One-click checkout, which sounds like it should be an instant value-creator in e-commerce, is proving to be a more complicated battleground than people initially expected. Just as Silicon Valley darling Fast, a one-click checkout star backed by payments behemoth Stripe was rapidly imploding, its $11 billion competitor Bolt was savaged in a devastating lawsuit by one of its most well-known retail partners, Authentic Brands Group.
ABG, which counts mall giant Simon Property Group among its investors, owns more than 30 consumer and retail brands, including Forever 21, Brooks Brothers and Lucky Brand. In a 60-page breach of contract complaint filed under seal in February, and revealed publicly last month, ABG said that Bolt “utterly failed to deliver on the technology capabilities it held itself out as possessing” and created myriad other problems.
The allegations also came not long after Bolt was thrust into a public spotlight through controversial tweet screeds by its 27-year-old founder and former CEO Ryan Breslow. Breslow, who has styled himself on social media over the past few months as a sort of knowing business sage, went on a public rant in January over perceived tech industry favoritism for Fast.
Among other comments, Breslow declared that Stripe and influential incubator Y Combinator (which rejected him as an applicant) were “mob bosses of Silicon Valley.”
Bolt, now led by CEO Maju Kuruvilla, contends that ABG’s claims are all part of an orchestrated attempt to secure a $500 million stake in the company, which is one of the rewards the mall brand company would receive if it wins the suit. Kuruvilla told us, in a statement forwarded by a company representative, that Forever 21 and Lucky continue to be “strong” partners. At this stage in the case, the claims are, after all, just claims. And nothing has been proven.
“Although we deny all of Authentic Brands Group’s allegations, it's clear that ABG has confidence in Bolt as they are fighting to own significant equity in our business,” Kuruvilla said. “We look forward to continuing to work closely with Forever 21 and Lucky Brand on delivering the best checkout experience for their shoppers.”
All that aside, many of the allegations in the case against Bolt sound pretty serious, especially since the company has raised hundreds of millions of dollars in financing and doubled its valuation the past year based on the premise of offering revolutionary technology. Here are some of the most concerning issues raised in the suit.
1. Breaching confidentiality
Every software startup wants to be able to publicly brag about the customers it secures, and use that information to help win new customers and investors. But not every customer is happy to be “outed” and used for that purpose. Even worse, is if the startup misleads other people about the details of these arrangements or over-hypes them.
ABG claimed that Bolt “violated concrete and explicit confidentiality provisions of the parties’ agreements, repeatedly disclosing to the public and potential investors details of ABG’s business and the parties’ business relationship that were confidential, and in some cases materially false and misleading to investors.”
The retail brand owner also said Bolt has “consistently overstated the extent of its integration with ABG’s brand partners, and has tried to piggyback on the success of ABG” by showcasing brands in investor presentations, including shoe brand Reebok before ABG even acquired it.
In a reponse to the complaint filed with the court, Bolt highlighted a passage from a regulatory filing in which ABG told investors it was partnering with Bolt to build "a loyalty membership program that spans our entire portfolio of brands."
ABG also announced in November 2020 on its Twitter account that its brand Forever 21 would be working with Bolt "to power its online checkout experience."
2. Falling way behind schedule
ABG said it entered into contracts with Bolt starting in October 2020, in which Bolt promised to deliver a new online checkout and customer loyalty platform for the company called AllPass by Jan. 15, 2021. The idea was that the technology would be used across all of ABG’s brands to provide seamless online checkout experiences. (The contracts also promised that ABG could exercise a warrant to obtain up to 5% of Bolt’s equity, according to the complaint.)
But the rollout of the AllPass product was plagued with technological problems and failures, and also fell way behind schedule, ABG claims. Only two of ABG’s brands have been able to integrate with AllPass, including Forever 21 and Lucky, according to the complaint. A third brand, Brooks Brothers, was forced to abandon an AllPass launch until glitches could be resolved, according to ABG.
Also, the actual working minimum viable product for AllPass wasn’t actually deployed for any of the brands until November 2021, or more than 10 months after it had been promised, according to the complaint.
In its own legal filing, Bolt said that it was obliged to deliver technology in a "commercially reasonable" timeframe, under its contract, and not by the deadline ABG described in its complaint.
3. Not working well with Klarna
Klarna, a popular buy-now-pay-later fintech, has been used to help grow sales at retail brands as cash-strapped consumers hop onto the trend of buying products on credit and installment plans at check-out. Buy-now-pay-later has been of particular interest to luxury brands, which find consumers are often more willing to buy if the price can be broken down into smaller increments.
Specifically, ABG said that Bolt struggled with properly integrating its check-out software with Klarna for the Brooks Brothers brand, a higher end clothing brand. It was belatedly discovered that “full” Klarna integration would require “significant additional work” that Bolt “had NOT counted on,” according to the suit.
This problem required ABG to bring in additional third-party software products right before the 2021 holiday season, which cost ABG “hundreds of thousands of dollars” in damages “if not more,” according to the complaint.
4. A “disastrous” Forever 21 mobile app rollout
Forever 21, a fast fashion clothing brand which targets teenagers and early 20-somethings, derives a substantial amount of its revenue from online and mobile-based sales. But the attempt to integrate Bolt with the retailer’s mobile app was “disastrous,” ABG said. “The app saw a significant drop in conversion, resulting in the loss of millions of dollars,” the retail brand owner said.
Forever 21 created a list of all of the problems with the rollout, which was included in the complaint. The list included notes like, “could not measure cart abandonment,” and “enraged customers” were “charged for delivery but never received package at home,” “customers with over 30 items in their cart could not check out,” and “analytics unable to distinguish orders from iOS vs. Android vs. mobile web browser.”
The “botched” rollout with Forever 21 made ABG “extremely cautious about rolling Bolt out across additional brands,” the retail brand owner said.
5. The $500 million warrants deal
As Bolt itself has trumpeted, laced throughout the complaint are references to a promise of warrants to ABG providing $500 million worth of equity. Under the terms of the alleged deal, ABG had the right to purchase the stake for approximately $29 million. ABG was entitled to the stake if it routed $750 million in e-commerce transactions through Bolt products, according to the complaint.
Although ABG has made substantial progress toward that threshold, Bolt abruptly shifted the terms in October 2021, according to the retail brand company. Bolt then started claiming that the agreement related only to e-commerce sales routed through its AllPass product — which didn’t work, according to the complaint.
“Bolt’s breaches, and in particular, its recent machinations with respect to the warrant, appear calculated to squeeze every drop of value of the ABG-Bolt relationship for Bolt’s benefit — including in driving Bolt’s ever increasing multi-billion-dollar valuations — while simultaneously depriving ABG of nearly all of the benefit of the parties’ bargain,” the company said.
In a motion to dismiss the case, Bolt said the entire suit stemmed from a failed effort by ABG to reshape the deal to be more in its favor. Bolt said in the filing that the agreement was premised on transactions handled through AllPass, and that the starting point for calculating the warrants was $750 million in volume — not the end point.
"This lawsuit is a transparent attempt to have this court rewrite core terms of three contracts that were intensely negotiated by sophisticated parties," lawyers for Bolt said in the filing. The retail brand company and affiliates "filed suit because they failed in their efforts to induce Bolt to renegotiate and amend those core terms" in ways that would be helpful to ABG and "fundamentally transform the bargain."
UPDATE: This story has been updated to reflect arguments made by Bolt in a legal filing asking the court to throw out ABG's case.
