BlackCart, a developing company, is addressing a significant issue in the world of online retail: the inability for customers to experience products firsthand before completing a purchase. Having recently secured $8.8 million in Series A funding, the company has created a platform enabling customers to try items before they buy, integrating seamlessly with existing e-commerce platforms to allow for free shipping and payment only if the customer decides to keep the product after a designated trial period.

This latest financing round was spearheaded by Origin Ventures and Hyde Park Ventures Partners, with contributions from Struck Capital, Citi Ventures, 500 Startups, and a number of individual investors, including Christian Sullivan of Republic Labs, Dean Bakes of M3 Ventures, Greg Rudin of Menlo Ventures, Jordan Nathan of Caraway Cookware, and Nick Pirollo, CFO of First National Bank, among others.

The company, which is based in Toronto, previously raised $2 million in seed funding last year.

BlackCart’s founder, Donny Ouyang, had previously established an online tutoring marketplace called Rayku and later joined Caravan Ventures, a seed-stage venture capital fund. He was motivated to return to entrepreneurship, he explains, following a personal difficulty when attempting to purchase shoes online.

Identifying a market need for a “try before you buy” service, Ouyang initially developed BlackCart in 2017 as a direct-to-consumer (B2C) platform utilizing a Chrome extension that connected with approximately 50 online retailers, primarily in the apparel sector.

This initial version demonstrated a clear consumer interest in such a service within the online shopping landscape.

Ouyang believes this early iteration of BlackCart provided valuable insights into which product categories are most suitable for this type of offering.

“Generally, products with moderate to higher price points, purchased less frequently, and involving careful consideration by the customer tend to perform exceptionally well with a try-before-you-buy model,” he states.

Two years later, Ouyang participated in the 500 Startups program in San Francisco, where he subsequently shifted the business focus to its current B2B model.

The company now offers a try-before-you-buy platform that integrates with a variety of online storefronts, including Shopify, Magento, WooCommerce, Big Commerce, SalesForce Commerce Cloud, WordPress, and even custom-built storefronts. The system is designed for easy implementation by online retailers, typically requiring around 48 hours for Shopify integration and approximately one week for Magento.

BlackCart has also created its own specialized technology focused on fraud prevention, payment processing, returns management, and the overall user experience, including a dedicated button for retailers’ websites.

Given that online shoppers are not immediately charged for the merchandise they receive, BlackCart employs a comprehensive set of behavioral indicators and data analysis to assess potential fraud risks. For instance, a customer who has extensively reviewed helpdesk articles related to fraud prior to placing an order might be flagged for further scrutiny.

BlackCart also validates the user’s phone number during checkout, cross-referencing it with telecommunications and government databases to confirm consistency between their historical addresses and the shipping/billing addresses provided.

Customers are given a specified timeframe (determined by the retailer) to evaluate the item before being charged. BlackCart assumes responsibility for any fraudulent activity as part of its offering to retailers.

BlackCart generates revenue through a revenue-sharing arrangement, charging retailers a percentage of sales from products that customers choose to keep. This percentage varies depending on factors such as the fraud risk assessment, average order value, and product type, ranging from around 4% to approximately 10%, according to Ouyang.

The company has broadened its scope beyond traditional home try-on to encompass try-before-you-buy options for electronics, jewelry, home goods, and even makeup samples.

BlackCart reports that merchants utilizing its platform typically experience a 24% increase in conversion rates, a 51% rise in average order values, and a 27% improvement in overall sales growth.

Currently, the platform is utilized by over 50 medium-to-large retailers and emerging e-commerce businesses, including luxury sneaker brand Koio, clothing company Dia&Co, online mattress provider Helix Sleep, and cookware brand Caraway. The company is also currently under non-disclosure agreement with a top-50 retailer and has signed contracts with 13 additional businesses awaiting onboarding.

BlackCart plans to introduce a self-service onboarding process in the near future.

“This will be implemented later, likely in late Q2 or early Q3,” Ouyang says. “However, we anticipate that even with self-service, around 80% of the process will be automated, while larger enterprises may still prefer dedicated support.”

The new funding will enable BlackCart to transition to a system of immediate payment to merchants upon checkout, followed by reconciliation, enhancing efficiency. This feature has been a frequently requested improvement from retailers.

The funding will also facilitate the expansion of BlackCart’s remotely distributed team from its current size of 10 to approximately 50 by the end of the year, with additions in engineering, product development, customer support, and sales.

More generally, the company intends to leverage the growth in the e-commerce sector, which has been accelerated by the COVID-19 pandemic.

“[Our goal is to] capitalize on the current economic climate to scale our operations as rapidly as possible,” Ouyang explains. “We are aiming to process around $250 million in transactions through our platform by the end of 2021, driven by both engineering advancements and sales efforts.”

Looking ahead, Ouyang envisions incorporating additional consumer-focused features into BlackCart’s platform, such as on-demand returns with courier pickup service.

“We are thrilled to collaborate with BlackCart as it establishes try-before-you-buy as the standard for online shopping,” stated Prashant Shukla of Origin Ventures, who has joined BlackCart’s board as a result of the new funding. “Its underwriting technology provides retailers with confidence, and its exceptional consumer experience leads to significant gains in sales and conversion rates. Today’s digital consumers expect an online shopping experience that mirrors the in-store experience, and BlackCart is uniquely positioned to deliver that,” he added.