Independent shops, snack bars and the self-employed are lagging behind in digitisation. One of Germany’s most prominent IT entrepreneurs wants to change that by treating them as one giant enterprise.
• In an internet economy driven by mantras such as "Move fast and break things!" or "Fail often, fail fast!" eight years is half an eternity. Young tech companies all over the world want to be first to the market and will quickly rectify any issues later if there are problems. He who hesitates is lost. Yet one German entrepreneur, Marco Börries, has spent the last eight years tucked away in Hamburg with a close-knit team of developers and hardware experts working on something no one has attempted before: to bring small enterprises everywhere into the digital age with hi-tech business management software.
Börries reckons there are about 200 million people running small businesses worldwide, from architects in Hanover to street cooks in Hanoi. “They represent a market of gigantic dimensions – an untapped well of potential for digitisation," he says, one morning at the offices of Enfore, his new venture, housed in one of the city’s hallmark riverside warehouse conversions.
Too late! Already been done, you might think. In increasing numbers of restaurants, waiters now send orders to the kitchen using tablets and smartphones; hairdressers are using online booking platforms such as Treatwell in the UK or Terminland in Germany; and tax advisers list themselves on the internet. Have Börries and his team wasted eight years on a product that's already out there?
"We're talking about a highly complex market in which every customer has individual requirements," says Börries. "Analysing and understanding these needs took quite some time. The product we now have offers a lot more than the various isolated solutions to date."
The Enfore software goes well beyond till functionality and cash-free transactions: it is in fact a full enterprise resource management (ERM) system, with optional extras such as automatic re-ordering. Small-scale retail outfits can use it to offer their customers a variety of services that have previously been the preserve of the larger chain stores. "With one click the stock management function creates an online shop," says Börries, "so customers can order online and collect in store, or indeed try a jacket on in the shop and have it sent home."
The system can identify regular customers and allows small businesses to analyse buying habits; it can produce discount campaigns and loyalty schemes, sending coupons or points cards to customers' smartphones. Retailers can choose to link up with platforms such as Amazon and eBay and automatically offer their products to a far broader customer base. The software also takes care of tasks many shopkeepers hate doing – such as daily cash accounting – which must be done properly to avoid problems further down the line. "We didn't just ask small business owners what they wanted," explains Börries. "We actually observed them in their working environments, filming them as they went about their business and analysing the footage, working with them to find out what could be simplified, automated or optimised."
Put simply, Börries' plan is to cluster together small businesses to make them stronger. Just as some fish seek safety in shoals, local retailers and service providers could protect themselves from the global giants by joining forces. "Make them look like one," as Börries puts it – in English. Bringing small businesses together has already helped him to negotiate better conditions from payment providers: Enfore users pay 1.19% on credit and 0.79% on debit card transactions, and less once they reach a higher turnover threshold. By comparison, small businesses using tablet-connected card readers provided by startups such as SumUp or iZettle pay 2.75% to credit card companies and 0.95% for debit card payments. Enfore itself takes €0.03 (3p) per transaction, up to a €20 a month maximum. This low ceiling would certainly seem to back up Börries' claim that he really is in the market to strengthen small-scale retailers and service providers.
Digitalising their business is not the top priority for someone opening a kiosk or snack bar. Börries and his staff of 65 are fully aware of that, which is why their marketing strategy concentrates on hardware. The Enfore application will run on PCs, Macs and mobile devices, but it really comes into its own on the company's proprietary touchscreen cash register, Dasher. This smart till has a large display for the salesperson and a smaller one for the customer (e.g. to provide signatures), a printer for receipts, a scanner to read codes from customers' smartphone screens, and an external card reader. It is quick to set up and doesn’t need lengthy inductions; all the additional functions – from automatically re-ordering paper napkins through to dispatching discount codes to previous customers who have not returned for 12 months – are installed, but can be activated and learned later.
The Dasher till is Enfore's “way in” to the market: it is considerably cheaper than most existing systems, retailing at €998 (including the card reader). Yet Enfore does not see it as a loss leader. "Despite the attractive conditions, we earn money on every cash register we sell," says Börries.
The most lucrative position in the modern internet economy is occupied by the platforms that match supply and demand. Companies that focus on brokering between buyers and sellers, taking commission on deals, can follow paths trodden by businesses such as Google and Facebook (online advertising), Airbnb (travel lettings), or Uber (transportation) towards untold turnover figures. That is Börries' ultimate goal, too – though one which he freely admits he is still very far from reaching. "The endgame is to open up the platform to companies who are offering products and services so that they can connect with small businesses looking for providers, creating value for all sides in much the same way as Google AdWords does by matching advertisers with users who enter specific search terms,” he explains.
In practice this might mean that the Enfore software automatically places an order for shampoo as soon as the second-to-last bottle in a hairdressing salon has been opened, and a range of suppliers could then bid for the order. Is there a danger that the platform would become a quasi-monopoly? Yes, but the risk is probably quite low. Enfore would first have to knock out all the alternatives to the functions it packages. Moreover, if Börries really can show that digitising 200m small businesses is lucrative, it won't be long before the Silicon Valley tech giants discover their own interest in this particular market.
Marco Börries, 49, left school early, at 16, and (according to legend) used the money he had been given to celebrate his confirmation at church to set up a software company called Star Division. He got the idea for making proprietary programs for personal computers, the booming home technology of the time, after a school exchange to Silicon Valley. In the 1980s and 1990s, Börries sold millions of licences to StarOffice, later called OpenOffice, which went on to give the market leader Microsoft a genuine run for its money. Der Spiegel and Die Zeit referred to Börries as "the German Bill Gates", a “whiz-kid” – labels that today elicit barely more than a weary roll of the eyes from the man himself.
In 1999, he sold Star Division to the US company Sun Microsystems for about $70m and moved to California with his family. In 2001, he set up a new venture there called VerdiSoft, synchronising the transfer of data between PCs and mobile devices, which were becoming popular. Four years later, the tech giant Yahoo bought the company for an undisclosed sum (reputedly just shy of $60m) and Börries was appointed head of its mobile division.
He left Yahoo in 2009 and returned to Germany, where he set up his third company, Mag10. The intention was to offer a WordPress-style publishing platform for the iPad, but it failed to convince investors after the first round of funding. By his fourth startup – originally Number Four, then simplified to Enfore – Börries kept his head down, eschewing big announcements as he and his team got on with the job in a low-key, almost secretive fashion. He has known many of them since the Star Division days, so the quotient of grey hair at the company's offices in Hamburg's Speicherstadt district is noticeably higher than at your average startup. Then again, it's unlikely he would have been able to get a group of overachieving twentysomethings on a mission to change the world to stick to it and maintain radio silence for eight long years.
Börries also brought several of his early investors to Enfore. Alongside his own money, there is about $38m of capital in the company from Index Ventures and the Deutsche Telekom subsidiary T-Venture, as well as investors such as Sun Microsystems’ co-founder, Andreas von Bechtolsheim, and the Yahoo co-founder, Jerry Yang.
Börries and his team have unquestionably set themselves an ambitious goal in a sector in which there is no shortage of competition from companies offering partial solutions: Business One from SAP, for instance, as well as tablet-based till systems such as Inventorum or Orderbird and payment services provided by companies such as SumUp and Square. Nevertheless, a fully integrated system ought to be more attractive (and cheaper) than a mosaic approach, especially for people just setting up. That's why the Enfore sales team concentrates on entrepreneurs in the early stages of opening their new snack bar or shoe shop. "Rather than going to established outfits and trying to convince them to transfer their whole system to our solution, we're targeting new businesses, as well as shops opening a second store or which are just changing hands as one generation passes on to the next," explains Börries.
He's not fighting a one-man battle: Deutsche Telekom is offering the Dasher till for an unbeatable €199 to clients taking up a two-year service contract with its Magenta Business arm; the company has even set up its own hotline with trained staff to help with the new cash register.
In logistics, too, Enfore has strong partners: it's too early to name names, but they are in the same league as Deutsche Telekom, he says. And the business models are sound: Enfore earns money from selling devices while also generating regular income from commission on payments made using them and, in future, from fees for services such as payroll accounting. If it gets to the stage that suppliers can competitively bid for orders, then it will have yet another source of income. Moreover, Enfore is not intended to be a closed system, but rather an open platform. Third-party providers will be able to offer applications that customers running small businesses can install and use.
The greatest hurdle early on, however, will consist in selling enough cash registers to get the system established, generate sufficient income and unlock the next stages. It will be a question of how rapidly and how broadly Enfore can expand its customer base to start benefiting from the platform effects that make the big tech companies so wealthy. One thing he certainly is not lacking is imagination. At present, his startup is concentrating on small restaurants, hotels and guesthouses, for instance. At a later date, however, he hopes to expand into the wholesale and manufacturing sectors, then the creative professions and service providers, and ultimately the health sector.
Despite this grand vision, Börries is no dreamer. Many of his partners have come on board because they recognised that their own customer base among small businesses was dwindling. "If we don't manage to connect them up, if we can't bring them into the digital future," warns Börries, "then these local stores and tradespeople won't be able to survive. That's not doom-mongering – that's the reality."