Hello, it’s Xavier 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, brands, and new commerce.
🏆 Who will emerge as the winner of the Covid crisis?
Web Smith draws a parallel between Covid and the 9/11 terrorist attacks.
He predicts that, just as the security theater in airports never disappeared and forever degraded the air travel experience, the pandemic-related security constraints in stores will never completely relax and will permanently degrade the shopping experience.
For him, the surge in e-commerce we saw during the lockdown period isn’t just a temporary bump. It prefigures a profound shift to digital and direct-to-consumer brands because the physical retail experience will never quite be the same.
Gavin Baker has a different take. For him “the future was always going to be omnichannel”. “In a world where CAC (Customer Acquisition Cost) is the new rent, one of the best ways to reduce CAC is to pay rent offline for physical stores”. Tomorrow’s winners will be those who first succeed in building an integrated omnichannel operation.
Now, the Covid crisis accelerated the switch to e-commerce and gave a welcome boost to e-commerce pure players, but they didn’t make progress where they needed: in physical retail.
On the other hand, by shutting down their stores, the lockdowns have forced brick-and-mortar retailers to focus heavily on e-commerce. For the first time, e-commerce was their #1 priority. And that matters immensely because that’s exactly where they needed to put the efforts.
“If most e-commerce companies have been pulled 1–3 years into the future in terms of their revenue, then the e-commerce businesses of most category leading brick and mortar retailers have been pulled 5–10 years into the future.”
Walmart’s or Best Buy’s e-commerce outgrew Amazon’s during the lockdown. Amazon is losing e-commerce market share.
Here at Spring Invest, we tend to side with Baker. We’re bullish on omnichannel and believe that mastering the dual craft is just as hard for pure e-commerce players as it is for pure physical retailers. Those brick and mortar retailers who survive the Covid crisis will be in a unique position to win the omnichannel game.
🔥 The browsing e-commerce opportunity
The idea’s been floating for a while. OK Amazon, Alibaba, or JD are unrivaled when it comes to ordering a specific item but they are search-based: if you don’t know what you want, they won’t help you much.
Vivek Goyal defines browsing e-commerce as the online equivalent of shopping by opposition to just buying. He says search-based e-commerce is missing 4 basic entertainment features :
China-based PinDuoDuo successfully built this combination of commerce and entertainment. In just 5 years, they reached 683m active customers and $180Bn GMV.
As often, when an idea’s time has come, one finds it everywhere.
Google has plans to turn Youtube into an e-commerce platform, any product shown in a video could be purchased with a click.
And, TikTok partners with Shopify on social commerce. “The partnership will eventually expand to include other in-app shopping features, as well, the companies said.”
Meanwhile, Benedict Evans is musing about e-commerce discovery in the context of a pandemic resetting physical footfall and a messy online advertising market.
🔎 Brand fragmentation and collaboration
Jim Barksdale famously said “There are two ways to make money in software, bundling and unbundling”. It seems that his precept is also valid beyond software, especially in retail and branding.
Ana Andjelic wants to unbundle brands. Mass fashion brands such as J.Crew or Tommy Hilfiger are losing steam and nothing can prevent their decline. According to Andjelic, the culprit is the increasing fragmentation of taste and the solution is to break brands up and turn them into a portfolio of sub-brands (a house of brands) each targeted to a specific niche. This move would be enabled by curation, constant exposure to the ecosystem that would allow each brand to evolve and grow across various product categories.
Ian Zelaya wants to bundle brands. He explains when and how brand collaborations can be successful. The key is to go for the long run, “It’s about more than slapping two logos together because both are super popular right now.” A great example is the collaboration between Apple and Nike which started in 2006.
“They’ve created a lock-in effect where they’re able to capture customer data and continue to provide new content, entertainment and utilities. They use all of that to drive a distinctive customer experience.”
🚚 Logistics, logistics, logistics
The Wall Street Journal has a nice piece about micro fulfillment facilities: small, heavily automatized logistics hubs located in urban areas that allow for quicker last-mile delivery.
A great article by Modern Retail on big retailers’ frantic efforts to accommodate for the holiday season. Target revamps its click&collect infrastructure, Lowe’s installs pickup lockers at 1,700 stores, Target and Walmart thriving to reduce waiting times at pickup…
Another way physical retail can add substance to the “service hub” narrative is by turning themselves into return hubs. Staples is now accepting returns from other retailers. This drives foot traffic of happy customers. Who wouldn’t want that?
On November 9, the news that Pfizer had reached 90% efficiency with its Covid-19 vaccine stormed the world. Just two weeks before, Web Smith was warning about the potential logistical collision between vaccine delivery and holiday season rush. Logistic lines always overheat with the increased volume of Christmas-related deliveries; if they are de-prioritized by the vaccine, it’s hard to predict the impact on supply chains. Brace yourselves.
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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 brands, and Disrupters creating new models of distribution. Our investment approach relies on strong relationships with 50+ European Retailers and Brands 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.