In a world where hybrid office-remote work setups have gained widespread acceptance, the retail landscape is also undergoing a transformative shift towards hybridisation. The traditional boundaries separating physical brick-and-mortar stores from the digital realm of e-commerce have become increasingly fluid. Within the evolving retail sector, stakeholders are eager to discover the optimal strategies for a successful year ahead. Esteemed industry experts have generously offered us insights on the noteworthy retail trends expected to shape this year.
While we’re all grateful our lives have returned to some form of normality post-pandemic, there are certain things such as changes to our working and shopping habits that consumers are keen to remain. The most recent EY US Future Consumer Index highlights that 54% of US consumers believe new behaviours adopted during the pandemic feel normal now and 45% don’t want to return to how they lived before the pandemic.
The growth of the ecommerce sector is not a new trend, online shopping was starting to overtake the physical experience way before the pandemic hit but during the last few years, the sector has experienced significant growth. Within the sector, 92% of small and medium-sized ecommerce businesses saw their sales numbers rise in 2021 and European ecommerce revenues jumped 30% to $465bn in 2021.
Oxford Capital, an early-stage investor in the future of retail technology, have provided some key questions to ponder. How can the retail sector continue to innovate and what will the future of retail technology look like? How will technology drive growth in the sector and how will companies differentiate themselves in an increasingly crowded market?
The Future of Retail Technology – Which Models Are On The Up?
When backing founders of UK start-ups, one of the first things to look at when assessing an investment opportunity is the potential size of the market and how it fits a particular demand or growing trend. The subscription model is currently a key player in shaping the future of technology in the retail sector. While not a novel concept predating the pandemic – subscription services like TV (e.g. Sky) have long been a consumer retail mainstay – the demand for offerings such as meal kits has experienced substantial growth in recent years. So significant is the growth in this sector that the UK subscription box market is set to be worth £1.8 billion by 2025.
It’s a trend that eis providers like Oxford Capital hold a particular interest in, and in early 2020 (pre-pandemic) they led a seed-stage investment into sustainable consumer goods company, Bower Collective. Offering a range of sustainable home and personal care products, Bower has developed an innovative approach to ecommerce by providing a closed-loop, plastic waste-free solution. Users subscribe to a range of products that are supplied in refill packages. Customers return the empty packages in pre-paid envelopes to Bower for reuse and recycling, ensuring zero plastic waste in their supply chain. While there has been some speculation that the rise of some retail models is purely a pandemic trend that will lose its appeal with consumers, Bower grew 400% in 2021. The company believes that DTC consumer goods provide the opportunity for strong margins which some other ecommerce/subscription companies don’t have.
Ecommerce businesses can also differentiate themselves from traditional retailers. An example in Oxford Capital’s portfolio is Spoke, a menswear company that sells trousers in up to 1,000 sizes, offering a perfect fit. No traditional retailer, other than an actual tailor, can offer such a range. But technology enables this. And of course, with a perfect fit comes loyalty, meaning customers return time and again to buy more.
The Demand for Sustainable Retailers
Retailers are facing growing pressure to improve their sustainable impact and explore how technology can be leveraged to provide greater benefits to both their customers and the environment. Deloitte’s recent findings reveal that almost one-third of consumers have halted their purchases of specific brands or products due to ethical or sustainability apprehensions. Numerous emerging enterprises are dedicated to attaining B Corp certification as a testament to their commitment to the highest possible sustainability standards.
B Corps use the power of business to address society’s greatest challenges, pledging to adhere to the most rigorous criteria in terms of social and environmental impact, public disclosure, and legal responsibility, all while maintaining a delicate equilibrium between profitability and social purpose. A fifth of companies (19%) in Oxford Capital’s portfolio have achieved or are progressing towards achieving B Corp status.
One of the future of retail companies in their portfolio is Artfinder, the first global art company to achieve B-Corp status. In 2020, it helped more artists than ever before make a living, 18% of its artists now make the majority of their art income from Artfinder (up 55% since 2019). In addition, 78% of artists say they felt supported by Artfinder during Covid, a testament to their community outreach and support team.
The Changing Face of Retail
Within our ever-evolving landscape, with a plethora of emerging technologies and early-stage companies, it seems that the horizons of retail technology and upcoming industry trends are boundless. In recent years, significant advancements have been achieved in enhancing and simplifying the retail journey, benefiting not only consumers but also empowering retailers. For example, over the last year, Milton Keynes and Northampton have been testing shopping delivery robots. There are now over 200 six-wheeled automated vehicles delivering shopping in these towns, with plans for as many as 500 in five more locations across the UK. The appeal for such technology witnessed a steady surge during the pandemic, as consumers exhibited an increased willingness to embrace innovative solutions. Remarkably, this demand hasn’t dropped off even as life has gradually returned to its pre-pandemic conditions.
What’s Next for the Future of Retail Technology?
For venture capital investors looking for the next big thing in retail technology and investing in the sector, it’s a crowded market. The key to spotting those opportunities that are likely to grow and flourish will be in identifying those companies that are capitalising on consumer demand and changes in retail behaviour. While the pandemic has meant that change accelerated far beyond anyone’s expectations, the next big innovation in the future of retail technology is just around the corner.
