Lightspeed Supplier Network Looks to Make Good on Promise of Big Data, But Should Have Happened Much Faster

Retailers around the world produce a lot of data. Data that is often overlooked by the retailer themselves. Those a bit upstream – like the suppliers and distributors of the retailer ecosystems – understand why and how that data can be used for good, but said data is beyond fragmented. And even up until the past decade, the systems retailers used were offline and not much fun to tap into, even if the supplier could justify the lift to do so.

AS POS systems have moved to cloud, the data is easier to get. It’s still fragmented, but it’s one step closer to providing something useful.

Lightspeed recently announced its Supplier Network effort, making good on all the data it sees across its tens of thousands of retailers. We’d argue this could and should have been produced five or more years earlier if Lightspeed had instead partnered with another entity to do this, but better late than never.

Aside from aggregation, Lightspeed went through the painstaking process of cleaning up the item level data on its systems. In grocery, items have UPCs, or universal product codes. This makes tracking consistent and rather pleasant thanks to the efforts at GS1 several decades ago. Retail is a bit dirtier, with SKU (stock keeping units). Restaurants? Forget about it: it’s the wild west of creative manufacturing at kitchens across the globe. What’s a Bob’s Burger? Dunno, but it’s different than a Bobby’s Burger.

You can watch the Supplier Network video below, but here are the cliff notes we thought most valuable.

First, Lightspeed will be able to forecast what stores should be selling based upon item level trends in geographies. We suspect this to more basic recommendations at this stage, but again if Lightspeed partnered with someone they could really widen the moat here around features and value. The value in forecasting is not only relevant to their merchants, but suppliers and distributors that need to know what to stock, where.

Second, the forecasting helps with just in time inventory. Inventory is expensive, and it’s even worse if you need to return it at a later date. By predicting trends more accurately, Lightspeed merchants can benefit from a more even inventory. It would be really interesting if Lightspeed’s system could automatically order inventory and suggest pricing, but again, this feels much more likely to come to pass if Lightspeed were to instead partner on the matter.

Third, Lightspeed seems to be bringing in the benefits of a traditional coop in lowering costs for their merchants through aggregated buying power. In theory it’s good, in practice it feels a bit harder to pull off. If two retailers in the same town are now able to buy the item at the same price, isn’t the winner really just Amazon who’s willing to make the smallest profit on the sale?

Fourth, and what should come as no surprise if you’ve followed SaaS businesses in the past decade, Lightspeed sees a way to insert itself into the merchant-supplier ordering process and collect a payment fee, which is free money. We would just as well assume merchants would be using ACH to avoid paying 3% on any orders, but maybe that’s too logical for an SMB, or maybe the SMB doesn’t have the cashflow to pay with their bank account.

We’ll close with two points.

One, Lightspeed has a lot of data, but it might not be enough. Walmart alone represents 25% of all grocery sales, yet Nielsen and IRI, two parties that aggregate grocery retail data for suppliers and distributors, combine Walmart data with data from Kroger and more to increase the statistical accuracy for suppliers. Lightspeed could find that it doesn’t have enough power to push through what it wants, and we’re reading between the lines here to observe that Lightspeed’s Supplier Network website references bike suppliers, the one retail segment where Lightspeed does have considerable penetration.

Once again, this is why leveraging a third party partner might make more sense.

Second, we applaud Lightspeed’s efforts but we’d argue this could have been brought to market faster, and with a wider moat, if Lightspeed hadn’t undertaken this work. This would have benefitted Lightspeed’s customers faster, would have allowed Lightspeed to focus its resources on other initiatives, and overall bolstered Lightspeed’s market position.

You can’t do everything, but this is far better than what other retail POS companies have done.