Businesses across the world have found 2020 a testing time to say the least and hundreds of thousands of small businesses have closed their doors for the last time this year.
And although it is clear that there are many who are trying to help business owners stay open there is a belief that some of the ‘big digital platforms’ offering services to help with business are contributing to the closures.
Victor Ho, CEO of Fivestars, believes that these bigger platforms all work on the same basis, that they “seek to take over a small business’ customer base and then charge them a tax to start reaching those customers.”
It would be easy to include Fivestars in this bracket if you judged them on the fact their software is designed to help smaller businesses with their marketing and payments. However Ho argues this, stating that they are taking a different approach.
Rather than building a “walled garden” of customers that forces businesses to pay for access, Fivestars charge businesses to use their software. The software gives the business the ability to build their own database of clients, meaning they no longer have to pay other, bigger companies to reach them. This way, “the incentives are more aligned.”
So how does the platform allow cross-promotion not just for the business but also across the other Fivestars businesses? By utilizing the payment product businesses can integrate with other point-of-sale systems as well as access automated marketing, which enables them to send personalized messages not just to their own customers but also to around 60 million other shoppers in the Fivestars network.
Furthermore, an announcement by the company that they have raised $52.5 million through funding, as well as a Series D equity round and debt which actually brings the total amount of funding to an impressive $145.5 million.
The round had been finalized before the current Covid-19 pandemic hit the country however Ho confirmed that they had decided it could be seen as bad taste to “flaunt” their numbers when many of their customers were struggling to survive amidst the stay-at-home orders.
However, since the pandemic started the company has had over 1 million new shoppers join each month, prompting the company to confirm the “record usage”. Yet with the pandemic continuing Fivestars has changed their strategy.
In the first instance the company started funding “just to keep growing our portfolio of merchants across our existing products. What changed pretty dramatically through this period for us was emphasizing the payments piece and the network. Ho continued that they soon realized that they needed to start looking at “what small businesses need more than ever”.
The pandemic also saw Fivestars make more of their products free to use and offered over $1 million in credits to their customers. Ho explained, “It’s very clear that small businesses are incredibly resilient. Particularly when it comes to the category of experiences – you’re not going to take your wife on a date to Pizza Hut when you go to Paris, you’re not going to go to generic chains.”
Fivestars has been credited as helping many businesses including Tropibowls in Fort Lauderdale. Natasha Teague of the health food store acknowledged that the system had been a “huge help” saying, “The value of being able to communicate with our customers and share updates in real-time has been immeasurable. The power of Fivestars’ expansive network and payment tech has made our reopening process seamless and a lifesaver as we navigate new needs as a result of the pandemic.”
Since Fivestars first started as a loyalty and rewards service they have grown to become one of the biggest marketing and analytics platforms. Speaking in 2016 Ho said, “The overarching goal is to bring the customers back in more often. We do that by helping merchants collect data on things like what customers are ordering, and through our tools we have a CRM and marketing automation suite to reach out and engage customers.”
Ho and co-founder Matt Doka worked together at McKinsey where they contributed to building reward and loyalty products for “Fortune 50 brands” and soon realized that smaller businesses could also benefit from these types of products, and they “wanted to try to fix that”.
Doka and Ho both realized that smaller businesses were going bankrupt faster than big business – something that has never been more prevalent than during the current pandemic. Ho said, “There is no way that small businesses can compete on price against a company like, say, WalMart. But without better loyalty services, they couldn’t compete on personalization, either. And yet customer service is probably one of the only ways to help them win.”