightspeed has hundreds of thousands and the next best network maybe has a couple thousand? If I'm a retailer, why am I going to go to a competing network that maybe offers a handful of brands when I can get access to thousands and thousands of brands, right? So that to me is a key advantage for ourselves because it really shifts the competitive landscape from one of features to network based advantages, which then becomes much more sustainable.


John: That's completely accurate. I mean, if you think about the most valuable companies in the world, they have found, fostered, and grown networks. It's very rare that it's a set of features that make a company successful long term. It is about figuring out what is your durable competitive advantage. And in our case, the Supplier Network gives us a really strong early but strong signal that this is the place that will help Lightspeed become that place that business happens. If you're a supplier, if you're a brand, why would you go anywhere else?


Gus: I mean, so obviously acting as a competitive barrier to entry is fantastic. But I think the beautiful thing about a network is that you can actually monetize it, right? So if we think about monetizing the Supplier Network, obviously there's payments, right? We can actually start to use Lightspeed Payments for the merchants to buy directly from the brands, which I think solves a problem for both of them, because one of the biggest problems that brands have is getting paid by the merchants. And again, if we validated them, if they're on Lightspeed Payments, they just feel so much more comfortable working with someone that we have underwritten.


John: That's right. I think in this case, payments applies on both sides. So we have gone through and underwritten a large percentage of our merchants on payments. We're also enabling and allowing brands now to use Lightspeed Payments directly on their own behalf. So this is working with whatever retailers or merchants they might want to. They're now able to pay them through a trusted mechanism as well.


Gus: And I guess the second one is capital, right? I mean, if we have an understanding of the retailer and we have an understanding of what they're trying to buy and we see the sell through data, you know, providing trade financing for us is, you know, it's not just doing it blindly. I mean, we're using real data. We know that product A is selling. We know that this retailer has shown great success in the past selling these kinds of products so we can significantly mitigate the risk through the data set that we have.


John: We can and not only can we mitigate the risk for both parties, we can also unlock an opportunity for merchants, because oftentimes merchants lack the capital in order to be able to take advantage of promotions that brands might offer them; be able to buy pre-season - very often brands will offer improved and better pricing ahead of the season because that helps them with their own planning.


But if a small merchant doesn't have cash to make that buy, then they'll end up paying more within the season. And that is a perfect use case for us to step in with a capital offer and help that transaction happen. The brand is happier because they have better planning and better orders for their season. The merchant is happy because they got a better price and are going to be more profitable and have a better margin on it. And Lightspeed is happy because we're able to both connect that and capital being an offering that we're able to monetize as well.


Gus: And I think the final one is basically becoming a distributor or matchmaker, for lack of a better term. Again, we have an identity of the brands, we have an identity of the retailer. We can use data to say, okay, you know, “Brand X, here is a thousand retailers that you're not selling to that based on our data would have a high probability of success in selling your products,” and we could kind of match make and I think you know distributors are taking what are they taking 30% of the orders. We could become the distributor, move them aside and take over that role and do it for probably a lot less than 30%.


John: That's right. Now, I mean, distributors have a number of roles that they play kind of in the product parlance, jobs they do. Things that a brand might hire them for to solve for them. And over time Lightspeed is well positioned to step up and do across that. Part of that is efficiency because as a brand, selling to one or a handful of distributors is far more efficient than going and working with maybe a thousand different merchants who might be stocking their products.


But if you think about the kind of automation and the data driven capabilities that the Lightspeed Network and the Supplier Network can provide, it can make selling to a thousand merchants almost as efficient as selling to a handful of distributors. I think the pieces around vetting and validating those merchants, those are all certainly roles that distributors play. On the flip side, and from a merchant perspective, they're able to work with a smaller number of distributors and more efficiently purchase, and a lot of the conversation has been, you know, it's a very two sided experience. So unsurprisingly, on the merchant side, we can also make it a lot more effective and efficient to buy from a larger number of brands and kind of participate in the positive economics that come out of that experience.


Gus: And in the end, I mean, if we're creating a more efficient network, I mean, probably means lower prices for consumers. So consumers actually benefit as well. 


John: That's right. By reducing the effort for brands to sell, for merchants to buy, we make it cheaper and more cost efficient for them to operate. And, you know, many of them will in turn pass that along to consumers. Some will keep some of that for higher profitability, pass along some for consumer savings and they'll all win by eliminating inefficiency in the system. Everyone wins, including that consumer.


MUSIC INTERLUDE 


Gus: Before I let you go, and I think we might be getting a little ahead of ourselves here, but I wouldn't mind your perspective on this. Obviously, Supplier Network is very much focused on retail, but over the long term, do you see it having, can we extend this into hospitality? Can we take the network into our hospitality business and add value there?


John: We can. So, many restaurants have physical products like hats or T-shirts or other kinds of merchandise that they sell. So in that way, there's a very direct and obvious connection to them acting as retailers. Hospitality customers, so in those cases, restaurants and, you know, kind of other folks in that space, they also have items like linens and other products they purchase for themselves and they have all the food that they turn around and serve.


So, you know, it's probably you know, if you think about the experience we talked about as things that we're building out now in the near term, probably a bit farther down the line for hospitality. But there are similar opportunities for us to matchmake restaurants to the suppliers and vendors who get the supplier that they want to work with. Maybe it's sustainable, maybe it's local and maybe there's other elements there.


Gus: But with restaurants it would be much more local, like the network would be much more locally oriented, right?


John: Generally. I mean, obviously you know, food is perishable, but I think in that case, it would be a little bit of a mix. You know, certainly there are restaurants that focus on local. There are some restaurants that might focus on maybe scale or volume or cost. In those cases, they might be using national distributors that either would run over our network. Like you mentioned, an ability to kind of take that role of distributor on the retail side, there is certainly a similar dynamics on the distributor side in hospitality.


Gus: Okay. I think we're going to wrap it up there. We covered a lot here in this discussion today. Obviously, you know, Supplier Network is something that we're all very excited about internally at Lightspeed. We are making progress and John, it's your job to continue to push this initiative forward. So I think our investors will be very excited to kind of see what's coming.


Again, you've only been here for six months, but I think hopefully we'll get you out on the conference trail at some point so people can have discussions with you directly. So I want to thank you for joining us today and thanks everybody for listening today for listening in on our latest Inside Lightspeed podcast. So, John, thanks so much.


John: Thanks so much for having me. I would love to meet folks in person as we get out there.


Gus: Thank you for listening to Inside Lightspeed. If you aren't already, be sure to follow Lightspeed on LinkedIn, Facebook, Twitter and Instagram. Our handle is LightspeedHQ. Original music for the episode was composed by Timothy the Player. The episode was edited by Jonathan Beaton and produced by Lightspeed. See you next time.