OpenStore Ventures into Software with OpenDesk: An AI Tool for Shopify Brands
OpenStore, a company known for acquiring Shopify brands over the last four years, has announced a new direction in its business model with the introduction of OpenDesk, an AI-driven customer support tool. The announcement was made on Tuesday, with OpenStore indicating its intention to market this new tool to other Shopify brands.
OpenDesk is a product of necessity, designed to handle the customer service demands across the 51 brands currently operated by OpenStore. The AI tool, built using customer support catalogues from a diverse range of verticals, aims to fill a gap in the market by catering specifically to the needs of Shopify brands. The company touts its ability to efficiently process approximately 71% of customer service inquiries through automation, a figure shared by OpenStore's CEO, Keith Rabois.
OpenStore, which launched in 2021, had rapidly scaled its operations by employing sophisticated pricing algorithms to swiftly evaluate potential acquisitions. This allowed them to secure brands with annual revenues ranging from $500,000 to $10 million. Initially focused on amassing a large portfolio, the company has now shifted towards seeking brands with substantial growth potential, evident in the success of Jack Archer, a men's athleisure brand projected to surpass $20 million in revenue this year.
Despite the impressive growth, OpenStore hasn't been immune to industry-wide challenges. In August, the company discreetly laid off about 20% of its staff. The layoffs are not directly linked to OpenDesk, but rather a response to broader strategic shifts towards identifying and acquiring only those brands with the potential for significant growth. OpenStore's team has been streamlined, with about 20% dedicated to the development and deployment of OpenDesk.
The decision to develop OpenDesk was partly driven by the increasing costs of hiring customer support staff. By targeting small brands that may find established services like Gorgias or ZenDesk costly, OpenDesk operates on a pay-as-you-go model. "We had this epiphany. While we're solving this problem for ourselves, it's the same challenge for the other five and a half million Shopify stores," explained Rabois.
Jack Abraham, another co-founder of OpenStore, brings his expertise from Atomic, a startup studio, to the venture. OpenStore has successfully raised approximately $150 million in funding, navigating a changing e-commerce landscape where brands are increasingly squeezed by inflation and high interest rates. Notably, OpenStore appears to remain resilient despite the pressure that saw other aggregators file for bankruptcy or merge, with Thrasio being a prominent example.
Industry expert Rick Watson acknowledges the crowded nature of the Shopify app market but highlights the potential in addressing small, fragmented stores through affordable solutions like OpenDesk. Small brands, which make up a substantial portion of Shopify clients, now require more cost-effective tools to sustain operations amidst slower e-commerce growth and tighter funding avenues.
OpenDesk's trajectory will depend heavily on its acceptance in the marketplace. Rabois is optimistic about its potential, expressing hopes for its popularity and revenue-generating capabilities, although he remains cautiously non-committal regarding the long-term investment in this particular aspect of OpenStore's operations.
In the interim, OpenStore's strategy reflects a reshaped approach in a rapidly evolving market. With OpenDesk, they aim to not only bolster their own operational capabilities but also provide a pivotal resource to the wider Shopify brand community amidst financial and operational adjustments. As they strategise for future growth and sustainability, OpenStore remains focused on limiting brand acquisitions to those with significant potential while leveraging their resources to maximise the success of OpenDesk.
Source: Noah Wire Services