That $30M App That Rewards You For Just Browsing

The ground floor of Macy’s flagship store on New York’s 34th Street is sensory overload. Through clouds of celebrity-endorsed fragrances, giant TVs screen catwalk shows above MAC counter makeovers; perhaps a hundred sales assistants beadily circle the stream of shoppers and tourists, trying to make eye contact. Shopk!ck can guide you through the clutter–and reward your perseverance. It starts by reminding you to open the app as you walk into the store, shows the most-liked products you can buy in Macy’s and awards you 50 to 200 “k!cks.” In some stores you can get 500 more for scanning sponsored items and 1,000 more if you spend over $75 with a linked credit or debit card. You can redeem those k!cks for a gift at Macy’s or something else, from a Starbucks card (1,250 k!cks) to an iPad (125,000 k!cks).

This is the age of invisible apps “that just notify us when something is going on,” as trend spotter and venture capitalist Mary Meeker said recently. Cyriac Roeding, 41, started reaching out to shoppers in 2010. Shopk!ck’s cofounder and CEO, and a German expat, he did so via ultrasound, a high-frequency signal that communicates with the app, verifies shoppers are inside the store and offers them k!cks. “I’d done some soul-searching,” says Roeding, who wondered, “What’s the intersection of mobile and the physical world? The answer was easy: It’s called shopping.”

Shopk!ck has racked up 7.5 million users. Every time they use the app with one of the 150 brand and 15 retail partners–including American Eagle and Sports Authority–Shopk!ck earns a fee. Last year it grossed an estimated 45% on revenue of $26.3 million; sales have doubled every year. Roeding says it’s been profitable since late 2012. In two rounds of funding–one led by Kleiner Perkins, the other by Greylock Partners–Shopk!ck has raised a total $20 million. The last round, in 2010, gave the company an estimated $75 million valuation. It’s probably tripled since.

First-mover advantage is nice, but it’s been a struggle for Roeding. He’s fending off new rivals–especially since Apple AAPL +0.66% last year introduced iBeacon, a Bluetooth signal that allows messages, like flash sales and discounts, to be sent to nearby phones. Shopk!ck had been working on a version of Bluetooth but decided to bundle iBeacon into its own tech, creating ShopBeacon. The result: a device that only sends signals to shoppers actually in the store (instead of a parking lot or somewhere else in the mall) and tells them to open the app to receive targeted messages if they’ve okayed push notifications. Within three months Roeding had a trial of ShopBeacon in Macy’s ahead of Black Friday. The retailer loved it because once you’re in the store you’re likely to buy something. “The conversion rates are very high,” says Roeding, anywhere from 20% to 95%. “That’s the opposite of online shopping, where conversion rates are terrible”–maybe 3%.

Shopk!ck has stared down the possibility that a Google or eBay engineering team will crack geo-location mobile shopping. Now that iBeacons are mushrooming, Wal-Mart, Virgin Atlantic and Duane Reade are all rethinking their own apps. Their gain isn’t necessarily Shopk!ck’s loss: Because it’s not brand-specific, it can continue to add retailers–and save shoppers the inconvenience of having to download a different app for every store. The last time Nielsen looked (2014), Shopk!ck ranked No. 2 in app use (1 hour, 18 minutes per month) of any shopping app.

Raised outside of Frankfurt, Germany, Roeding played with computers as a kid and got a degree in engineering and business admin before taking himself to Tokyo to study management. There he noticed something intriguing about people and their cars. “They had these very large antennas on the roofs of their cars, and I thought, ‘Oh, my God, what is that?’ It turned out they had mobile phones in their cars, and I thought this is how people are going to live and communicate. I thought, ‘This is going to change everything.’ ” Back in Germany he cofounded 12snap, a mobile advertising startup.

Roeding was desperate to go to Silicon Valley and launch something but didn’t have a green card. “ I had to network like crazy–it was probably the hardest sale I ever made,” he recalls. Finally the CBS affiliate in L.A. agreed to sponsor him. Roeding started and ran its mobile division. Frequenting conferences, he met Kleiner partner Matt Murphy. “I was always super-impressed with his insights because at that point almost no one had really worked in mobile,” remembers Murphy, who later invited Roeding to be Kleiner’s entrepreneur-in-residence.

“I joined on the first day of the Ice Age,” Roeding remembers–Sept. 15, 2008, the same day Lehman Brothers imploded. “Every day I came to work and felt like why in the world do they have me here? No one wants to invest in anything anyway!” But at a desk in Kleiner’s basement the app took shape. First he sifted through the 5,000 business plans the firm had received for the $200 million iFund. When he couldn’t find anything that jibed, he came up with his own. “I went shopping a lot, I observed people, and I went to different places and hung out with my fiancé, now wife,” says Roeding, who speaks with a mild Teutonic accent.

The idea was a total outlier at the time. “Even some shopping services like Groupon hadn’t launched a mobile app yet,” says Murphy. “No one was thinking about how you build something that marries the online and offline world.”

Roeding’s biggest challenge was getting retailers as partners while the economy was in the basement. Kleiner liked the idea but was unsure it would catch on. “The initial thing from Best Buy was, ‘Yeah, that’s interesting, but it will take a year or 18 months,’ ” recalls Murphy. “ Cyriac made it happen in six months.” It still took 40 meetings before Best Buy signed on.

“Target said no to Cyriac three or four times, and Cyriac kept coming at them, various levels in the organization, working with brands to influence Target, coming up with different economic value propositions,” says Murphy. “Winning a retailer you had to convince ten different groups, and Cyriac had the tenacity, patience and creativity to get through that.”

Another big stumbling block for retailers was the idea that customers walked into their stores but could elect to get gift cards from competitors. But they liked the fact that ShopBeacon could pinpoint a customer. Once she’s in the store, ShopBeacon can then send a notification that the dress she liked while browsing the app at home is in stock and give her a deal on flip-flops as she passes the shoe aisle.

Shopk!ck can tell browsers about special offers on handbags as they pass the handbag aisle.

Roeding says he overhauls the app at least once a year. “We learn so much from data about what users want and don’t want, then rigorously turn our learning into a new product.” Example: the so-called couch mode, which lets shoppers use the app when they’re outside of stores.

One problem he hasn’t solved is ensuring the app, when activated, doesn’t become a constant, buzzing nuisance. (Hint: Turn off Bluetooth.)

To keep his lead, Roeding constantly studies the anthropology of shopping. In the future, he thinks, it will be more like wandering through a gallery than waiting in line to buy a necessity. “It will be almost like a minivacation.” Some would call that retail therapy 3.0. Roeding might call it LeisureK!ck.