There is a reason supermarkets put candy bars and copies of the National Enquirer by the check-out line.
Shoppers, it seems, can’t resist chocolate or the latest news about the British royal family.
The customer might have walked into the market just to get some milk, said Meyar Sheik, but with strategically placed items, the customer ends up expanding his or her bill.
Sheik is CEO of Certona Inc., which offers the e-commerce equivalent of candy bars at the check stand. Retailers by the hundreds use Certona’s cloud-based software on their consumer-facing websites to help customers navigate the sites and suggest things they might want to buy.
Certona increases the average basket size — the value of the products shoppers buy from e-commerce sites — by 10 percent, Sheik said.
The software is worth the investment and Certona is a good business partner, said a spokesman for North Carolina-based MSC Industrial Supply Co., which uses the product on its e-commerce site.
$30 Million Funding Round
The San Diego business just landed $30 million from a new investor to fund some more growth. In a statement about the round in late September, company officials said they wanted to grow market share, fund R&D, and expand services and customer support.
Sheik offered a few extra details in an interview with the Business Journal on Nov. 14. The CEO said he would like to spend some of the money to expand the company into Europe or certain parts of the Far East.
He is also leaving the door open for acquisitions. Sheik said he might consider technologies or talent rather than entire companies.
Private Equity
Primus Capital, a private equity firm with offices in Cleveland and Atlanta, led the latest, $30 million funding round. Two Primus Capital representatives have joined the Certona board. The new directors “are not advocating any different direction,” Sheik said, adding that Primus is bullish on the business and supportive.
The round is the first since Certona closed a $7 million series A round in 2008. ABS Ventures led that round with participation from Express Ventures, a previous investor. Since then, the company has grown organically, relying on billings, Sheik said.
The company does not disclose revenue, though Sheik did say it is growing at a double-digit rate. Asked if Certona was profitable, he gave an emphatic yes.
Predictive Algorithms
Certona uses machine learning and predictive algorithms to profile individual shoppers across various digital retail channels. It all happens in real time.
Within three or four clicks on a website, Certona said, its personalization platform lets retailers accurately predict the next best action for the shopper “to deliver the most relevant, in-the-moment shopping experience” — even if the shopper has never been to the website before. Certona said its clients experience significant improvements in customer engagement, conversions and sales.
Certona’s products are similar to what Amazon.com has developed for its own e-commerce website — though they are not the same products.
By now, Certona’s customer count has grown past 500. Those customers include, GameStop Corp. (NYSE: GME), Petco Animal Supplies Inc., Pier 1 Imports Inc. (NYSE: PIR), Puma and Toys R Us Inc.
Most clients work in the business-to-consumer space, but Certona is building its presence among business-to-business retailers such as MSC — a $2.9 billion company offering metalworking and MRO products and services. MRO stands for maintenance, repair and overhaul.
Quick Learner
To demonstrate the software, Sheik called up the website of Colorado-based retailer eBags Inc. and pointed out how the contents of the homepage changed based on his browsing activity. He had a history of looking at bags, and that’s mostly what the site showed. After clicking on a set of headphones, however, the underlying Certona software started recommending other electronics, such as a Bluetooth speaker and a portable battery charger.
“It’s learning my behavior in real time,” Sheik said. The point is to help website visitors find what they are looking for. Such technology is essential when a retailer has 80,000 SKUs (products, or stock keeping units) and more than 800 brands, he said. Some sites have a half-million SKUs.
Certona has 135 employees and is hiring. The CEO said he is weighing options for expanding the office, either next door to his University Towne Center building or in a place more convenient for the bulk of his employees.
Sheik’s co-founder is the company’s chief technology officer, Geoffrey Hueter, who earned his doctorate at the
University of California, San Diego and previously worked for San Diego-based HNC Software Inc. HNC was acquired long ago by FICO (NYSE: FICO).
Patent Picture
Certona has six patents (including one that covers “keyword index pruning”) and six pending patent applications.
Its software personalizes the customer experience in a variety of ways. For example, it customizes e-commerce websites depending on the day of the week, or where the shopper is physically located. The “hero shot” on the landing page might change depending on where the customer is coming from: An outdoor clothing retailer might show a model wearing a heavy jacket to a user in New York, but a model wearing a windbreaker to a user in San Diego.
If an e-commerce customer leaves a product in his shopping cart but does not check out, Certona software can trigger an email — something to the effect of “Did you forget something?” — to bring the customer back. If that doesn’t get the customer’s attention, Sheik said, the vendor might send another email one week later, offering 10 percent off.
That’s something supermarkets don’t do.
Not yet, at least.
CERTONA
CEO: Meyar Sheik
Revenue: Undisclosed
No. of local employees: 120
Investors: ABS Ventures, Express Ventures, Primus Capital
Headquarters: University Towne Center area
Year founded: 2004
Company description: Certona offers cloud-based software for e-commerce retailers, including patented technology that identifies customers, determines their interests, predicts what they might do next and makes suggestions for other purchases.
