5 Tech Investments That Reflect Real-World Retail Trends

Since late 2021, we’ve seen a drop in the amount of venture capital (VC) funding globally. Financial markets have become tighter and VCs have become more discerning as a result. Not only are they spending more time vetting companies, they’re also gravitating toward solutions with an immediate product-market fit, rather than betting big on long-term potential alone.

This shift was evident at last week's eTail West conference in Palm Springs, CA, where we learned that VCs in the retail space are prioritizing technologies that fit well into retailers’ tech stacks and have immediate business and/or consumer impact.

I sat in on a number of talks, including the panel “Investing In the Next Big Thing: How VCs View Today’s Retail Landscape.” The panel’s host, Brian Lange, co-founder of Future Commerce, led a discussion of the types of companies VCs are looking at, where they’re investing, and areas that are currently overhyped.

Following are the five areas — new and old — that they’re currently most interested in:

1. The in-store experience is ripe for both basic and inventive improvements.

Looking at market size and where traditional retailers are going to get the largest return on investment, improving the in-store experience is still, by far, the largest opportunity for retailers. But where to start?

So many of the problems that plague brick-and-mortar stores have already been solved on digital shopping channels — or never existed in the first place.

Matthew Nichols, general partner at Commerce Ventures, illustrated this with the fact that in physical stores, “We are still waiting in line!”

“We’re still very bullish on what Amazon Go is doing," Nichols said. "But more specifically, how do you take that technology and apply it to existing retail footprints to make it really easy to check out?”

Claire Chang, founding partner at igniteXL Ventures, thinks retail should focus less on improving the traditional shopping experience and more on reimagining it. “We have to move away from treating storefronts as glorified fulfillment centers,” Chang noted.

Chang referenced a South Korean startup called Stylenanda, which was acquired by L’Oreal. The company built out different themes across different neighborhoods in Seoul, bringing various entertainment concepts, such as movie theaters, into stores. She also cited RH's concept — bringing a restaurant into a furniture store — as another way retailers can complement the traditional product purchasing experience with a social one.

2. There’s a lot of untapped opportunity for symbiotic relationships between brands and the retailers that sell them.

Brooke Kiley, partner at VMG Catalyst, talked about concepts that give brands access to more store locations while driving new traffic to the retailers that sell their products.

“We have one brand, Rowan, which is an ear piercing concept," said Kiley. "It has some of its own brick-and-mortar stores, and has also gone to market with Target.”

Rowan’s customers can go online, set up an ear piercing appointment, and then go to a local Target location where they can purchase the earrings and get their ears pierced.

This gives Rowan access to Target’s thousands of locations where its customers can now take advantage of its services, while driving traffic into Target stores where those shoppers are likely to make other purchases during their visit.

3. Generative AI is already changing the way people search for products.

There has been a lot of discussion about ChatGPT, and at eTail West this discussion centered around its applications in retail. The most immediate use cases for natural language processing seem to revolve around customer service and improvements to the product discovery experience. Longer term, retailers are considering its use in advertising, marketing, coding and other task automation.

“From a top-of-funnel discovery perspective, we’re seeing a huge shift in the way people are searching for products,” said Kiley. “Last year, 66 percent of e-commerce product searches started on Amazon.com. ChatGPT is the latest technology that's creating a shift in the way consumers search.”

The career investor also suggested that it’s up to retailers to step up and own their insights, search optimization and personalization.

Commerce Ventures’ Nichols added, “I think there are some industries where this will fundamentally turn the way they operate upside down. Do I think retail is going to be one of them? No, but I do think it's going to get done very quickly for a bunch of very practical use cases.”

4. Retailers are figuring out how to monetize livestreaming with tech companies’ help.

When looking at trends, it’s important to factor in market size and how technologies are being adopted in other countries. In China, for instance, livestreaming e-commerce accounted for $514.20 billion in sales in 2022, according to eMarketer. This is compared to only $17 billion in the U.S. While livestream commerce has yet to reach critical adoption stateside, the results globally are impressive and will inevitably gain traction among U.S. consumers.

igniteXL Ventures' Chang is bullish on live commerce, having invested in buy with, a technology company that provides retail brands with a live commerce platform and counts Walmart as one of its clients.

“The conversion is just amazing,” said Chang. “The average e-commerce conversion [rate] is 2 percent. We're looking at eight to 10 times higher conversion. The average order value is much higher, too. I think one of the instances was around 72 percent higher average order value and much higher engagement. So if you look at all the benefits, why shouldn't you invest in livestreaming?”

5. Meeting consumers where they actually are on sustainability.

More consumers than ever are saying they want to shop sustainably, but they also want the low prices of fast fashion. Producing and operating sustainably in the U.S. requires government regulation, and normally comes with a higher cost.

Despite their good intentions, consumers are still primarily motivated by factors like price and convenience. The big opportunity for brands is to leverage their current sustainability efforts as integral parts of their shopper experience and brand story — making sure that sustainability is closely paired with affordability and speed.

“Bringing sustainability into an existing shopping experience is actually quite powerful,” said Nichols “A company we invested in, Trove, powers the e-commerce resale — or recommerce — experiences for Patagonia, lululemon and other brands. The sustainability element of the message really resonates. But it's also the ability to get a Patagonia jacket for 50 percent [off]. I think sustainability is really an important part of the story, but we’re seeing that sustainable practices on their own don’t drive people to make different purchases.”  

What About the Metaverse?

The metaverse is top of mind for Gen Z, which means that it will ultimately need to be top of mind for retailers. But right now, the real world is higher priority for retailers.

Brian Lange brought the panel to a close by asking the panelists to describe in one word or one sentence their thoughts on the metaverse.

Responses included: “overhyped,” “niche” and “something Gen Z is more comfortable with.”

To be fair, this is what a lot of people said about social media 20 years ago, so let’s not write off the entire metaverse just yet. For right now, however, there’s higher priorities in retail.

Kieran Powell is the executive vice president of Channel V Media, a PR and communications agency that works with retail, technology and financial companies to create awareness among their high‑value audiences.