The son of a shopkeeper has learned his lesson that inspired him to solve the trouble of an age-old retail.
Seeing tons of people flowing into and out of the shops in Blackpool, Alan O’Herlihy fell in recalling his tough lesson and the relationships with the tricky retail industry.
He is 41 years old now, but he still remembers his young times when he was helping his father with his grocery shop. He wanted to open his own fast food restaurant chain when he gathers enough money, but the life path pulled him towards outlets.
The flow within his shops was about €31,000 weekly, but during the 2008 recession, the income dropped dramatically to €17,000 a week, which made the young businessman close his franchise.
According to his own words, he had lost the shirt that day. “I went from having a net worth of €3.5m a year-and-a-half earlier to owing a million, and I was only in my early thirties.
“When you lose a business, it’s like a death in the family,” he added. “Especially when you live nine miles out the road and everybody knows about it. In Ireland, they will not let you forget it, whereas in the [United] States, they’d give you a badge of honour.”
During the turmoil, O’Herlihy suspected that money was going missing from the franchise, exacerbating its demise. He hired an operation in India, where he had previously subcontracted work during a former job as a SAP consultant.
Yet the process of tracking the lost revenue was so cumbersome that O’Herlihy, armed with a qualification and passion for software engineering, decided to identify and solve the problem himself.
Point-of-sale shrinkage is the retailer’s term for losses at the checkout caused by theft or carelessness, customer scanning errors, or shoplifting.
“I needed to pick up the pieces and I believed in this idea,” said O’Herlihy.
He founded Everseen, which spent six years developing software that can analyse the CCTV feeds of activity at manned and unmanned checkout terminals, and compare it with the transaction data.
The software, which trains the system to detect when, where and why items were not scanned, gives retail staff real-time reporting to mobile devices about theft, scanning errors by staff or customers, or false alerts at self-service terminals that frustrate honest shoppers.
“We may be a one-trick pony, but we’ve carried out a trick that no one else can do in the world,” O’Herlihy said.
The trick has proved a magnet for some of the world’s largest grocery retailers. Retailers lost $40bn at the point of sale in 2014 because goods were passed through checkout lanes without being scanned, according to the Nottingham-based Centre for Retail Research. Retail chains are typically unaware of how and where these losses happen.
Everseen’s software has been trialled by five of the world’s top 10 grocery retailers. O’Herlihy said that he was not yet at liberty to divulge the names, yet they are likely to include Walmart and Tesco.
Small wonder, then, the venture has pricked some serious investor interest. It recently secured funding from Marcol Group, a multibillion-dollar equity investor and asset manager led by Terence Cole and Mark Steinberg.
Pii Ketvel, the chief executive of Marcol Capital Europe, said that the Cork company’s software had “the potential to completely transform the market”.
The Marcol investment was worth €1m, according to filings to the Companies Registration Office. That comes on top of the €3.1m Everseen has attracted since April alone, most of which was from a string of prominent Irish businessmen. Among the contributors to a €1m funding round in June were Ray Coyle, the former owner of Tayto crisps; former SIAC boss Finn Leyden; and Philip Nolan, a partner with Dublin law firm Mason Hayes & Curran.
A further €1.58m came from another group of investors, including Total Produce chairman Carl McCann; Eamonn Rothwell, the chief executive of Irish Continental Group, which operates Irish Ferries; and Cyril McGuire, who reinvested much of the estimated €20m he made from the sale of Trintech in 2011 into technology start-ups.
Rothwell and McCann were also among the investors who sank a further €870,000 into Everseen in October 2014.
McGuire was an early investor in Everseen, putting in €150,000 in January 2014, and also ploughed money into the company in 2013. Former Grafton group boss Michael Chadwick also invested in early 2014. Enterprise Ireland, meanwhile, has given the company €550,000 in total.
In total, Everseen has raised some €8.5m since chief executive O’Herlihy set it up in 2008.
Traditionally, checkout fraud was tackled by retail staff monitoring CCTV footage of a terminal or manually sifting through video recordings. Yet the human eye can only process one image at a time, so typically detects only 5% of all non-scans at a checkout.
Everseen’s digital eye, though, has “perfect vision” and “never needs a coffee break or a day off”.
The corporate video looks like the stuff of dystopian science fiction: it features a humanoid robot analysing a wall of screens with CCTV footage of customers paying at supermarket checkouts and self-service terminals.
Everseen’s technology, however, is not sinister. “The staff know that this is there,” he said. “And we have data protection software where we actually take out the faces and hands of the customers and cashiers.”
O’Herlihy has been quietly tipping away on developing the video analytics since 2010.
He got back on his feet after the closure of his fast-food business with the help of early-morning meditation, Thai boxing and embracing the techniques of the US motivational speaker Tony Robbins.
In 2010, with a grant of €100,000 from Science Foundation Ireland, €25,000 of his own money and advice from an academic friend, O’Herlihy visited Dublin City University’s performance engineering laboratory. There, he sponsored a Romanian postdoctoral researcher who would become his chief technical officer, or “our MacGyver”.
It would be 2016 before Everseen finally reached what O’Herlihy has called its “breakthrough year”. Until then, the company was in so-called stealth mode, as scientists at its Romanian base in Timisoara analysed point-of-sale shrinkage and devised a solution to the problem.
Everseen has 28 staff at its research hub for artificial intelligence and computer vision systems in the city, which is also home to a design centre for Movidius, an Irish start-up that has developed a vision-aided flight system for one of the world’s largest makers of commercial drones.
When Everseen’s video analytics software was ready, the company began testing at 100 outlets owned by an Irish retailer 18 months ago. The company then went straight to some of the world’s leading retailers. Data from the pilot projects showed that 95% of the issues at the checkout were down to products not being scanned.
“The big guys didn’t believe us, so we gave them the product for free in the beginning,” said O’Herlihy. “In return for the free trial, they agreed to share the data with us.”
O’Herlighy went to the retrailers and challenged them to turn a big problem into something positive. “You can see the number of non-scans per number of transactions that staff process and reward the good people,” he said. “We said, ‘Put it in as a KPI [key performance indicator] in your business.’”
Non-scanning at checkouts is most acute at self-service terminals, famed for their “unexpected item in the bagging area” alerts. Self-service is growing in popularity as grocery chains strive to keep labour costs in check, yet there are up to 10 times more non-scans than at manned checkouts, according to Everseen’s trials. The company says that its software can reduce 90% of all non-scans.
When something goes wrong, the retail staff will have an Everseen android attendant — on their watch, tablet or other device — that has a sensor that shows there is a mistake at the checkout. “They will have an image of the product that wasn’t scanned, so they can go to the customer and say, ‘Sir, I think you forgot to scan,’” said O’Herlihy. “They get that image within three seconds, which is pretty fast. That’s our key product at the moment.”
The company recruited research scientists with expertise in artificial intelligence and machine vision technology and then hired the best executives in loss-prevention technology. Pat Brazel, an Everseen shareholder who stepped down as chairman last year after he and others sold software development firm ActivateClients to First Derivatives for €4.75m, advised O’Herlihy to hire “rock stars”.
Managing director Rafael Alegre is a former European managing director for Checkpoint Systems, a US provider of tagging devices and software for retailers. Chris Taylor, the sales director, used to work for Verint Systems, an Israeli provider of video analytics and cyber-intelligence for governments and organisations.
Brazel helped assemble investors in Everseen, as did his successor as chairman, Ian Duffy, a partner at RSM Farrell Grant Sparks.
Another investor, whom O’Herlihy declined to name, ploughed €500,000 into Everseen with a co-investor after meeting the entrepreneur on a train from Dublin to Cork.
Everseen now has sales operations in the US, UK, Spain, Turkey and South Africa, and there are 75 people testing its software in Kolkata, where Everseen sponsors a local football team. O’Herlihy plans to use the latest round of funding from Marcol and local investors to expand further in America, where it is poised to unveil a deal with a retail giant in the weeks ahead.
O’Herlihy’s own experiences as a retailer may not have ended on a happy note. Yet he has no qualms about helping the world’s retail behemoths save money at the checkout.
“As the son of a small shopkeeper, I know how bloody hard it is to make money in retail,” he said.
THE LIFE OF ALAN O’HERLIHY
Home: Glenville, Co Cork
Family: Separated, with two daughters, Maria, 10, and Aoife, 7
Education: Commerce degree at University College Cork, followed by a higher diploma in applied science (software engineering) at the same university
Favourite book: “I don’t read many books, but The Secret changed my life a few years ago.”
Favourite film: The Netflix documentary Tony Robbins: I Am Not Your Guru
“I get up at 5am, do some meditation to get my head right, do a bit of Tony Robbins stuff. Three mornings a week, between 6am and 7am, I do Thai boxing with my buddy Johnny. I travel a lot so I’m only in the office about 20% of the time. If I’m here, I might get in at 8am. My daughters stay with me three nights a week, so during the school term I’ll drop them to school at 9am and come in to the office at 9.30am. After that, there’s no real structure to my day. We have an office in India and the Americans are a couple of hours behind us, so I’m working in three different time zones and the phone is basically on the whole time.”
“There’s a mountain out between Glenville and Ballyhooly and I go up there sometimes to chill out and go for a jog. You never meet a car or a person — so it’s brilliant.”