How Shopgate Plans To Take Over Mobile Commerce

Smartphones have completely changed the way people conduct business. Instead of being glued to a desktop PC, consumers now have the option to order virtually anything using their smartphone or tablet. Over the last few years, hundreds of thousands of websites have begun to release mobile apps. Others have developed special sites for mobile devices. Many have done both. German startup Shopgate wants to serve the needs of those businesses. As a company that specializes in delivering mobile shopping solutions, Shopgate develops mobile websites for smartphones and tablets. The company also produces specific apps for iOS and Android devices. "We do it as a Software-as-a-Service solution, which means that the merchant plugs into our mobile commerce platform, and then we create the mobile store for the merchant," Andrea Anderheggen, co-founder and CEO of Shopgate, told Benzinga. "It is highly efficient. We're currently serving about 5,100 merchants and 4,000 total apps -- or 8,000 if you count [the individual apps for] Android and iOS." Shopgate is Anderheggen's second e-commerce company. His first was Sofort.com, an international payment service provider. While Sofort has become very successful overseas, Anderheggen joked that he made a lot of mistakes with that firm that he won't make again with Shopgate. He said that he spends most of his time focusing on the investor development and business relations side of the business, while his co-founders (Ortwin Kartmann and Dieter Kartmann) handle the rest of the operational duties. Anderheggen founded Shopgate in 2009 after realizing that the iPhone had become a game-changing device. It may be common knowledge today, but a lot of people did not realize that at the time. "It wasn't so clear how Internet usage was going to shift to mobile," he said. Related: How an eBay PowerSeller Raised $20 Million For a Startup The basic idea behind Shopgate was rather simple: e-commerce is becoming and more mobile. Merchants have responded to this shift by building mobile sites, which Shopgate aimed to provide. "We do native apps in iOS and Android, as well, which ultimately means that the merchant has an optimal way of treating mobile visitors to their website," Anderheggen explained. "But on the other hand, we also can offer native apps so that people can download those apps and buy things later on." Shopgate profits from merchants by charging transaction fees and a "very low" fixed fee. "Even merchants which are not in the top 10 or 100 merchant segments can actually benefit from this technology," said Anderheggen. "Merchants pay a very low fixed fee and then they pay a transaction fee on top of it. At the end of the day you could summarize it and say, 'We've enabled merchants of all sizes to participate in the mobile commerce market.'" Series B "We are very fortunate to have raised a Series B," said Anderheggen, whose company received an unspecified seven-digit investment. "We were even more fortunate to raise a Series A funding in 2011. That was due to our previous company. In the home market in Germany, we're quite well known." Shopgate spoke to a "number of investors" who pitched investment opportunities during its second round. This enabled the company to carefully select investors that were a good match. "Ultimately we selected Northcap and Creathor Venture," said Anderheggen, adding that Shopgate needed hands-on investors. "We selected them because they have a very strong entrepreneurial background." After coming to the United States, Shopgate formed a partnership with Trust Guard, which specializes in Website Security, Privacy, and Business Verification Seals. Related: New Startup AppLift Raises $13 Million, Is Already Profitable "The main thing about Trust Guard is that it increases the conversion rates because it provides trust to an online store or a mobile store, in our case, and it increases revenue," said Anderheggen. "Anything that helps increase the conversion rate is beneficial for Shopgate." Future Goals Shopgate's primary goal is to defend the firm's market position in its home territory. In Germany, as many as 80 percent of the mobile shopping apps were developed and are maintained with Shopgate. In the United States, Anderheggen would like to achieve a similar level of success. "That's a very ambitious goal because we have an 80 percent market share in our own market," said Anderheggen. "That's probably not going to happen in the U.S. But I've always thought it was good to have great objectives." His ultimate goal is to turn Shopgate into the world's leading mobile commerce solutions company. It could take several years to come anywhere close to achieving that goal. But if the firm's success in Germany is any indication, Shopgate could prove to be one of the more memorable startup success stories. Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report. Louis Bedigian is the Senior Tech Analyst and Features Writer of Benzinga. You can reach him at 248-636-1322 or louis(at)benzingapro(dot)com. Follow him @LouisBedigianBZ