E-commerce analytics startup Assortify thought they landed a big win last fall: A contract with Sports Authority.

Hayneedle veterans Marcus Goedeker, Jacob Messerly and Jeremy Vlcan started Assortify as a pricing and assortment analysis tool for e-commerce companies. In September 2015 they exited the Straight Shot accelerator in Omaha, Nebraska, with a couple large clients and several potential contracts.

At the time, the Assortify team was targeting companies with $100 million in revenue and higher. One potential contract, Sports Authority, was exactly the kind of company they were looking for.

“All we knew is that they were a $3 billion company and they really liked what we were doing and wanted to invest in our product,” said Goedeker.

By December 2015 the team had started work for Sports Authority, their largest contract to date.

“This was far before any talk of their being in trouble,” said Godecker.

Delivering value

According to Goedeker, everything went fantastic for the first few months. Assortify was helping Sports Authority optimize over 300,000 products for their online e-commerce sites. They also helped the company identify products they weren’t offering that had high ratings and positive reviews on other sites.

“The immediate results were very good,” said Goedeker. “The data we were providing them was increasing their profitability and revenue.”

Goedeker gives an example of the kind of value Assortify provided to the company.

“Using the Assortify software, Sports Authority identified 35 products that could be optimized based on their competition,” said Goedeker. “In 8 days the changes to those 35 products generated $85,000 in incremental revenue and $33,000 in additional margin dollars.”

They noticed that Sports Authority was a little bit behind its competitors in the online space, but that only made the Assortify team more optimistic about the opportunity to show their value.

“We were pretty excited. We saw this as a huge opportunity for us to have a great use case,” said Goedeker. “They had a large brand name and over 400 stores nationwide. The fact that they were a little behind was a bonus for us because we could showcase what we could do.”

Warning signs

In February the company learned that Sports Authority was filing for bankruptcy.

“At first the thought was, lots of companies go through this. And the feedback from the them was, ‘Don’t worry about it,” said Goedeker.

The Assortify team also had reasons to remain optimistic.

“What made us hopeful was that their e-commerce division was doing phenomenal,” said Goedeker. “They had posted triple-digit growth over the last few years. They were growing rapidly online.”

If anything, they thought, the impact would be limited to the closing of retail stores.

In March, when Sports Authority officially filed for bankruptcy, news began to leak that the situation was much worse. Even then, there was still a possibility that someone would buy the e-commerce side of the business, even as stores across the country closed.

By May, however, it was clear the end was near.

“May came and everyone at Sports Authority was notified they were losing their jobs,” said Goedeker.

It was an emotional experience for the Assortify team to watch employees on the other side lose everything.

“We’re just a small startup. It’s hard to be upset when the people we’re talking to every week don’t know what they’re going to do now,” said Goedeker. “It’s just a tough situation all around.”

In June Sports Authority sold its brand and intellectual property to Dick’s Sporting Goods for $15 million.

Lessons learned

Goedeker and the Assortify team has learned a lot from the experience of working with a major client at a very early stage.

“Large companies take a lot of time from a startup,” said Goedeker. “We learned it’s not necessarily great to have a large company. When you’re small it takes up so much of your time.”

Large contracts can profoundly affect the trajectory of a nascent business. When the Sports Authority contract came in, Goedeker admits they placed less emphasis on finding new business and raising capital.

“When we got that contract we decided to put on hold raising money and put all our focus on this contract and our other customers,” said Goedeker.

A startup may also be tempted to change their product to fit one company while missing out on the broader market need.

Larger companies can mean longer sales cycles as well, according to Goedeker. After months of travel, emails and phone calls, a project can get cancelled due to changes in the budget.

All of these insights have shaped the next stage for Assortify.

View to the future

By late April Assortify was in development and rethinking what customers liked best about their product.

“Sports Authority and other users always came back to this one part of our product where they would say, ‘Oh, wow. This is amazing,’” said Goedeker. “People would say, ‘I used to work at Target, and if we had had this at Target I would’ve loved it.’ We kept coming back to that.”

The result was a new product that focused on their best features at a lower price point.

“We said, ‘Let’s double down on these features that are very unique, that we can’t find anybody else doing,’” said Goedeker.

According to Goedeker, one of the biggest lags on the sales cycle is getting budget approval. By lowering the price point to a level to around $500 they hope to work around those longer approval processes.

In the past they had spent a lot of time explaining their platform for each customer. This time around they have streamlined the system so it’s easier for a customer to start fast without a lot of explanation.

“We wanted it to be a bit more scaleable,” said Goedeker.

On July 10th Assortify launched its new product.

—

Ryan Pendell is the Managing Editor of Silicon Prairie News.