Retail Chronicles | 01.09.2020
Emerging trends in retail and new commerce.
Hello, it’s Laurent from Spring Invest, a French investment fund dedicated to RetailTech. Welcome to the latest edition of Retail Chronicles, our bi-monthly newsletter about emerging trends in retail and new commerce.
📰 ONVB, a new model of distribution
Following our latest investment in Cabaia, we (Xavier et Alexandre) published in LSA a long review to explain our last investment and the new model of distribution that we called Omnichannel Native Vertical Brands (ONVB), an evolution to the formerly hyped DNVB model. This paper covers the following topics:
From physical retail to omnichannel retail, why digital channel is so hard to appropriate for most physical retailers ?
The reason for the rise and fall of DNVB (Digital-Native Vertical Brands);
What is the emerging model of distribution ONVB (Omnichannel Native Vertical Brands) and why this could be a more reliable and sustainable model ?
The full review can be read on LSA (in French).
🤝 Acquisition of TikTok: a new step in Walmart transformation ?
Last week, Walmart confirmed it was teaming up with Microsoft in a bid for TikTok acquisition, the Chinese social network with 100 million monthly active users in the US. Oracle is also interested in the deal.
After a dozen acquisitions of DNVBs, the launch of its third-party marketplace, and its own advertising business, TikTok could be a way for Walmart to accelerate its transformation.
Walmart explained that this acquisition could be “an important way to reach and serve its omnichannel customers as well as grow its third-party marketplace and advertising businesses.”
We’ve often talked about the difficulty for (e-)retailers to manage their customer acquisition strategy without being dependent on Facebook or Google. With a dedicated social media network, Walmart would be able to target its customers in a more efficient way without paying and sharing any data with potential competitors. TikTok could also provide Walmart with a new model and channel of distribution, the livestream shopping model, helping Walmart to compete with recent similar initiatives of Instagram or Facebook.
📈 RetailTech Last Trends
CB Insight published its Retailtech report for H1 2020 last week. Main RetailTech trends are :
Omnichannel management : solutions making more connections between e-commerce and store operations (data, supply chain, customer experience…);
PoS Management: solutions improving efficiency and automation in the store, vending machines;
HR: mobile tools to make store staff more efficient, solution helping store employees to shift to other roles;
Payment: cashierless and contactless solutions;
Logistics: digital freight forwarding platform, robotic fulfillment, flexible warehousing, logistics platform;
Customer Experience: solution adding interactivity and personalization to e-commerce, virtual try-ons solution, touchless experience using mobile solutions;
Ecommerce: social media commerce, resale platforms.
Read the full report here.
🎯 From Wholesale to Direct-to-Consumer strategy, Nike as an example
Nike is accelerating the transformation of its distribution model from a multichannel and multi partners approach to a direct-to-consumer strategy with methodical steps:
In November 2019, Nike stepped back from Amazon;
In June 2020, Nike announced that they will close 9 of their wholesales accounts;
In the coming months, Nike plans to open 200 new smaller stores based on the Nike Live Concept;
A small number of strategic partners will be part of Nike’s omnichannel strategy only if they are compatible with the modern and connected customer experience developed by Nike.
With this approach, Nike aims at getting better control over its omnichannel distribution relying on digital sales, owned stores, and handpicked wholesale partners. With a balance of power shifting from retailers to brands, Nike may become the first example of a successful and rapid move from an indirect to a direct-to-consumer distribution model.
Read more here.
⚔️ A look at the US – Amazon is not inevitable !
While Amazon struggled with a huge surge in orders and being out-of-stock on many items during the COVID-19 period, some customers found they could get a faster delivery time by ordering on Walmart. On the second quarter, Walmart’s performance was quite impressive illustrating the positive effects of an efficient omnichannel strategy:
E-commerce sales increased in the second quarter by 97% YoY;
E-commerce sales concern higher margin products making digital sales more profitable (profit margin of the group increased by 63% over the period);
For online food sales, Walmart’s market share increased to 30% while Amazon’s market share (through Amazon Fresh) decreased to 27%;
Walmart’s third-party marketplace generated a high volume of sales;
Customer acquisition and retention got higher than ever;
Average basket price became higher (+27%) while less frequent (-14%);
Walmart+ (the equivalent to Amazon Prime membership) is not considered as essential for now, the launch is postponed to an undefined time;
To read more content on Walmart's strategy on H1-2020, have a look here and here.
🏪 Despite Covid-19, US dollar stores are still flourishing
Like other nonessential businesses, US dollar stores had to close their doors in Spring 2020 in some US states. Like the other retailers, US dollar stores mainly rely on in-store sales rather than e-commerce. But, unlike the other retailers, US dollar stores performed really well with very strong growth during the Covid period. As an example, Dollar General Q2-2020 revenues grew up +24% YoY, while Dollar Tree growth was +9%, the latter still planning to open 500 new stores this year. This could be a sign of a shift in consumption habits with an increasing number of budget-conscious shoppers. It is interesting to note that dollar stores are still operating in a traditional way with a poor digital experience. But they invested a lot in tools making the in-store customer experience better (cashier-less checkout, digital coupon, mobile scan&pay app…).
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Spring Invest is a French investment fund dedicated to companies that are shaping the future of retail. We invest both in Enablers, B2B companies providing innovative solutions to (e)retailers and CPG companies, and Disrupters creating new models of distribution. Our investment approach relies on strong relationships with 50+ European Retailers in order to provide sales acceleration to our portfolio. We also provide operational support with a dedicated team of Venture Partners working with our portfolio on sales, communication, HR, and internationalization.