Watch more: Need to Know With Rundoo’s Nick Hershey

Independent supply stores like to do things their own way, which gives them competitive strength. However, one of the things they’re doing could be getting them into trouble in the artificial intelligence era.

Rundoo Co-Founder and CEO Nick Hershey told PYMNTS it’s the way that independent stores have “always done things” that is setting them back against 21st century competition. To help these firms get ahead, Rundoo raised $30 million, bringing total funding to $48 million, to continue rebuilding, for the AI age, the back-office technology underneath independent supply stores that have been running successfully for decades.

Rundoo serves independent paint, hardware, farm-and-feed and building materials retailers. Many are competing against national chains equipped with sophisticated inventory systems, digital storefronts and analytics while operating businesses on aging point-of-sale and ERP infrastructure.

“It’s not a tech-averse market,” Hershey told PYMNTS CEO Karen Webster. “It’s just a tech-deprived market.”

AI Is Turning the Tech Upgrade Into an Operating System Replacement

The competitive gap between independent supply stores and larger enterprises, at least when it comes to digital transformation, is less about persuading small businesses to adopt technology than giving them technology capable of matching how their businesses actually operate.

Webster described the reality facing independent supply store owners and operators as both “a technology sale or buy” and “a change management investment” because modern infrastructure can ultimately alter the workflows surrounding inventory, pricing, purchasing and customer relationships.

For vendors, that raises the stakes. Replacing the system of record means replacing infrastructure that owners depend on to keep the doors open. That makes the purchase more consequential than adding another software application.

“Most of our competitors are on-premise systems, and they work in the industry, but they are not just pre-AI or pre-mobile, but pre-internet,” Hershey said. “It’s less ‘There’s some missing information that we’re having’ and more, ‘Let’s take the whole architecture the [businesses are] using and modernize it.’”

He compared the implementation decision to trusting a company to “perform surgery on my business,” calling it, for many customers, “the biggest change in their business of the last couple decades.”

The Small Business Technology Stack Is Moving Deeper Into Operations

The question is no longer whether independent supply store operators will digitize. It is who gets to become the system they digitize around.

“Our primary client is the retailer,” Hershey said. “But in order to service them, we have to have a strong relationship with the co-ops, the manufacturers, the distributors that work with them.”

Independent does not mean isolated. A hardware store may depend on a cooperative such as Ace; another retailer may rely heavily on a manufacturer or distributor. Modernizing the retailer therefore requires connecting into those surrounding ecosystems rather than replacing them. That points toward a model of vertical software designed as an operating layer embedded across the commercial relationships of an industry.

The broader opportunity is that thousands of businesses commonly described as small may demand technology stacks approaching the sophistication of their largest competitors.

AI Gets More Valuable as the Platform Gets Wider

That operating system position also changes the AI opportunity. Rundoo initially launched its AI assistant, Dooey, primarily for reporting. Customers could ask about margins or sales. But usage expanded into ordering, email drafting, sales assignments and other operational tasks.

“I think the reason Dooey is so loved by our clients is because they’re managing so many different workflows, and they’re just short-staffed,” Hershey said. “You ask any one of our clients … they’ll say, ‘Labor’s the No. 1 challenge.’”

Webster characterized the appeal more simply, asking whether AI had become “the assistant they never really had.”

That may capture why AI inside vertical software could matter more than another standalone productivity tool.

An assistant embedded in the operating layer can potentially see inventory, transactions, customer accounts and purchasing workflows at once. Its advantage is not simply intelligence. It is context.

Watch the full conversation with Rundoo CEO Nick Hershey and PYMNTS CEO Karen Webster to hear more about:

• Why “tech-averse” may be the wrong diagnosis for Main Street. Hershey said many independent supply stores are actually “tech-deprived,” creating an opportunity to replace pre-internet infrastructure rather than convince owners of technology’s value.
• Why vertical software is becoming an operating system business. Webster framed the switch as both a technology purchase and a change-management investment, while Hershey described a platform spanning point of sale, ERP, inventory, commerce and embedded FinTech, increasing its value and the trust required to replace incumbent systems.
• Why AI becomes more useful when it sits across the workflow. Rundoo’s assistant expanded from reporting into ordering, communications and sales tasks, suggesting vertical AI’s advantage may come from having operational context across a business rather than offering another isolated productivity tool.

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The post Rundoo Bets Independent Supply Stores Are Vertical Software’s Next Big Market appeared first on PYMNTS.com.