After layoffs, Shopify aggregator OpenStore launches an AI customer service tool for brands

OpenStore’s business model has shifted in other ways. In August, the company laid off about 20% of staff, which hasn’t previously been reported. In an interview with Modern Retail, OpenStore CEO Keith Rabois said the company was also increasingly focused on identifying “more brands that can have incredible upside potential” that can grow by 10X versus “just buying a bunch of brands that we can make 10% or 20% better.” Rabois estimated that, currently, about 20% of OpenStore’s team is focused full-time on OpenDesk. Depending on how that service grows, OpenStore may dedicate more resources toward it. 

OpenDesk has a pay-as-you-go model and will target smaller brands that find services like Gorgias or ZenDesk too expensive. 

OpenStore launched in 2021 with a plan to build a leading Shopify roll-up company. It built pricing algorithms that would allow OpenStore to evaluate and place a bid for a brand in as little as 24 hours based on Shopify data. That opened up the potential for OpenStore to acquire brands faster than most other aggregators. At one point, the company said it was acquiring multiple companies a week, and wanted to acquire brands doing between $500,000 and $10 million in revenue per year.

Over the course of just a few years, the company raised around $150 million.

OpenStore has multiple other co-founders in addition to Rabois, including serial entrepreneur Jack Abraham. Abraham is the founder and managing partner of startup studio and investment fund Atomic, which helped launch Hims among other brands. 

But since OpenStore launched, the e-commerce landscape has changed significantly. E-commerce sales growth has slowed down. And thanks to inflation and high interest rates, startups have been increasingly under pressure to cut their own costs over the past couple of years. And other aggregators, particularly on the Amazon side, have filed for bankruptcy and merged as they’ve sought to adapt to the changing landscape. Thrasio filed for bankruptcy in March, while most recently, in September, aggregators Heyday and Branded merged.

OpenDesk was built because OpenStore was “hiring more and more customer support agents, and they were extremely expensive,” Rabois said. To build OpenDesk, OpenStore trained an AI model based on the customer support catalogs that its various brands use. OpenStore owns a variety of brands in apparel, home goods, supplements and even a drone brand called Exo Drones. Now, OpenStore is automatically able to respond to roughly 71% of customer service inquiries through AI, Rabois said, while the others are handled by customer support agents.  

“We had this epiphany of — while we’re going to solve this problem for ourselves — isn’t this really true for the other five and a half million Shopify stores? Don’t they all have the same challenges and problems as we do?” he said. 

What makes OpenDesk different from other customer service support tools, according to OpenStore, is that it was built by a company that actually operates brands. “Nobody else runs 50 brands, so they don’t have the data set to train on across all types of verticals,” Rabois said. 

Rick Watson, an e-commerce strategy consultant and the CEO of RMW Commerce, described the Shopify app space as a “crowded market.” At face value, it seems like a lucrative opportunity to sell services to other Shopify brands, given that there are now millions of Shopify stores. That being said, most of them are small. In fact, OpenStore itself estimates that 85% of Shopify stores do less than $50,000 in revenue. 

In turn, he said, “the software needs to be cheap and inexpensive” to cater to small brands. But services like a new customer support tool may also be a tougher sell in an environment where e-commerce growth has slowed, and venture capital is harder to come by, he said. 

“When [Shopify brands] were flush with cash, it was very easy for them to say, ‘I need these 10 Shopify apps to make my store grow’” Watson said. “Now, it is maybe like, ‘my store growth has slowed down some, so do I need all these 10?’”

OpenStore hasn’t been immune from some of these macro shifts. Rabois said the decision to lay off staff in August wasn’t directly tied to the fact that it was shifting more resources toward OpenDesk, but rather that “counterintuitively, the less people you have, sometimes it allows you to execute faster.”

He added, “We felt the need to prioritize some things, get OpenDesk into the market as fast as possible and really prioritize that software product because it had such success for us and it had big potential.”

The other big priority this year for OpenStore, Rabois said, is “to limit the number of our brands we buy to be just the ones with explosive potential.” This is because OpenStore has seen runaway success from one of its brands in particular, a men’s athleisure brand called Jack Archer. He said that Jack Archer “will easily exceed $20 million” in revenue this calendar year.

In turn, as OpenStore gets more selective, “the composition of the team [and] the skillsets you need,” all change, Rabois said. He didn’t say exactly how many brands OpenStore plans to acquire this year, only that it is focused on finding brands with the most growth potential.

But Rabois still sees the millions of small, fragmented brands that make up the Shopify ecosystem as a big opportunity. “There [were] more smaller stores than I would have guessed [in the Shopify ecosystem] he said. “Then you start wondering, what can you do to improve that?”

And that’s where OpenStore believes OpenDesk comes in. Rabois said it’s “hard to predict” exactly how much of the company’s focus will go toward this new software product in the long term, adding that “it’s a function of how successful is the product in the hands of customers.”

“Hopefully, it’s super successful, super popular, [and] the revenue will be off the charts,” he said.