Demandware Inc., whose software helps such tony brands as Tory Burch, Brooks Brothers and L’Oreal sell online, announced an acquisition today that rounds out its portfolio with in-store technology.
The company said it would buy Tomax, a provider of software that retailers use at the point of sale and to track inventory and staff. Demandware says it will pay $60 million in cash, plus up to $15 million more over time based on results.
“The retail landscape is rapidly changing with more than 70% of specialty stores saying their next POS will be a unified commerce platform,” Greg Buzek, founder and president of IHL Group, a research and consulting firm for the retail and hospitality industries, says in a statement Demandware included in its announcement of the sale. “Traditional siloed systems are not meeting the needs of the consumer who requires the same experience across channels and devices. Retailers need to have a ‘single version of the truth’—one view of the enterprise organization and information about the consumer from point of sale to digital commerce.”
Demandware says the acquisition will enable it to provide “retailers with access to comprehensive consumer, product, inventory, order and price data, giving retailers real-time information as a basis for continuous innovation in the store.” Demandware delivers its software via the cloud, that is hosting it on the web instead of licensing it to clients to operate from their own data centers, and Tomax is moving to a similar model.
“We have demonstrated that our cloud solution is a superior model for managing consumer engagement across channels,” says Demandware CEO Tom Ebling. “The addition of Tomax’s POS technology and deep in-store domain expertise allows us to accelerate our One Platform strategy by extending our reach further into the physical store. This transaction creates a tremendous opportunity for Demandware, by expanding our market to include in-store retail sales.”
Retailer clients of Tomax include L.L. Bean Inc., No. 32 in the Internet Retailer 2014 Top 500, Hallmark Cards Inc., No. 215, and Party City Corp., No. 222. Tomax CEO Eric Olafson will be joining Demandware, Ebling says.
Demandware executives previously had discussed wanting to add the kind of in-store expertise Tomax brings, says Shawn Milne, an analyst for investment firm Janney Capital Markets who follows Demandware. “Tomax has 170 employees with a key 100-person retail technology-focused engineering team, which we believe drove the buy vs. build approach,” Milne says. He adds that Tomax has about 30 clients and annual revenue of about $24 million.
Demandware, whose stock trades on the New York Stock Exchange under the symbol DWRE, ranks No. 9 among provides of e-commerce platform technology to Top 1000 online retailers in North America, based on the online sales of its clients. The company counts 39 Top 1000 retailers among its clients, including 31 in the Top 500 and eight in the Second 500, which ranks retailers Nos. 501-1000 based on their online sales.
The company is particularly strong in providing e-commerce software to apparel brands and retailers, which make up 22 of its 39 Top 1000 clients. They include VF Corp. (No. 110), Tory Burch (No. 157), Brooks Brothers (No. 168), Barneys New York Inc. (No. 186) and Crocs Inc. (No. 219).
For its fiscal third quarter, which ended Sept. 30, Demandware reported:
- Total revenue of $38.2 million, a 56% increase from $24.5 million during the same quarter a year earlier.
- 243 live customers, an increase of 32% from 184 a year earlier.
- 1,027 live web sites using its software, up 39% from 741.
- A net loss of $6.853 million, an increase of 9.5% from $6.257 million a year earlier.