Capex turns passive visitors into engaged buyers

Converting online looky-loos into customers

It was just yesterday for many that window shopping and browsing catalogs were the only ways to be a consumer product voyeur. Most of the time, no one really knew that at that moment, you were likely to be a buyer. These days, chatbots are at the ready when you visit some online sites, popping up (no pun intended) at the chance to change curiosity into consumption. 

These bots can increase purchases by 50%, according to several reports, yet only 9% of consumer-facing websites all over the world have these interactive agents, suggesting the market opportunity is still pretty much a greenfield. Moreover, with the emergence of sophisticated AI, these conversational bots are just getting savvier.

Tokyo-based Capex is betting that this industry is in its nascency. Consider advertising on the internet was a mere $4.5 billion in 1999, according to investment bank Morgan Stanley. A generation later, that number stands at $257 billion. The chatbot spending market is estimated to also be a meagher $4.7 billion in 2022, but it’s expected to grow 23% compounded annually to hit $15 billion by 2028. 

Riding on that growth wave, the nearly four-year-old company, which has mostly done business in Japan but has its sights set on the United States, has been aimed mostly at the banking, credit card, life insurance and healthcare product sectors, all of which are looking to improve their digital commerce conversion rates. Thus far, it appears to be working. Capex’s conversational plug-in has improved the number of conversions to sales by 2-11% for its clients, without them incurring startup and implementation costs.

Understanding scenarios, and the customer

“Our service has been well received by major B2C companies in Japan, especially (in) the finance sector,” said Capex founder and Chief Executive Shuntaro Kogame, adding “We aim to replicate our success in the US.” Prior to Capex, Kogame worked in corporate banking at Mizuho International and as chief operating officer of a crypto exchange and marketplace. 

After starting in 2019 and raising $1.6 million, Capex has demonstrated an early track record that its technology and concept work. Nowhere is Kogame’s leadership more evident than in the company’s early success in Japan, where Capex counts Rakuten Securities, Seven Bank (which is affiliated with the Seven-11 store chain owned by Seven-Eleven Japan Co., Ltd.) and Dai-Chi Life, a life insurance company, as its primary customers.  

It is in Japan, with those customers and others where Capex, using mostly an online strategy as opposed to mobile, has experienced the impressive results with its pop-up chat bot. From banking to health food products to life insurance, its conversion rates have been anywhere from 16% to 37%. In the case of Seven Bank, it saw 1,500 new users per month with PickUp, the company’s chat agent. 

Behind its success is Capex’s ability to map out hundreds of thousands of scenarios across different user types. It also integrates search and generative AI to build on top of its repository of potential conversational journeys. Its engine considers how to engage from the first day to a month out with refresher content to rekindle a consumer’s initial interest. Moreover, its chatbots are becoming more human-like visually. That may or may not freak some people out. But on the whole, it’s a temporary concern given how much culture has accepted avatars and talking to absolute strangers online.   

Performance based, no upfront costs

What makes Capex particularly unique is its business model. For starters, It does not rely on advertising for revenue, and it is not built on software-as-a-service, said Global Business Development head Eugene Liao. Nor does it charge its customers any implementation or start-up costs. “The initial cost is zero,” Liao said.

Industry-specific, product-specific and service-specific measures can explain why conversion rates for certain industries are higher than others. Capex offers its PickUp tool with no subscription fees, clear attribution and performance-based pricing. For example, Capex keeps costs per acquisition (CPA) in check by setting its price per conversion at 70-80 percent of its client’s CPA target, which almost assures that the client’s CPA costs remain lower than what they have projected. 

Yet the biggest differentiator is that Capex only gets paid after a transaction with a digital customer occurs. There are no upfront costs, and its clients are required to pay a service fee only after successfully completing a transaction, which minimizes risk for its clients.

Going to America

After using Japan as its test market, Capex is full steam ahead on its quest to tackle the U.S. market, where it will downplay the Capex corporate name and do business under the PickUp brand. What’s more, it is distancing itself from being pigeon-holed as an artificial intelligence company due to the noise in the sector and is instead focusing on its chat application integration features. 

The company is currently offering free onboarding for all US-based companies, which is valued at $5,000-$6,000 in fees. Already hired is a business development director in the U.S., with multiple future hires in the works, including scenario writers and designers. 

Importantly, Capex has already inked its first American customer: Green Regimen, an e-commerce company that sells protein products directly to consumers. The client is expected to go live with its PickUp bot tool relatively soon.  

What e-commerce operation, whether selling insurance or protein powder, doesn’t want to convert more of its online traffic into sales sans any upfront costs? That is what the PickUp chat bot precisely does with little to no risk to the e-commerce client. By creating a pop-up chat bot that converses with the customer and helps that person focus on a transaction they may or may not need to execute, Capex is helping reshape the online e-commerce experience for both the consumer and the online seller, which it is doing with a differentiated business model that presents little to no financial risk to the e-commerce platforms. 

At the same time, it’s providing these e-sellers a tool that should help them capture a bigger slice of the nearly $27 trillion digital commerce pie projected by 2032, according to Gartner Inc.’s Magic Quadrant for Digital Commerce 2024.

Conclusion

We have come a long way from only selling books online to selling just about anything digitally. There was a time, not that long ago, when online perusing and browsing for clothes, home furnishings and cosmetics was a relatively benign exercise without much interference from the vendor or ecommerce platform. But those days are over. The emergence of conversational chatbots are the digital equivalent of store clerks and on-the-floor salespeople looking over the shoulders of consumers in the aisle, trying to be helpful but mostly trying to encourage consumers to part with their money. For consumers, the development is not unlike the brick-and-mortar world of retail, where in some cases salespeople can be sincerely helpful in guiding purchases. In other cases, the sales associates can be intrusive, pushy and annoying, making the shopping experience less than pleasant. 

The same is likely to hold true with conversational chatbots designed to assist looky-loo shoppers with their purchases. How these bots interact with digital consumers may determine their effectiveness. Thus far, however, based on the early results in Japan,  consumers seem to be accepting of and responding to Capex’s attempt to help spur sales through innovation of the digital commerce experience. 

(This profile is part of our series of brief overviews of late-stage startups that are part of Startup Genome's Hypergrowth, a late-stage scaling program in partnership with the Tokyo government)