17 Miljoner Dollar Senare: eComID:s Nya Globala Strategi - Oscar Rundqvist #387

B2B SaaS specifically, it seems to be super strong still. Can you tell me a little bit about the macro climate right now in the B2B SaaS space? We had a lot of investor interest for this round.

I think it's clear for investors that fashion tech has been somewhat underinvested lately. Not much kind of drastic innovation has been in place the last couple of years. I guess some commerce bets a couple of years ago maybe draw investors away from the space.

But now it's really clear apparently for investors that the industry will change. We're seeing a huge shift with AI opening up so many new opportunities for for shopping. And I guess that's why investors also want to kind of, yeah, take bets and place themselves with companies that are trying to change things for real.

And we're trying to really become the category winner in this space. So I guess that's why there was a lot of interest. Framtidens e-handel, Sveriges ledande podcast inom retail och e-handel, sponsas denna vecka av Orange Juice.

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Together with me in the podcast studio today is a person that just raised $17 million to his startup. This was the biggest fundraise ever in Europe in the FashionTech space. It was the second biggest fundraise in the FashionTech space ever in the world.

Oskar, who is the founder and CEO of the company, runs EcomID. He has investors such as H&M Ventures and Stadium, while Systemic Capital was leading this investment round. Today we're going to talk about AI.

We're going to talk about returns. We're going to talk about the future of shopping. A warm welcome to you, Oskar Rundqvist, CEO at EcomID. Thank you so much, Björn.

Thank you. How are you, Oskar? Very good. How are you? Great. Excellent to have you in the podcast studio today again. We recorded an episode roughly a year ago.

This was episode number 324, 324. What did we talk about back then? We talked about how we had gained traction around becoming a returns prevention tool for leading fashion brands.

So I think that was the focus to also make brands in the industry aware of the fact that we cannot kind of chase top line just because of the sake of chasing top line when returns is so costly, both for the brand's profitability, but maybe even more importantly for the planet and for the environmental impact. Why is returns so relevant for e-commerce companies? I think it's really interesting to look into not average order value and those kind of legacy metrics anymore, but rather average kept order value.

Historically, shipping and transportation was quite cheap. Since 2020, over the pandemic and everything, shipping has more than doubled in costs. So that means that returns is becoming increasingly costly for brands, which means it's even more important than ever to sell what's right and what customers will love and keep and not only sell anything that then will come back and become a cost.

My personal biggest learning from the previous episode, 324, was the actual cost, the average cost that a return had per return for the company. Can you elaborate that a bit and also state the exact number that each return cost the company? Yeah, so handling just one return for brands costs between $21 to $46.

And that is a surprisingly high number for most brands because what you need to do is to look at the end-to-end impact. You need to count for the shipping, manual packaging, the shipping out, shipping back, manual inspection. 15% of returns cannot be resold.

15% of returns needs to be discounted. And a lot of products are also being sent back and forth multiple times. And that is why it's more important than ever for brands to focus on selling the right things in the first place and not selling anything and just kind of maximizing average order value when a lot of products will come back.

I think it was about €50 in total. Yeah, it depends per brand. And some larger brands often can kind of negotiate down prices for shipping, for example. But it's, yeah, between $21 to $46.

And it's attacking the same problem, but from a different angle. Because previously in my mindset, I was thinking, how can we lower the actual return cost? How can we lower the shipping cost of returns, for example, or the returns handling cost?

How can we optimize for that? Your perspective is different. Your perspective is how can we prevent returns? Exactly. So that was one of the kind of main findings.

Previously, before EcomID, I was leading the digital customer experience at H&M. And then I started to look into the return space and realized that 99% of all returns startups and vendors out there worked with returns management or returns handling. But in my world, then it's already too late.

So when we started to look into kind of returns prevention options, there weren't many. That's why we've been focusing on the pre-purchase journey rather than the post-purchase journey where returns management is quite a quite crowded space. And why are we recording this episode in English?

The past one, the last one, was in Swedish. Yeah, maybe to give ourselves a bit of a challenge. More importantly, after this round now, we are really going abroad.

So we're going global. We're going outside of the Nordics, expanding quickly to UK, to France, to Netherlands, and also looking into the US. So I guess that's the reason.

And $17 million. Yes. That's a lot of money. Can you walk us through the round? It is. Yeah, but we were quite, already in our last round, our pre-seed round, we were quite selective.

It was oversubscribed and we were selective in terms of, I see our cap table almost like an extension of our team. So I wanted to really feel like we are partners. It's not kind of companies, investors, but rather we're one team working in the same mission.

And we had the same philosophy in this round. Systemic Capital, they are leading the round. A fund based in London. One of their LPs is Paul Polman, who is the former Unilever CEO and now also co-chair of the Fashion Pact.

So the biggest kind of fashion network for fashion companies, which is a highly kind of strategic fit for our mission. Also joining is Stadium, which I'm really proud of because they are one of our earliest customers. And moving from customer to also investor, I think says a lot.

And they are joining both through Stadium and through Bojaklav, one of the Stadium founders, personal investments. Then also Reneneration, an LA-based fund leading within climate tech. Fun fact there is that Leonardo DiCaprio is one of their advisors.

So let's see if he will pop up with us going forward. And lastly, also, we have Course Corrected, one of the leading climate tech funds in the Nordics based here in Stockholm. And complemented with a list of really kind of strong and exciting angel investors, such as Vassend Knutson, the founder of King.

We have the Primark CTO, Legora founder, Alamamé, the founder of Truecaller, etc. So yeah, really exciting of an extension of the EcomID team. What year did you found EcomID?

We launched in 2024. So yeah, about two and a half years ago. Two and a half years ago, that's nothing. Tell me about the first investment round, because already from the beginning, you had H&M Group Ventures that invested in EcomID.

H&M Ventures with Nan Andersson in the lead were, yeah, the first ones kind of identifying the potential in our mission and us as a team. So forever grateful that H&M has been following this from day one. And then we also had Capital T, a Netherlands-based climate tech fund, and angel investors like Anna Heta, who is currently the head of digital at ON in Switzerland, and Madly Impassioned, a former H&M managing director.

And yeah, and we were really selected back then already to wanted to make sure that our cap table were, yeah, like an extension of the EcomID founding team. And bringing such a strategic investor on board at such an early stage, what has that meant for EcomID as a company? I think the fact that I came from the industry, most of our co-founding team came from the industry, and also having H&M as a strategic anchor investor, so to say, in the first round, has given us a lot of credibility, showing that we know what we're talking about.

We've seen this problem hands-on, and we're serious about this kind of industry change. And that's something I'm also really proud of in this round, that we're also onboarding now Stadium as investors, showing that we're not an H&M company. We've never been an H&M company.

We are an industry-wide company solving an industry-wide problem, not an H&M problem. And what's the post-money valuation in this round? We're not kind of commenting on the exact valuation, but I guess it's a quite standard seed round valuation.

And how about the traction then, like in the past 12 months? What has your journey been in the first two and a half years? So currently we're working with more than

Is that your agent Vera you are referring to? Exactly. And also what Vera does is that she is remembering the context on each shopper. So if you go into one brand's destination, let's say NNO7, one of our partners, and you say that, yeah, I'm going to this kind of party over the weekend looking for this kind of shirt.

Then Vera will remember if you, the next day, go to COS website, for example, another of our customers. So you don't need to kind of repeat yourself. And Vera kind of, like a human being, she gets to know you and she learns your style, your tastes, your size and fit preferences over time, so that every time you go to a brand where Vera is available, you will be able to kind of expect instant relevance.

On the back end, how do you give Vera or your agent each customer's context? So one thing is that she's learning from the conversations. But then we also have on-site sizing technology, so recommending size recommendations on the brands own destinations.

And that we store and save on your e-commerce ID, like your e-commerce ID, your shopping passport. And that context then is saved on Björn's e-commerce ID. And then you identify yourself with your e-commerce ID also within the Vera experience.

And then she can also kind of, yeah, take that into account when she is recommending products. And our underlying kind of identifier is your email address. So if you've used your email address with one brand, we remember that for the next brand experience.

So that's two of our key modules currently. So on-site size recommendations and conversational search on the brand's own destinations. But we're also now going into exploring with kind of virtual try-on and in general, we want to do anything where the pre-purchase experience can be smarter with the latest technology.

As a SaaS tool, the biggest mistake is probably that you go too broad, that you try to build the Microsoft Office with the Microsoft Word with, I don't know, 1,712 different functions where you don't need 99% of the functions. Then you have a Google Docs instead that, you know, removes everything that most people don't need and just make it simple. So how do you pick the projects that you want to resolve?

How do you pick the problems you want to resolve? Fully agree. I think killing feature darlings on the way is like almost as important to kind of pick your next best.

If you become too broad and not don't specialize, you basically deliver quantity instead of quality. So we're trying to kind of constantly move the needle and kind of also identify what brands are looking into next. And then also strategically kind of choose what we're not prioritizing anymore.

A lot of pivots, for example, with our merchant portal, where we are replacing things all the time, where we constantly kind of see what's used, what's leveraged, what's asked for by the brands and what the pieces that are not asked for, we quickly try to kind of, yeah, remove in order to focus on the next thing. And how about shopping recommendations? I mean, can I help Vera to style me?

Yes, definitely. So you can already go into, for example, Sellermal, Gina Tricor, Haglöfs and some other brands that already are using our kind of conversational search intelligence. And then you can, yeah, talk to her like she's a human being and then you can kind of let her guide you to a special occasion or anything.

It's actually really, really cool. And I definitely think it will be a key component of the future of shopping. Do you remember the SaaS agent 5-10 years ago? Like there was an agent at SAS.

com, the Swedish Scandinavian airline, and it was, yeah, tell me about the experience. Static, no memory, annoying, frustrating. And I think some AI kind of, yeah, chat experiences today are quite similar.

And I think the key difference, of course, LLMs are much more intelligent today and they kind of learn and improve themselves. But I think the key thing also is the missing context. So when you go into a conversational search experience without context, you need to start from scratch.

So that's what we're trying to solve with your e-com ID. So as soon as you go to meet Vera, you can identify yourself with e-com ID and then you can skip so many steps in the beginning. So the conversation starters jump ahead and yeah, unlocking instant relevance instead of starting over.

Is also the past shopping behavior part of the context you provide to Vera? Yes. So that's, and in general, like your e-com ID is where you will be able to kind of see any data that Vera is using, for example.

I believe that the future of data sharing is kind of based on extreme transparency. So of course, data sharing is scary if you don't know what's going on, if it's like a black box. But if you completely kind of follow and understand what's going on, then I think data sharing is really, really good.

Especially in this case, when it's unlocking new kind of value for you. So that I think is a key component of the future of personalization to have extreme kind of transparency around what data is kind of the underlying intelligence. And when you build a SaaS tool like yours, how do you choose what problem to attack next?

How do you decide on what projects to work on, but maybe even more important, not to work on? I think for us from day one, the desired outcome has been really clear. We want to make smarter pre-purchase experiences to help brands sell more of what's loved and kept and avoid unnecessary returns.

So that's our kind of guiding star, our guardrails. So anything that can help us towards that desired outcome is interesting for us. And then we are basically prioritizing within different opportunities based on these different factors, like effort to build, how many brands have expressed an explicit need, how many competitors do we have within different kind of, for example, virtual try on.

We haven't launched that yet because there is a lot of virtual try on players out there. I think today's solutions aren't working because the underlying product data is not kind of correct and reliable. Until it's reliable, virtual try on will not be kind of accurate because then it's a lot of AI hallucinations.

So that is what we are now solving first to get reliable underlying product data. 17 million US dollars is a lot of money. What's the organizational, the operational strategy ahead?

How do you plan to expand the team, the number of offices? Do you plan to have several offices globally or are you going to stick with one office in Stockholm? What's the plan in the next two or three years?

So we'll definitely stick to kind of our head office will definitely be in Stockholm. We believe this is a great place to build. We have our kind of core team in place here, but we'll also have now local sales offices in some key markets, for example, London, which is something that we're looking into currently and also looking into the US.

In Stockholm, we will have the fashion tech office in the Nordics. So anyone in the Nordics who wants to kind of work with the fashion tech solution and development should kind of look into our future office. That's our goal here, which is something that we're currently looking into.

How many persons are you right now? 16. And how many persons will you be in a year from now? Around triple today's amount. Cool. Exciting. Yeah. And you also mentioned you had a 0% churn.

Can you please explain what churn is and how you succeed with a 0% churn? Churn basically in our world is an existing customer that we are losing. And so far we haven't lost one single customer, which we are really proud of.

And I think it's for different reasons. One, that we are doing something that really kind of solves a concrete problem here now. Two, that we have a kind of team that makes sure that we can kind of really spend time with our brand partners.

And also we invite all of our brand partners to our vision, to our direction. We sold something today, but what will we solve in the future will be something even bigger and more impactful. So I think that's something that, yeah, I don't know if all vendors do that, but we invite all brands to our quarterly town halls where we share about our roadmap and our vision and what we want to solve in the future.

And I think also our overall idea of keeping shopping on brands on destinations is something that brands really kind of find, of course, interesting because a lot of other movements in our industry is talking about the scenario if shopping moves into Gemini, for example, which is not what we are supporting. And do you see that you also might go outside the fashion space or are you going to stick to specifically fashion as a category? So currently we support, yeah, fashion and with that we also mean kind of outdoor shoes, some accessories, glasses.

So already kind of some, yeah, a lot of categories. But I think for us, it's interesting to solve as big of a problem as possible. And for example, with the turns, then jeans, dresses, apparel in general is where brands have the biggest problem compared to, for example, beauty where the average return rate is just 2%.

But for sure in the future, we want you to be able to use your shopping passport everywhere. So you can also combine outfits, et cetera. So currently it's still the focus where the returns problem is the biggest, but definitely looking into other categories going forward as well.

And what's your main argument towards fashion companies? Is it increased conversion rate? Is it a lower return rate? What's the USP with the product? I'll say increased average kept order value, which is then a combination of kind of selling more of what's right and reducing what's of what's wrong.

What we have now also started to look into a lot is kind of product

It's really inspiring to be close to. And before they did a lot of, yeah, they're much better than me to talk about it, but it kind of reviews and trying to kind of really guide the customers. With us, they are now kind of with especially size recommendations, helping their shoppers to buy the right size, but also with kind of search and product insights, like I mentioned.

So we're helping them with product insights to understand when specific dresses are returned for different reasons. So they can also kind of guide the name for the assortment for the next collection. So that is what also the kind of size recommendation tool unlocks these unique product insights to improve your assortment over time.

One of the biggest challenges in e-commerce that I think is definitely underrated is cross communication internally among the different teams in an e-com organization. So as an example, the buying and design team has to understand the returns in order to, you know, co-develop according to the data that you get from returns, for example. So can you tell me a little bit about the challenges and who should own this?

Should there be a returns manager in each organization? When should you get the returns manager? Who else should own the returns internally? Great question and topic.

I wrote a little bit article like two years ago about the fact that I think brands should hire a chief returns officer. Because as you say, the returns problem is so complex in that way, because it's spread out horizontally. There is not kind of one vertical responsibility split, but rather you need to kind of analyze it horizontally.

So either you need a really good way to communicate across the different teams, or I think larger organizations, larger brands should really consider hiring someone fully kind of focusing on returns. Which, for example, Nelly have been doing really, really successfully, because then this one person have the full ownership. What is a larger organization?

What is a larger brand? Yeah, I guess it depends on prioritization. But I guess if I would have a brand that would have more than, I don't know, 20 million euro in revenue, I would start to kind of consider that kind of role because you can also fit a lot of other things in that kind of role.

For example, yeah, assortment intelligence and improving assortment over time and creative aspects to improve your assortment from also returns intelligence perspective. So let's assume you have 20 million euros in revenues in net revenues to clarify, then you probably have, if you're in the fashion space, about four million euros in yearly returns. If you can optimize those four million euros to, I don't know, 3.

something million euros, it's suddenly quite cheap to hire one person that actively works with this. Yes, since they are paying today between 21 to 46 US dollars, if you can actively avoid returns, that kind of role quickly finances him or herself. And again, you know, the returns manager has to communicate with the marketing team and inform them about those product categories have fucked up designs.

Sorry for the F word. And therefore we should prioritize them in marketing while the design team has to be informed about the changes that should be done to the products. Exactly.

And then you have this annoying living material that is cotton that has to grow, even if it's the same field. You know, it's growing every year. It's like it's different from year to year because it's a living organic product, just like a wine doesn't taste the same from 24 to 25.

Cotton also behaves differently from year to year. So you can, you know, make the product in the same way from the same cotton and get a different outcome. Yeah, exactly.

And I think that's currently in the market, 91% of shoppers buy different sizes from different brands. And one of the reasons, of course, is that there is no kind of market standard. I think it's interesting that we're regulating so many things, but there is no kind of sizing reference regulations in place yet, which really would help shoppers.

But I guess, yeah, brands see also sizing differences as a brand USP, I guess. But exactly as you say, I think this kind of role could also help the marketing team to not do marketing for products that have a, let's say, 70% return rate. Because if you actively push a marketing campaign for products that you know have a real high return rate, then it's definitely something that you're losing money.

You're paying to sell products that you're already losing money on. So for sure, fully agree. What will the world within returns look like in three years from today?

I think and hope that size selection will no longer be something that the shopper does. Our goal is that shoppers, it will be like a backend functionality. Because if we already today have a sizing situation where 91% of shoppers buy different sizes from different brands.

You buy large from some brands, extra large from some brands, and maybe medium from one brand. Then it's clear that the sizing system is broken. So I think that in three years' time, you will buy products that you like.

The size selection will happen under the hood. The brand already knows you, hopefully through your e-com ID. And if the brand is wrong, then you don't have to pay for the return if it's due to size and fit issues.

So that's one example of where I think that shopping will become more informed and incentivizing to trust the latest technology. Because I think that's, you can do a lot of things with technology, but it always comes down to who wins, who benefits from trusting different kind of technologies. And then I think it comes down to this kind of incentive system where the brand and the shopper and the environment should kind of coexist.

What does that mean for the consumer? It sounds like the sizing, the choosing of your size will be automated and almost removed. So you can basically move up the buy button.

As long as you buy things in an informed way and reducing unnecessary returns, you can also then activate your wardrobe. So let's say that you buy a lot of things where you know or hope it's the right size, then you can also automate the kind of wardrobe intelligence to sell things. And then let's say that there is another Björn out there with exact your body measurements, with your exact kind of fit preferences, that also will automate secondhand buying.

So you can, if you know that that person, the other Björn out there, sells something, then you know that yeah, this, I know this fits me. You don't need to care about what size it is if you know who's selling it. So I think this kind of level of increased intelligence will benefit the more circular industry in general.

And how about AI? So if you plot out AI another three years with exponential growth, so you just assume that, I don't know, the data centers that AI companies plan to build will be built and that AI doesn't plateau, but it rather grows exponentially. What will this mean for e-com ID?

It will be really, really good for us if more e-com sites become kind of AI ready. They will also be ready to kind of receive our shopper data through the e-com ID accounts. So for us, the more kind of AI ready storefronts get, it's really kind of benefiting our direction.

Where we're heading is basically that all sites will be AI ready, receive our e-com ID data, and then each e-com experience can be relevant, even though it's a completely new brand for you. What platforms do you think are AI ready and also not AI ready? Currently, I think no platforms are completely AI ready.

I still think that there is so many legacy standards in e-com that needs to be rethought. Like PLP is like filtering. That is the most kind of non-AI thing you can think of.

Like manually filtering gender, size. I don't know all the filtrings you have, but that is so non-AI. I cannot think of anything else more non-AI than that. But it's a standard.

So all brands still have it. I haven't yet seen any brand site with a PLP without manual filtering. So I think that since 1994, when we had the first online transaction, actually not much has happened with the storefronts.

You have the kind of PDPs with an image, with a name, with a price, with a description, with a size selection. And that's been the kind of PDP structure since more than 30 years back. So I think we definitely will and should see a proper restructuring of how e-com sites are built.

Just like Google put an industry standard in place for search. There's only one company in the world that can put an industry standard in place for platform and potentially e-commerce shopping experience wise, which probably is Shopify. So the question is, you know, when will Shopify implement AI, not search necessarily, but the AI filtering, AI prioritization of product?

Because technically, it's quite simple, isn't it? They are growing so fast now, doing a lot of kind of amazing things. I would focus more on the brand's own Shopify sites than on optimizing availability and visibility within Gemini, within ChatGPT, within kind of AI models.

Of course, that will help drive some traffic if that's where shoppers go in the exploration phase. But I think the focus should always be to kind of optimize the brand's own destination and not kind of other potential shopping destinations where a shopper could end up. And how about your company in three years from today?

EcomID, where is it and what problem will it resolve? In three years, EcomID is the kind of default solution for shoppers who want to have relevant shopping. It's the world's shopping passport where when you come to a new brand, you sign in with your EcomID and immediately the brand site become Bjornified.

Everything that you like in your size, in your taste comes up first, even though you never seen this brand before. So that's what we're visualizing. So since Shopify isn't doing it, you guys are doing it.

So really, really important for the industry for brands to own their own transactions, to own their own direct relationships. We talked about improving assortment. If the brands don't own their own kind of underlying data in terms of who is buying from us, what's their body measurements, what are they returning and why, then they cannot kind of improve their assortment over time.

And then the industry will not change over time. So that's also why I think it's really important to help brands own their own traffic. And the brands have the incentives to own the data, to own the process, to be as less dependent as possible.

I think also due to the history of e-commerce where, you know, there's been a bunch of platform changes and it moved from Google to Meta to TikTok and you want to diversify risks, which has been a key word since COVID basically. I think that will stick. And that will be the biggest incentive for brands to own its own data and to own the shopping process themselves.

Yes, fully agree. Because if they don't, they don't. They rely on being packaged elsewhere. And then they are not kind of in control of how their own products are presented and packaged and also rely on visibility.

And visibility is what other players are charging for. So Gemini ChatGPT, Zalando, marketplaces are charging for visibility, which even more pressures the brand's margins, which again shows another reason why brands should really own their own traffic. If you wouldn't build e-commerce today, what would you build instead?

Do you have other business ideas in mind that are good business ideas? I love building things that changes how people do things. I think the B2C angle is really interesting, affecting kind of people and not kind of only being B2B.

That's why I think our model is really interesting because we have a B2B angle for sure, but we also try to kind of have a B2C angle where we get the relationships with the shoppers. One idea that I think is so interesting is that why do we have Netflix and those kind of things for video content and media and not for newspapers? Now still you have these kind of paywalls really scattered, which is really, I think, inefficient.

So I think I will probably look into maybe something around trying to centralize some kind of paywall where you can read articles with one account. Really inspiring. And Oscar, if you have one last thing you would like to recommend to the podcast listeners, what would that be?

I think inspiration comes when you stay around people that you really like and build something that you genuinely believe in. So I guess it's, yeah, that's it. Building something that you genuinely believe in with people that you genuinely like.

Amazing, Oscar. Thank you so much for coming to the podcast. If people want to get in touch with you, how can they do that? Thank you so much, Björn. I think, yeah, LinkedIn or my email address is just oscar at ecomedy.

com. And thanks for having me again. Perfect, Oscar. If you want to get in touch with Oscar, please go to our show notes and you will have every link and every contact detail to Oscar there.

If you want to get in touch with me, you can do the same. Go into the show notes and you will have my LinkedIn link right there. If you like the podcast, make sure to follow the podcast in Spotify or Podcaster.

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Go in to follow our show notes and check out the link to Orange Juice right there. I also want to thank our amazing producers, Fredrik Anka Sjöld who is producing the podcast in the studio and Mikaela Dorsch who is editing and publishing all the podcasts and reels. Thank you so much for listening and see you again on Friday.

Ciao! Bye! Thank you for watching.