Our Journey Continues: Purple Dot – The Pre-Commerce Company

Purple Dot’s mission is to create a world where everything that gets made gets sold through trusted pre-commerce.

We started with a simple premise: unsold inventory sucks. Regardless of what or where you are selling, brands around the world pour their hearts into developing products for their customers.

But somehow, 1 in 4 products produced for eCommerce is never sold. Every year, the retail industry amasses $562 billion in unsold inventory. That’s more than the GDP of 102 countries around the world. That inventory may get sold on deep discount, hurting brands' margins. Or worse, it ends up in a landfill.

TLDR: From business impact on merchants to the environmental impact on our planet, unsold inventory is a serious and urgent problem.

From the outside looking in, many believe this problem exists because merchants simply overproduce products that people don’t want. While that does happen, there’s more to overstock than meets the eye.

Despite merchants using the best and most innovative forecasting tech and strategies to avoid overproduction, the macro-effect of these data-driven approaches have been largely unmeasurable. But why?

‍What we’ve learned

In reality, merchants typically don’t have a massive lack of understanding of what their customers want, not at this scale. The prevalence of the Notify Me is just a tiny demonstration that merchants can be really good at knowing what their customers love.

Instead, it's a massive lack of control of their inventory management — and the timing of when they can sell.

Much of eCommerce has been modeled after brick and mortar. This includes when merchants start to sell. In the physical retail world, it is common practice to wait until stock was on-hand on the shop floor to start selling it. Why? Because shoppers can touch, feel, and experience the product to build trust that it’s the right purchase for them.

eCommerce doesn’t have the same opportunity. As a result, brands don’t need stock to sell it. Still, they wait. Their entire tech stack is built on this logic.

When we first started building the infrastructure layer that could easily give merchants the flexibility to sell earlier before that stock is on-hand – we knew that trust would be key. Afterall, building customer trust is always a core driver of sales and loyalty.

But with pre-orders, this trust takes on a totally new dynamic. New questions emerge for the customer that center around “What happens if it’s delayed?” or “Is my money just going to disappear into a black hole?”

The FTC has weighed in with regulations for pre-orders that answer these questions and more. With those regulations in mind, Purple Dot transacts the order and escrows the consumers’ funds until stock arrives. While these funds are in escrow, we also have visibility into the estimated ship dates change so customers are always informed.

Transparency builds trust. When brands provide that, we found that customers don’t actually mind waiting to receive their orders.

How pre-orders helped one global toymaker launch on time

Let’s take just one example. We worked with a large global toymaker on a new product launch and they marketed this launch date for months to drum up hype. But, they learned a few weeks out from their launch that some products were going to arrive late to the warehouse.

This is a merchandiser's worst nightmare. If products arrive late, they miss their launch date. And if they miss the launch date, they miss that demand. And what happens if they miss that demand? Missed forecasts. Unsold inventory. Dead boxes in warehouses that will never be sold.

And these stories happen thousands of times a day, for dozens of reasons, all across the world. It reminds me of “missed connections” on Craigslist. The timing just doesn’t line up like they planned.

That toymaker was so close to losing control of a successful launch. But instead, they decided to take back control and sell the delayed stock anyway and on time. They used Purple Dot as their platform to ensure everything from the trusted customer experience to touchpoints with the warehouse even made it possible to sell stock that wasn’t on hand. They beat their forecast instead of missing it.

We’ve learned that in eCommerce, we don’t yet have the basic table stakes to easily sell stock that is not at the warehouse — whether it's one hour, one day, one week, or one year away. The building block foundation breaks (big time) if merchants sell that stock. Trust erodes with consumers and warehouses go into meltdown, all because V1 of eCommerce was built for a structured, unrealistic world where stock arrives and then (and only then) do you sell it.

‍Where we’re going

Since launching with our first customer SPOKE London, we’ve listened closely to customers on how they can take more control over their inventory and their timing. We’ve listened with one thought in mind: How can we create a world where a merchant never has to think twice about selling early?

And from there, our customers ran with Purple Dot, embedding pre-commerce deep into their inventory management and merchandising strategies for countless use cases powering anywhere from 5%-80% of their overall business. We’ve processed millions of dollars of GMV,  all of which represents stock that before Purple Dot was always at risk of not being sold. But instead, it gets shipped out to the consumer as soon as it arrives, as it should be. No inventory risk. No spiraling storage costs.

Last year, we closed a $10m Series A round led by OpenOcean with strong participation from Commerce Ventures and our existing investors Unusual Ventures, Connect Ventures, Moxxie Ventures and Paul Forster (former CEO and co-founder of Indeed). This enables us to continue building and putting our customers first, and to continue to grow fast.

Being on the frontlines of innovation within inventory management has opened our eyes to how much further the industry can go to optimize for online selling. Yes, a lot has been done to optimize for an online storefront, fulfillment, and the post purchase experience. 

We firmly believe that the next 10 years of innovation in eCommerce is going to come in the time period before stock arrives at the warehouse. That’s why we named our company “Purple Dot.” With another throwback to physical retail, you probably remember going into stores and spotting a red dot on a price tag. You knew that this red dot meant a sale or a discount. With a Purple Dot, consumers know it’s a pre-order, and know they’re in safe hands to buy early from their favorite brands.  

This is the opportunity that is untapped at solving this urgent problem of unsold inventory. Afterall, there is only so much more the industry can do to optimize for selling after stock arrives — like making your checkout faster, or reducing returns, or a perfectly timed abandoned cart.

But before stock arrives? The opportunities are endless and transformational. And we are just getting started.