David Holmes: Yes. So we’re spending a lot of time marketing directly to the customer segments that we’re going after in the target market that we mentioned during the call. So those are market segments that we traditionally haven’t dealt with in the past so we’re having to do a lot of new marketing efforts to reach those new audiences. And we’re essentially trying to communicate with them in the pools where they play today. And so, we’re making ourselves known in those industries. They might know us as more of a retail player today, but we’re making it known that we’re now entering this industrial segment. And we have some exciting new products to show and we’ve been out showcasing them with a lot of marquee customers.
Richard Greulich: So these are individual end user customers — companies. So you’re not really — but you’re distributing through distributors. Are you not?
David Holmes: We have channel partners and we sell direct as well through our Socket stores.
Richard Greulich: So the people you’re actually marketing to, are these fairly large companies or large opportunities for you as opposed to just one or two little orders?
David Holmes: Yes, that’s correct. I mean, a lot of the folks that use these types of devices are large enterprise customers. But I would say, there’s everywhere from Tier 1 all the way down to Tier 4, 5 and 6 that we’re addressing with these things.
Kevin Mills: Maybe I could add — maybe I could just add. One of the things that we see happening is that people are more willing to use apps on smartphones than they were in the past. And we’re particularly strong if you’re using an app and you need data capture. Most of our business comes from the lower small, medium businesses because they are — they were the first to embrace iPads and with iPhones for business because in many ways, they didn’t have a choice. Now that it’s been successful with the smaller companies, the larger companies are saying, well, what about us? And again, we understand it will take time, but we have the data capture accessories that they need so they could use an application on an iPad or iPhone and have the same type of experience they would get with the more ruggedized, dedicated device from Zebra or Honeywell at a lower price and also avoid the training that’s associated with those more dedicated devices.
So that’s kind of what we’re seeing and we’re servicing. Obviously, before anyone can make that decision to go with the iPads, they need to test us and they need to know it’s robust enough. And those are the things we’ve been making sure are in place so those trials will be successful.
Richard Greulich: I would think that going — expanding into the industrial market, it’d be tempting to spend a lot more on sales and marketing then. But how do you draw the line between and the fact you’re unprofitable now, controlling costs while you continue to try to expand your sales and marketing in that area?
Kevin Mills: So our business model doesn’t require sales in a traditional sense. We provide an SDK and we work with the application provider. And the application provider, by integrating our SDK, enables all of the users of that application to try and use our products. If we don’t have the application — or the SDK in the application, it’s a zero. If we do, then they basically get a choice. And that really is what happened with Shopify, Square, LightSpeed, et cetera, is that Square integrated our devices, our SDK into their application. And then every Square end user, if they buy our product, it automatically works because it’s already enabled, if you will. So the business model hasn’t changed. It takes a little bit longer. But at the end of the day, we are an accessory to the application.
People don’t buy our scanners. They buy Square and decide they need a scanner and ours is the one that works. This is the same as true with Shopify. We’re following the same, I would say, methodology. It will take a little bit of time, but we are seeing interest from app providers to integrate our SDK because they’re getting pressure from their end users to be allowed to use off-the-shelf iPhones and iPads. But we won’t have a lot of traditional marketing, our traditional sales expense. As you can see, we control our expenses quite tightly. We will spend a little bit more money on our SDK development and our marketing development, but we feel there’s a lot of leverage in that spend.
Richard Greulich: So just so I understand, so Square incorporated your capabilities. And have they — do they do that with other people as well or no?
Kevin Mills: In the case of Square, you have two choices. If you want a cordless scanner, we are the only choice on Square iOS. If you want a — you can have a wired scanner, right? In the case of Shopify, we are the only scanner that Shopify support. So if you’re using Shopify and you want to scan, then basically you’ll end up with the Socket scanner.
Richard Greulich: And forgive me. Again, I’m new to the company, just trying to understand. So the fact that you’re basically the only provider of that service, for example, those two companies. And again, then you earn revenues based on people buying your accessory device in a sense?
Kevin Mills: Correct.
Richard Greulich: Okay. So Square doesn’t pay you anything?
Kevin Mills: No, actually, Square actually is a reseller for us. So if you go to the Square website, you can buy the Socket Mobile scanner direct from Square. If you go to the Shopify website, you can buy. And they buy through distribution, right? And then some customers decide to buy directly from us or from Amazon or some other mechanism. But the key to all of this is that when the scanner arrives, regardless of the avenue you used to purchase it, when you take it out of the box, it works for shopkeeper who has a little interest in technology and they’re off and running. And most of these people have no IT support, so it needs to be pretty user-friendly, robust, bulletproof. And we’ve achieved all of that in the retail space.
And now what we’re trying to do is expand that into other areas. Particularly we would describe commercial services where people are asset tracking or doing kind of remote work, whether it be in nursing or things like fumigation, delivery services, those type of areas where they can use the barcode to augment and improve their process. A lot of them start with the camera-based scanning. And to the earlier question, we believe that the free camera-based scanning covers 80% of the requirement. We’re willing to provide the free camera-based scanning to the 80% to have a good position on the remaining 20%. And it becomes a very simple upgrade process, whether it is to an enhanced camera or a physical scanner at the end user level. And the application guy doesn’t need to get involved because their business model is about selling subscriptions.
