Startups supported by Radar american eagle Jay Schottenstein, CEO of the company that helps retailers manage in-store inventory and reduce product theft and loss, has reached unicorn status with its latest round of funding, CNBC has learned.
Founded in 2013 by Spencer Hewett, the company has raised $170 million in a Series B funding round co-led by Gideon Strategic Partners and Nimble Partners, with participation from Align Ventures, at a valuation of more than $1 billion.
The company counts Schottenstein among its investors. He said American Eagle was the first retailer to implement Radar’s technology in all of its stores.
Through Radar, “American Eagle has gained greater visibility into its inventory, empowered its employees, and sharpened its insights,” Schottenstein said. “By digitizing our inventory in real-time, our creative, operations and technology teams can now focus on creating the seamless, customer-first experiences that define the American Eagle brand.”
Radar also works gapOld Navy and other major retailers, covering more than 1,400 stores.
When Hewett founded the company with the backing of venture capitalist Peter Thiel’s Young Entrepreneurs Fellowship, his goal was to create a better way to do instant checkout, but that strategy evolved into inventory management. Using hardware mounted on the ceiling of brick-and-mortar stores, Radar’s technology can read any radio frequency identification (RFID) tag with 99% accuracy, the company said.
This technology addresses one of the most difficult aspects of running a retail business: inventory management. Retailers face the constant challenge of managing inventory: knowing how much product to make, deciding where to ship it, and tracking the product once it arrives. Errors can lead to lost sales and lower profit margins.
Radar primarily works at the store level. This allows store associates to quickly find the products customers want and addresses the pain point of shoppers who visit a store to purchase an item that says it’s available online but is actually out of stock.
“If a customer asks, ‘I want this in a different size,’ regardless of where it was moved in the store, we can immediately see where it is in the store and get it to the customer,” Hewett said in an interview with CNBC. “This gives them the confidence that they can actually support the customer even when they’re not there. For example, they say they might have inventory in the back, disappear for 15 minutes, and then come back and say, ‘Actually, our inventory system said we had it, but we don’t have it. We can’t find it.’
As a result, some of Radar’s retail customers, which offer the option to buy online and pick up in store, have seen order cancellation rates drop from 25% to 3%, Hewett said.
This technology also helps managers better monitor delivery status and more easily identify inventory shrinkage or losses due to theft, errors, or damage. Shrinkage can also result from customers stealing goods, but it is often more opaque than that. They also often occur due to employees across the supply chain taking items or administrative errors.
For example, if a store was scheduled to ship 100 T-shirts, but 80 arrived due to theft or packaging errors at the distribution center, it would be difficult for the store manager to identify, which could lead to out-of-stock items and lost sales.
“We don’t have the working hours to go and count every box that comes in, so we have to accept what they say and assume it’s true,” Hewett said. “With radar, you can actually confirm in real time that it’s true and immediately flag it if it’s not.”
Although the company declined to share overall customer data showing the technology’s effectiveness, Hewett said one of his customers saw a 60% reduction in customer shrinkage after implementing radar at one of the company’s stores.
Companies tend to measure shrink on a net basis, taking into account both excess and deficiency. A company may have a 15% shortfall and a 15% surplus, which reflects a 0% net shrinkage, but that also means 30% less inventory for customers, Hewett said.
“Size and color are important. For example, if they don’t have my size, I’m not going to buy it. So it’s a lost sale, and that shows up in revenue and margin,” Hewett said. “We effectively eliminate that problem and ensure that our customers always have the size, color, and product they want in stock.”
