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To the newsletter! We finally got around to writing about our thesis on Retail Tech. Some highlights below and you can find the full post here.
Reports of the Death of Brick-and-Mortar Retail Are Greatly Exaggerated (or Why We Love Retail Tech)
Ever since Amazon first showed us the advantages of buying books online, ecommerce has taken the retail world by storm, but as this new market has grown and evolved, its disadvantages have come into clearer focus as well.
So where are we now and how does Retail Tech fit in? Glad you asked!
The Consumer Has Spoken
While the pandemic was a boon to ecommerce overall and some of those gains will undoubtedly stick, it also highlighted for consumers some of its limitations, leading to some interesting results from a survey done earlier this year.
Ecommerce’s Profitability Dilemma
From a recent McKinsey piece: (note: “DNB” = “Digitally Native Brand”)
Few DNBs turn a profit for their first three to five years, and many fail to turn a profit even after a decade of growth. Over the past 20 years, fewer than 0.5 percent of DNBs have reached the $100 million revenue level. Even some large, publicly traded DNBs reinvest all earnings into additional marketing and capacity expansion and fail to turn a profit.
Several of the main drivers of these profitability issues point to what has generally been considered one of ecommerce’s two key advantages (no physical footprint):
High customer acquisition costs (2 - 5x brick-and-mortar, even at scale)
Shipping costs added to every sale (an issue pre-pandemic; much worse now)
High return rates (3 – 8x brick-and-mortar)
While Retail Tech has begun to chip away at ecommerce’s other big advantage (customer data).
What does this mean for the future of retail?
We think most retail businesses will evolve into a hybrid of both online and physical retail and the most successful will be those who (whether digitally or physically native) utilize new Retail Tech products to press their advantages and evolve into the form of hybrid model that best suits their product and customer base.
Among these technologies, we like:
Customer insight tools that collect data at point of sale and other on-premises activity, and (critically) tailor their data models to each vertical into which they sell
Sales tools that allow retailers with a built in physical location advantage to scale sales within their existing footprints via ecommerce
Scaling Tools that allow retailers to leverage existing infrastructure to efficiently add products or services to existing offerings without requiring new cap ex
Our portfolio companies pursuing these solutions include:
Copper - A smart point of sale (“POS”) system for capturing and gleaning insights from customer purchase data without requiring expensive hardware overhauls and even more expensive staff retraining
OmniX - Computer vision software for capturing and gleaning insights from shopper, demographic and location efficiency data collected from existing security cameras
OneShop - A customer CRM and direct sales outreach platform for in-store sales personnel to capture, organize and monetize higher-value shopper data and efficiently leverage in-store sales through new ecommerce storefronts
Rumby - A white-labelled ecommerce solution, with webstore functionality and e-marketing optimization tailored to the laundromat, dry cleaning and hospitality industries to scale physical locations and leverage existing delivery network infrastructure to enable on-demand pickup and delivery services
Portfolio Company News
Tarform (Number One!):
A SuperPowers Podcast:
Portfolio Company Job Openings
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