- Ordergroove raised $100 million in new funding led by Primus Capital Partners.
- Ordergroove makes software that brands and retailers use to sell their products via subscriptions.
- Subscriptions have grown more valuable to brands looking for new ways to acquire customers.
Ordergroove, a tech company that powers subscriptions for brands and retailers like The Honest Company and L’Oreal, announced Thursday that it had raised $100 million in a funding round led by growth equity firm Primus Capital Partners.
Founder and CEO Greg Alvo told Insider that Ordergroove thinks of the current era of retail as a time of “relationship commerce.”
Ordergroove helps brands build long-term rapport with customers through subscriptions and memberships. It uses machine learning to help sellers predict their customers’ consumption habits, and its newly revised analytics platform gives further insights. Its software integrates with e-commerce platforms including Shopify, BigCommerce, Salesforce Commerce Cloud, and Magento.
Ordergroove plans to use the funding to grow its team, which is about 120 people now. It also plans to continue building more software products with the aim of creating a “frictionless” commerce experience.
Having a close relationship with and an understanding of customers has grown more important in an e-commerce climate impacted by inflation and changes to consumer-privacy policies.
“There’s only so much you can compete on these days, especially in an inflationary environment, and I think price is not really cutting it anymore,” Alvo said. “I think a differentiated way of competing is really taking a step back and saying, how do I build this product and this experience and this customer journey to where there’s an affinity to come back to my website, my brand over and over again.”
E-commerce has changed dramatically in the 12 years since Target founded Ordergroove in 2010. When he was getting started, he faced an uphill battle in convincing retailers that subscriptions were beneficial, he said.
“When I started Ordergroove, there were three retailers at the time doing subscriptions: Amazon, QVC, and Petco,” Alvo said.
Some of Ordergroove’s earliest customers were large companies like Walmart and Nestle. Now, it’s common for even emerging and midsize companies to offer a subscription option to their customers.
Target said that Ordergroove’s “sweet spot” is fast-growing companies with a few million dollars in online sales each year.
“Now a smaller brand can have access to the same technology and platform that L’Oreal has had access to,” Alvo said. “And we scale with them from a pricing standpoint.”
‘We just want our customers to be successful’
The needs of Ordergroove’s customers have changed in recent decades. It’s recently grown more expensive for retailers to acquire new customers as Apple’s 2021 changes to iOS have updated how brands can target customers in ads, especially on Facebook. For many online sellers, that has meant designating ad spend towards newer platforms like TikTok or collecting first-party data through other sources like storefront quizzes.
Leaning into subscriptions can benefit retailers in a couple of ways, Alvo said. Recurring revenue is predictable, and it improves the economics of customer-acquisition costs. Offering a good subscription experience — with exclusive offers or other incentives for customers who subscribe — can also help brands to build affinity with customers and keep them coming back. Some customers may prefer having purchases automated so that they don’t run out of products they use regularly.
Ordergroove is not the only company that online sellers can turn to when exploring subscriptions. Recharge similarly sells subscription management software and has raised $277 million in venture funding since it was founded in 2014.
It hasn’t all been smooth sailing for subscription-focused companies, though. Birchbox, one of the earliest companies to sell curated subscription boxes, is reportedly considering filing for bankruptcy, and apparel subscription company Stitch Fix laid off 15% of its workforce earlier this year.
Target said that Ordergroove is processing “billions” in gross merchandise volume for its e-commerce partners each year, with an annual growth rate of about 60%.
It has its foot in physical retail as well — Target said that shoppers can sign up for subscriptions using Ordergroove’s software at the point-of-sale in some 10,000 stores. He said that is a big advantage for Ordergroove as many shoppers have returned to stores following pandemic lockdowns.
“For us, we don’t care where our GMV comes from, we just want our customers to be successful,” he said.