Algorithm and Blues: How a Vinyl Record Retailer Turns Recommendations Into Sales Via Text

'Conversational Commerce' Business Model Is Gaining Momentum

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Back in the day, vinyl geeks schlepped to a record store or flea market and spent hours going through bins of dusty albums. ReplyYes is a whole lot easier.

The Seattle startup sends a daily text message suggesting a vinyl recommendation determined by an algorithm. You want? Reply yes. In about six days the album arrives in the mail. That's it.

Madrona Venture Group, which launched ReplyYes about eight months ago in its startup lab, calls the business model "conversational commerce."

The concept began with Peach, a food-delivery service backed by Madrona that sends daily texts asking if customers wants to order a particular lunch dish -- say, Chicken Tikka Masala from Seattle's Cedars Restaurant. Peach did so well, Madrona started ReplyYes, which has sold more than $1 million worth of vinyl so far and on Thursday added graphic novels to its menu of collectibles. "There's something with messaging that just feels intimate," said Madrona Managing Director Scott Jacobson. "It's very much more of a conversation than e-mail."

Conversational -- or chat -- commerce is having a moment.

In recent months a variety of text-based services have sprung up, including Assist, which lets you book haircuts or order flowers via text or Facebook messenger, and Magic, an all-purpose butler/valet/personal shopper.

Established tech companies have been bitten by the chatbot bug, too. On Tuesday, Facebook's Mark Zuckerberg said he wanted to let his customers chat with artificially intelligent bots and do everything from get sports updates to order a car service. Microsoft, for its part, believes the world will soon move away from apps into a phase dominated by chatbots.

"This has the power to be another huge way to buy," says Forrester analyst Sucharita Mulpuru. She sees chat commerce as a valuable tool in the marketing armory for companies large and small but deems the buzz in VC circles a little overdone.

ReplyYes is hoping that by focusing on collectors it can build a lasting business. Hence vinyl LPs, which have gained cachet of late. Last year the value of vinyl shipments in the U.S. surged by almost one-third, to $416 million -- the highest level since 1988, according to the Recording Industry Association of America. "It's a passionate community," says ReplyYes Chief Executive Officer Dave Cotter, who adds that 68% of his record buyers are repeat customers.

When users sign up for the service -- called The Edit -- they're quizzed on preferences and asked to give a thumbs-up or down to such albums as the Beatles' "Abbey Road" and Dr. Dre's "The Chronic." Each day a text arrives with a record on offer, and besides replying yes to buy, users can text like or dislike to further refine the algorithms used to determine their interests.

The company also runs a promotion that asks new users to text what artists or album they like so the company can track them down.

ReplyYes uses a blend of artificial intelligence chatbots and humans with deep knowledge of records and now comics. The humans handle anything complicated or respond when users ask for opinions and recommendations.

The new graphic novel service is called Origin Bound and will carry thousands of titles including "Deadpool: The Complete Collection," the deluxe edition of "Watchmen" and "Star Wars: Darth Vader Vol 1." To help the service appeal to aficionados, ReplyYes recently hired someone who grew up next to a comic-book store.

ReplyYes has raised $2.5 million, and other investors include Francois Kress, the CEO of Carolina Herrera, and Lorne Michaels's investment arm. Lowercase Capital is also backing the company; partly it wanted to use the technology for its Lowercase Alpha service, which lets early-stage founders test out and get immediate user feedback.

"As people get numb to social and email, messaging is still the unpolluted medium," says Matt Mazzeo, a Lowercase Capital managing director. "It hasn't yet been diluted by massive spammy marketing channels."

With all the money and big guns crowding into chat commerce, that may not last for long.

The trick, says ReplyYes's Cotter, is to respect the trust customers grant you by allowing ReplyYes into their text inbox. You can't spam them and must consistently send products that match their tastes. You are only as good as your recommendation engine, he says. The company is currently looking for its next nerd community -- say, knitting nuts looking for yarn.

-- Bloomberg News

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