154: Give Your Customers an ROI with Jordan Gal

15
Jun

Jordan Gal is the Founder of Rally, a technology solution that creates a seamless checkout experience for customers. We discuss the benefits of building a unique business, ways to create a satisfactory store experience for your clients, and how the unbundling of marketplaces is redefining ecommerce. 

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Listen to the podcast here

 

Give Your Customers an ROI with Jordan Gal

Our guest is Jordan Gal, the founder of Rally, a technology solution that creates a seamless checkout experience for customers. Jordan, you have a unique product and we’ll get into uniqueness in a few minutes, but let’s start at the beginning, at least the beginning of your company. How did you get to stumble upon this opportunity and what does Rally do and what kind of road leads you to that, to founding this business?

Yeah, if I look back at the origin of the business, the business was started two years ago, but it has its origins like 10 years ago when I started an e-commerce company with my brothers. So we were merchants ourselves, we were selling physical products online. And in many ways, even though it’s 10 years later and the tech, overall tech has gotten immensely better, in many ways, the things we’re building now are a lot of the things that I wanted as a merchant 10 years ago. And it’s sometimes surprising that it hasn’t happened yet, but we can also get into why I think it hasn’t happened.

Okay, so tell me a little bit about your journey of getting there. So you said you had the previous e-commerce business, what happened to that? And then how did you come up with this idea? I get it that you wanted some of these solutions, when did you decide to go for it? So just give a little bit more detail if you can.

Yeah, sure. So, so for me, it really goes back to growing up in an immigrant entrepreneur household. My parents moved this year from Israel when I was six. My dad was an entrepreneur and that, you know, when you grow up in that environment, you kind of get marinated in it and it ends up being the only thing that makes sense to you, at least in my case. So I’ve been an entrepreneur for 20 years, but I got into e-commerce with selling online. Being our own store, we built on Volusion, one of the early platforms that really allowed you a lot more control.

We were originally on Yahoo stores, and that was very frustrating, because you couldn’t change anything yourself. You always had to go to a developer or an agency. And moving over to Volusion was like revolutionary, because we were then directly in control. And that control is what got me very interested in conversion optimization. So when we ran our own e-commerce business, I was the one responsible for conversion. And that’s what got me staring at a website and thinking, what can I do to this page that creates a scenario where a higher percentage of people take the actions that I want them to take and that being empowered in that way is really really interesting from like a marketer point of view.

So that business grew pretty well but we we didn’t like where it was going. We were selling products that were available elsewhere and so you’re really competing on like thin margins and you and back then a lot of it was competing on you know being better at Google AdWords. And in an Amazon world, we didn’t like where that was going. So we really faced the decision of either creating our own brand, that way you can only get it from us, or selling the business. We ended up selling the business, and it was a pretty good exit. Nothing crazy, but it got me my start in e-commerce.

And after that, I started a software company focused on e-commerce merchants. That software company was called Cart Hook. We originally came out with a product called an abandoned cart app, which emails people that have abandoned the checkout process. After about two years of running that, we stumbled upon a much bigger idea, which was just replacing the checkout entirely. So instead of avoiding and rescuing abandoned carts, it was how do you make a better checkout experience to avoid abandonment in the first place. And that product is the one that really hit for Cardhook and grew very quickly.

Okay, so that’s fascinating. So let’s get into this in a couple of minutes, but before we go there, I’d like to ask about the theme of this podcast is about frameworks, is business frameworks. What’s a framework that helped you build this business, this business, rally, or even the previous business, something maybe mental model that you have been using.

I think I took a pretty traditional approach with Cardhook where I built something that I knew I wanted when I was sitting in that seat as a merchant. So that’s, you know, that’s a tried and true, like build for yourself type of framework. And that worked well, but only up to a point. It worked well because we knew people needed abandoned card apps. We had used one and it wasn’t a very good product, but it made us great ROI. So that was like the most straightforward, like lowest risk version of a software product. Because I use something just like it, I’m just going to build it a little bit better. So basically the better mousetrap framework.

Where we ran into limitations is the market quickly got saturated and in our case that functionality turned out to be a feature that got added to email service providers. And so our uniqueness, even if we were differentiated to some degree, it’s really hard to be differentiated enough to make the decision for a merchant to make a decision that they should go out and use a second product as opposed to just using the additional feature in the product that they already signed up. So that was almost like hitting the limitations of the Better Mousetrap. And our second product, the checkout product, was a truly unique point of view and a unique product at that time. And we were rewarded for that. So I kind of felt both versions, right? The Better Mousetrap framework and the build something unique. And if you get it right, you get rewarded. It’s high risk, high reward, but it was pretty amazing to launch something out into the market and have an immediate reaction of demand. 

So, this idea of building something unique, how does it emerge? Is it just an organic thing that you keep pushing the flywheel and eventually you stumble upon something unique or is there an intentional way of finding a unique thing that looking out for it and searching and locating? Is there a process for this?

You know, given that experience that I had, I’m firmly in the camp of you’re better off building something relatively unique. And the way we went about it, the way I seem to almost instinctually go about it, is just data gathering in the market. And whether you want to call it breadcrumbs, or these like little pieces of the puzzle that eventually you start to form a picture of where the market’s going, and what product will make sense for the market, not right now immediately, but based on where the market’s going over the next six, 12, 18 months. So if you look at our product right now, it’s aimed specifically for the future.

It is a checkout product, but it is unique in that checkouts in e-commerce have historically been owned by the platform. So if you are a merchant and you build on Shopify, historically speaking, Shopify provides you the checkout and you don’t really have a choice in that matter. It’s just an assumption. And that’s the same for Salesforce and Magento and WooCommerce and Volusion, all these other big commerce and so on. And so where we think e-commerce is going is in unbundling.

And if you looked, if you talked to people two years ago, that sounded a little crazy. And then a year ago, it sounded less crazy. And a lot of investment went toward what’s called headless or composable commerce apps. And we’re building for an eventual scenario that that’s the preferred way for merchants to build. So it’s definitely listening to individual people, listening to partners, listening to vendors, listening to thought leaders, and then trying to come up with what the puzzle will look like in the future and building in anticipation of that. It’s also quite stressful because you almost are waiting for the market to catch up to you.

Yep, that’s fascinating. So what drives this unbundling? Why would someone want to unbundle? you know, two minutes, three minutes ago, that the reason the previous business essentially lost momentum was that what you did became a feature of a bigger platform. So what would drive the opposite momentum, i.e. the unbundling these bigger platforms? Why would people want to go to different providers and buy products that are not on the platform or independent of the platform.

In e-commerce, it’s driven by merchant demand for more flexibility and control over the shopping experience. So what do I mean by that? If you look at a typical e-commerce store right now, if you go to Allbirds, it looks a lot like e-commerce stores looked 20 years ago. And that’s because when commerce first went online, a lot of it was mapped to the offline experience. So when you walk into a store and you’re looking to find something particular, looking, you’re looking for shampoo, you go to the shampoo aisle. Online, the homepage is very much the storefront. And then if you want to find shampoo, then you go to that category. So the category maps to the aisle.

And then when you get to where you want to go and you want to find more information about a particular product, that maps to the product page. And it gives you all the information on that particular product. And then when you’ve decided that you want to buy it, you literally put it in your cart. And then you get on the checkout line. So it is very analogous to the offline experience. And that was important to match expectations. So people understood how to shop. What’s happened over the last 20 years is that the tech has gotten so much better, but the buying experience is still relatively rigid.

So it still looks like, you know, you put something in the car and then you go to the checkout line. And that works for a lot of commerce, but a lot of things have changed over the last few years. And what’s happening now is that merchants want to bring the buying experience much closer to where the shopper is. And where’s the shopper? They’re on TikTok, they’re on YouTube, they’re on Instagram. They’re relatively far away from the checkout page in the online store. So right now, what everyone’s doing is they’re asking all of their traffic to go through the same funnel. Whether you came from Instagram or YouTube or TikTok or something else, everyone goes to the same product page. Everyone goes to the same card. Everyone goes to the same checkout. That’s not necessarily the best path to buy, but right now it’s the only path.

And so what’s happening with this unbundling is merchants want more flexibility to do different things with the buying experience. Not everyone needs to go to the same path. Some people go to an influencer’s Instagram profile, they click on a link and they know what they wanna buy because the Instagram influencer is telling them, hey, I love these new, I don’t know, fat burning pills, buy them here. That’s straightforward. That shopper should be able to see a landing page specific to that offer, buy it right there on the spot and continue browsing. And so a lot of these things are like the merchant demanding more control over it.

And traditional e-commerce platforms weren’t really built that way 10 plus years ago. And so there’s a lot of like struggle. And so we think where things are going is much more flexibility. The merchant grabs whatever technology is right for them. They can allow for buying anywhere along the journey, including multiple places all at the same time. And it all has to map back to their inventory and the fulfillment. So it’s just going to look different. The buying process in the future should look different than what it looks like right now. And really, it should be the merchant’s choice.

That’s very interesting. So how did this need emerge? How did you guys realize that the merchants are looking for something different.

Okay, so this is where it gets a little messy. So if we go back to the Cardhook, the previous software company, we launched that second product, the checkout product that I’m alluding to, we launched it back in 2017, and it was specifically for Shopify merchants. And the reason it was for Shopify merchants is because what I noticed in the market was a lot of energy and excitement around the ClickFunnels community. ClickFunnels was one of these communities and products that allowed people to sell very easily. Everything template, everything you don’t need to know tech, you don’t need to know anything. You can get online and start selling stuff quickly. And people loved it. They had this huge community around it.

The problem was as soon as you started to sell physical products on ClickFunnels in any real volume, you realize, oh, there’s no backend. There’s no inventory management, there’s no fulfillment, there’s no order management, like it’s not built for it. And so a lot of the successful merchants on ClickFunnels started migrating to Shopify. And I was in the ClickFunnels Facebook group just reading and reading and reading. And what I noticed was when those merchants went to Shopify, they lost a lot of functionality around the checkout that they wanted. Specifically something called post-purchase offers, which allows you to make an offer after the checkout page instead of before. And so what dawned on us was there’s a ton of demand for that capability on Shopify.

So that’s the product we launched and it went boom. We did 100 million in processing the first year, 200 million in year two, then 400, then 800. In total, we did 2.8 billion in processing, grew the company to 6 million ARR, doubling every year, healthy, profitable company with just some friends and family money. It was a dream company, it was amazing. Unfortunately, it hit a wall. And that wall, oddly enough, was the platform itself. So Shopify did not like what we were doing and the way that we were doing it. And eventually they shut down our ability to grow and put us into a deal that wasn’t good for us. And eventually we hit the sunset, the product, I sold the company. And unfortunately what was moving toward a great success, you know, hit a wall. It did okay at the end of the day, but not nearly what it should have done.

So Rally comes out of that experience. And Rally is myself and the CTO from Cardo, who’s now my co-founder, and a bunch of other people on the team saying, okay, we clearly know how to add value in this space, but it needs to be in a different context. It can’t be under the Shopify umbrella because they are uninterested in playing ball in that way. So how did we know that there’s demand for what we’re doing? We know for sure there’s demand for what we’re doing based on our previous experience. But that doesn’t mean like we’re assured success. We still need to find our pockets and our people and our distribution and so on.

Ok, so that’s  fascinating. So your your trick is now to raise the awareness of all these merchants that they don’t have to use the Shopify shopping cart. They can use a generic Rally shopping cart, and then they can implement it wherever they want in the buying process. So let’s zoom out a little bit, and let’s talk about the bigger shifts that are happening in e-commerce. So you said unbundling, you said shopping cart experience is being unbundled. You are at the forefront of it. Are there other things that are being unbundled? And then the second question is, is Web3, so is Web3 also creating or fueling the shift? And how does the landscape look like? 

Yeah, in some ways, those are connected, Web3 and what else is happening in e-commerce is there is an all out war for interchange. Meaning the traditional 2.9% plus 30 cents transaction fee that goes along with payment processing online is being attacked from all angles, including the traditional players themselves. So that monopoly that has existed for a very long time, the Visa, MasterCard, Amex, those networks that have a perfect, it’s a beautiful business model. It is charge the merchant 300 basis points, take 100 of those basis points, bribe the shopper to continue the behavior that perpetuates the same transaction rails being used over and over again, and the merchant’s stuck, and Visa and MasterCard just make money forever. It’s a beautiful monopoly they had for a very long time.

I don’t think it survives the decade, not in its current form. And interestingly enough, they’re actually aware of it. In many ways, they’re looking to disrupt themselves. There’s an article in the Wall Street Journal from about a month ago that talks about a group of banks and issuers coming together to create their own wallet. So this is them, you know, admitting that they’re losing ground to the PayPal’s buy now pay later, Apple pay at the operating level. So all of these very, very well funded parties from banks, the credit card issuers, to credit card networks, to Apple and others are all looking to angle themselves on how to pull more margin from the payment processing. And the merchants are in the middle of all of it. And my hope and our aim is to make sure that the merchants benefit from everything that’s happening there and not just the existing networks. So that’s a big one and Web3 obviously is connected to that because Web3 offers payment rails that don’t cost nearly as much as the traditional 2.9%.

Okay, so what’s your vision of the future? How is this all gonna play out in the next five to 10 years?

Our view on it is very, it’s almost like we feel like we have to be incremental about what we’re doing. If we just try to go for exactly what we want to exist in the future, it feels unlikely to succeed. To just say, hey, use these new payment rails for your checkout. I mean, think about it yourself or what you see. There actually isn’t that much demand for people to use, you know, ETH and Bitcoin. Like, no one’s buying that way because these assets are very, like, they’re investments. They’re speculative in nature. So no one’s using it and everyone’s kind of dismissing it. And if we went out and launched like a crypto payment processing product, I don’t really think it would go anywhere. So if you look at what we offer right now, you should see that as phase one.

So at the first phase, we offer merchants a better checkout that increases their conversion and increases their average order value. Great. What that should do is allow the merchant to adopt it. And then what that leads to is we convert about 40 percent of every checkout into a Rally Pay wallet user. And what that means is when a shopper goes through our checkout once, they get remembered in our vault. And anytime they come back to any Rally Pay checkout, anywhere throughout our network, they have a very easy time buying. It’s a lot like Shop Pay, but Shopify uses it only for their platform and only for their payment processor. This is like an open version of that that works across any platform and any processor.

So, phase one for the merchant, phase two to grow the network, and then phase three is when you have merchants and shoppers in a network together, that’s when you have the opportunity to allow them to transact directly. So what I mean by that is, right, if you think about American Express, it’s its own private network. It connects merchants and shoppers. So in some ways we’re building the same thing, but we should build that processing on much lower cost payment rails so that the merchant benefits directly because they’re using our checkout and the shoppers benefit directly because they’re in our network.

So, you know, that’s not an overnight thing. That’s many years. And the challenge, of course, is staying alive long enough to see it come true. So you still need to make progress. You need to make revenue. You need to grow so you can attract more funding so you can keep, you know, planning keep planning out and building the vision. The good thing is I really like this, so I’m fine doing it for 10 years, no problem.

Then what finances your growth? Is it this 3 percent margin or 2 percent margin that Visa MasterCard are making between, as you said, bribing the customer to keep the credit card and essentially pirating the merchant, the 3%. Is this the 2% margin? Is this what pays for this? And if you make it better for both parties, then the margin is going to be less. So is there enough there to compete with these big boys who still have the big pockets?

Yeah, it’s challenging and our business model comes partly from the existing reality. We get revenue share from the payment processing partners that we work with, Stripe and Braintree and PayPal and others. They incentivize us to push transactions in their direction. So out of that 2.9%, right now, we have a little – we have a place in that stack. So part of our business model comes out of that. The other side of it is we charge merchants directly. And that is where things get real for a startup. Meaning, if you can’t justify your pricing on an ROI basis, especially in today’s environment right now with the economy the way it is, you don’t have a business.

So what we do is we charge merchants, call it 50 basis points on all transactions, right? The pricing varies based on the merchant, but just call it 50 basis points. And then our job is to increase the revenue, give them ROI on that. Right, so they’re actually paying us more on top of what they already pay for payment processing. And we justify that pricing through unique features that increase the revenue of the merchant. And if we don’t succeed in increasing revenue for the merchant, we don’t really have a business. And that, I think, is a very healthy dynamic for us.

Now, you said that one of the advantages of Rally is that it creates a novel storefront experience. It’s not the traditional shopping cart, you know, supermarket type storefront experience, but there are different storefront concepts that are emerging as we speak. So can you share about some of these concepts that you are looking at?

One of the biggest challenges that we have is we have to fit into the existing paradigm, the existing framework, and also go beyond it. So right now, we have a lot of stores. Most of our customers right now use it in a traditional context. Let’s say they’re a big commerce merchant and they decide to use our checkout instead of big commerces. The only difference in that experience is that when you hit the checkout button from the cart page, you go to our checkout instead of the BigCommerce traditional checkout. So that’s like a traditional context. Now, there are also headless contexts, right? For example, if anyone wants to go to Rally shop, what they’ll see there is a builder.io landing page leading directly to a checkout that then pushes the orders into the Swell backend and Swell is a new headless platform. So that starts to show you the flexibility around what you can do on the front end and the backend.

One of the things we’re doing over the next few months is coming out with content in the form of these fun mini sites. So we have one that we’ll be launching in the next few weeks, and the goal there is to build something interesting and then show how we built it. And so this is, in this case, it is a very straightforward, like two page site. One landing page that tells the story of the product, and then the next page is the product page, and then it goes into the checkout. Another way to think about what we do is a direct connection to the backend. The backend is really important because you have to have orders, you have to have products, product catalog, you have to have fulfillment, you have refunds, so all these things that the merchant needs on the back end and what you can do on the front end gets opened up because you can have as many checkouts as you want with us.

It doesn’t need to be all through the same checkout. So if you think about something like a gaming experience, right, if you’re in the middle of Fortnite and you are Reebok and you want to start to advertise in these types of gaming environments, there’s no way you can ask the shopper, the video game player, to leave and go to a Chrome tab and start buying. It’s not going to work. So you have to be able to accept payment in that environment and still map the inventory and product to a back end on, let’s say, Salesforce or Commerce Tools or something else. So that’s the type of flexibility that we aim to provide to merchants.

So people have more options to spend money and maybe that’s going to be kind of an economic stimulator. It will force us to, when we spend more then we always have to work more and produce more, right? So that kind of drives the economy. That’s the consumer economy. This is how it works.

Yeah. In many ways, it’s really just lowering friction because people have intent. One of the things that Amazon did so well is when you intend to buy something, there is almost no friction in buying it. Right. I can leave my chair right now. By the time I’m downstairs, I bought something on Amazon. That was a huge advantage for Amazon. And that advantage needs to be commoditized in many ways. Because it is a bit silly that we’re in 2023 and when we go to a website, we have to manually convey our information into a bunch of form fields. First name, last name, add, like that is, you know, that is archaic. It should just be like a little, you just touch it.

And you say, here’s all the information that you need in a private way, in a secure way, and you’re done. You move on. Like Apple Pay has touched on that experience and merchants that have that functionality have an advantage and that needs to be perpetuated throughout buying experiences everywhere. And that I think is where things like crypto wallets will actually start to have utility because you can store all of your information very securely and privately, and then convey it very easily via some type of authentication, whether it be Face ID or hardware wallet or phone or something else. So as it gets to a place where no one cares that it happens to be crypto or blockchain, it just gives you more value and benefit. That’s when it’ll start to get an option.

Well that’s fascinating. Fascinating what’s happening in payments and shopping and e-commerce. It’s all a big revolution going on. So definitely check this out. Check out Rally. Now, where should the business go to learn about your products, yourself, to communicate with you? What are the connection points?

So if you want to learn about the product itself, you go to rallyon.com, that’s R-A-L-L-Y-O-N.com. And then to reach out to me or find out more about what I’m up to, you can go to Twitter at Jordan Gal. And I also have my own podcast where I talk about all the good and bad about running my business with my friend Brian. So our podcast is called bootstrappedweb.com. That’s from back in the days when the Cardoc was bootstrapped. Rally is not bootstrapped, it’s venture funded. Yeah, and that’s where you can kind of follow along the journey week by week on what’s working, what’s not working, and everything we share.

That’s fantastic. Well, definitely check this out. Bootstrapped, what is the title again?

bootstrappedweb.com.

Yeah. I mean, it’s a fascinating, probably a topic for another podcast, the Bootstrap versus funded, venture funded, the pros and cons. I’d love to have this conversation. But for now, that was Jordan Gal, the founder of Rally. So thanks for listening. And Jordan, thanks for coming on the show.

Thanks very much for having me on. 

 

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