Progress Perspective: ShopTalk 2019 Scouting Report
By Sam Thompson
Sam is a Senior Managing Director at Progress Partners, with extensive experience in media, technology, marketing, entertainment, and more specifically in the intersection of tech ecosystem and retail. He attended ShopTalk in March 2019 and offers his observations and opinions in this event summary.
Progress Partners attended ShopTalk last month - a retail industry annual gathering where the entire ecosystem comes together to discuss the future of retail based on the latest trends, technologies, and business models, including changes in consumer expectations and interests.
This year, over 8,000 retailers and brands ascended in Las Vegas to hear from industry experts that share strategies to adapt and evolve. Our team observed a few general trends around the shift of technology’s role in brick-and-mortar stores, the future of groceries, consumer behavior change in retail fashion space, and the potential coming of the e-commerce experience.
Security to Loyalty: Tech switches gears in brick-and-mortar stores
Data has continued to be a buzz topic, but it is switching gears from securing privacy, to assisting retailers, to enhance customer loyalty.
FaceFirst, a data collection company that previously focused on the security of customer data, is a prime reflection of such a shift in data use. Previously known for identifying shoplifters and known criminals, the company is now working with large retail companies to deploy its facial-recognition technology to better engage with customers.
By sending automatic text messages to shoppers to receive their profiles, stores can acquire access to valuable data such as past purchase history, time shoppers spent in store their last visit, visit history and the sum of online purchases with the store’s chain. This data collection will enable retailers to recognize customers’ identities and personal preferences as they arrive in the store, and thanks to that, even digital stores are seeing physical retail stores as assets.
Collision of Digital and Physical Assets: Changing product interaction
While retailers build with tech companies for a better experience for consumers, digitally native brands are investing in brick-and-mortar stores as a key part of the supply chain. The marriage of digital tools and physical stores are yielding a unique way products can be interacted with, and technology is breaking into stores like it’s never before.
Lowe’s same-day store pickup for online orders is a great example of how retailers leverage shoppers to become their own delivery service and use the brick-and-mortar stores as micro-fulfillment centers that service both online and in-store purchases.
The Future of Grocery: Online, delivery, and more
One industry with significant room for technology disruption is grocery. With low e-commerce penetration, the grocery industry is becoming more and more of a target area for retailers to gain market share and invest in innovation.
CommonSense Robotics, Takeoff Technologies, and Alert Innovation are examples of logistics tech startups that offer frontier robotics solutions to fulfill online grocery orders. They bring small-footprint fulfillment centers that can be placed within an existing store, and offer a bricks-and-clicks option just as grocery’s click-and-collect options ramp up in the market.
As retailers stress a desire to get their merchandise close to the consumers that want it, there is no shortage of last mile delivery tech companies to help them - like Roadie and Dropoff. Roadie is an “on-the-way” delivery service that connects people with items to send with drivers heading in the right direction. They work with retailers, airlines, and grocers to enable a faster, more efficient, and more scalable solution nationwide, and they have a larger same-day footprint than Amazon Prime.
Although Amazon has become a stronger marketplace force over the last 12 months, and many believe that the company will continue to grow its already 50% market share, participants at ShopTalk suggested that there are more opportunities for logistics tech startups, which retailers can leverage to “collaborate” and compete with Amazon, given the e-commerce giant has not succeeded in every retail category.
Larger companies like Walmart and FedEx are partnering with tech startups to ramp up and integrate technology to provide a seamless grocery ordering process and same-day shipping.
For instance, Walmart currently has a partnership with Alert Innovation, with whom they built an automated micro-warehouse to pick and pack online grocery orders in New Hampshire, and are also examining autonomous vehicles for delivery for long-term success.
Fashion, Beauty, and Skincare: Luxury and cabbage don’t mix well
Amazon Fashion is the most-shopped apparel retailer in the U.S. (measured by the number of shoppers) and has jumped to its new place of primacy by “penetrating the heart of the Mid-Market”.
However, Amazon penetrates the retail industry by delivering the best value at convenience and price, BUT luxury is built on sentiment, desirability, and heritage. While e-commerce for high-end goods is ramping up significantly, there might be a limit to its growth. The physical experience of a high end brick-and-mortar luxury space cannot be easily replaced, and is often expected by its consumers - those who online shop for luxury fashion wouldn’t typically anticipate seeing grocery items (like milk or cabbage) on the same website.
Luxury retailer Farfetch, an online platform that sells products from 800 boutiques around the world, received the most attention at ShopTalk and was seen as a successful “unicorn” tech company. Recently valued at $8 billion dollars, the company and industry attributed its high valuation to its business model which places an emphasis on data capturing, delivering, and customer experience.
Unlike other luxury aggregators, Farfetch entirely depends its inventory on brick-and-mortar retailers, making it a marriage of digital tools and stores. Its founder commented that “Fashion cannot be digitized like media, music or video,” and that the company is capitalizing on being the online platform that brings consumers luxury goods from all over the world. Also unlike traditional luxury retailers, Farfetch can collect data through interactions with users via their online platforms and utilize machine learning to automate decision making on merchandising, targeting, curation and feedback from the dataset.
Through initiatives like 90-minute delivery, white-glove concierge service, and personalized recommendations, Farfetch is developing the way the next generation of luxury customers shop. It wouldn’t take much to see where and how far Farfetch can go if it chooses to look beyond fashion and accessories into other luxe categories where independent retailers are planted.
Farfetch has been very good at cutting off Amazon’s access to the luxury market by forging strategic relationships with brands such as Saint Laurent, Burberry, and Thom Browne, as well as with major retailers such as JD.com in China and the Chalhoub group in the Middle East.
On the other hand, it is too early to dismiss Amazon in the luxury fashion space. With a saturated reach among affluent Americans, and 82% of its member’s households earning more than $112,000 annually, the possibility of Amazon penetrating the high-end market may be welcomed sooner than expected.
Online Retail: A big (e-commerce) step forward with Pinterest
We’re at an interesting point for emerging brands, as social media platforms are shifting their advertising services. Online acquisition costs are increasing, which forces emerging brands to find new channels such as pop-up shops, physical retail locations, or new marketplaces to acquire customers and engage with micro-communities
Pinterest, the online platform tailored for retail and brand marketers, is a lean-forward environment compared to traditional social media platforms that draw traffic in passive advertising exposure. Users heavily reply on Pinterest to assist in their shopping experience, and in fact, the platform is leading its social media counterparts in finding and shopping for products with 48% market share of U.S. users, which is three times more than the next competitor, Facebook.
Pinterest is launching a new capability to enable retailers to upload their entire catalog to capitalize its ability to participate in consumers’ decision making. At the same time, the platform is very cautious with showing content that aligns with user intent at the moment of interaction; When users have more generalized and long-term intent, the platform shows more inspiration versus showing more products when users intent narrows down and becomes more specific.
The company’s leading ability to influence consumers at the decision phase grants itself a unique advertising opportunity and the industry consensus is to expect Pinterest to take a pioneering bite in the e-commerce experience.
About Progress Partners
Progress Partners is a Boston and New York-based M&A boutique investment bank that works with emerging technology companies, with specialized efforts in the media, marketing, advertising sectors. Progress Partners works with buyers and sellers of high growth companies to complete M&A transactions, raise debt or equity capital, as well as, develop and implement strategic growth plans. The firm's high standards of excellence, deep industry experience, extensive network, and entrepreneurial background give Progress Partners the ability to build and realize superior value for its clients. Securities offered by Applied Capital, LLC, member of FINRA and SIPC. For more information, visit www.progresspartners.com.