Many retailers are turning to mobile technology in a bid to increase sales by attracting more customers to their stores. Forbes explains that technologies like virtual reality, augmented reality, robots and more are also going to contribute in the likely growth of the retail sector in the near future.
If you follow the money trail, it looks like retail tech investors are betting on physical stores.
CB Insights, a market intelligence platform that analyzes tech funding deals, found investment in 2019 began to shift away from e-commerce and direct-to-consumer companies, and toward tech that makes physical stores smarter, such as cashier-less checkout, robots that roam the stores looking for empty shelves, and electronic price tags that can offer targeted discounts.
Its State of Retail Tech report found that funding of in-store technology rose by nearly 60%, while funding for e-commerce companies declined by 8%.
While the total number of dollars invested in e-commerce companies in 2019, at $19.7 billion, still is far greater than the $3.7 billion invested toward in-store tech startups, the funding momentum is trending away from e-commerce. E-commerce investment has declined for the past two years, while in-store tech investment has increased every year since 2015.
Laura Kennedy, lead analyst in consumer and retail at CB Insights, says the funding shift reflects a realization by retailers and the investment community that physical stores are where you make money.
“In the last few years we’ve seen a real shift in understanding by those benchmark brick and mortar omnichannel retailers – the Targets, Walmarts, Home Depots, Best Buys of the world – of the role that their stores have to play in their broader long term success,” Kennedy said.
Retailers are realizing that “the store is where our assets lie, so we have to invest in them,” which is fueling the growth of startups creating tech designed to boost sales and productivity in the stores, Kennedy said.
Part of that shift, she said, also stems from the growing realization by investors that is it hard to make an e-commerce-only business profitable.
“I don’t think that rules out investment in e-commerce. It will always be part of how people shop. But in the cases of retailers who have stores, it’s going to work in tandem with the store,” she said.
The CB Insights report also found venture capital and private investors increased funding for supply chain and logistics technologies, and retail-related artificial intelligence.
Funding for supply chain and logistics tech companies rose 14%, to $15.7 billion, while investment in on-demand businesses (such as ride-sharing companies, or on-demand pet services) fell by 27%, to $13.6 billion; investment in online grocery and food delivery companies declined 21%, to $6.2 billion.
Funding for retail-related artificial intelligence companies rose 65%, to $1.5 billion.
Following the money trail in retail tech in 2019 led CB Insights to make these predictions for 2020:
- Stores will get smarter, with computer vision, AI, cashier-less checkouts, electronic shelves that change prices in response to shopper analytics, and with new ways to improve supply chain speed to match consumer demand.
- AI will enable personalized product recommendations, help brands develop on-demand manufacturing, and use facial recognition to recognize shoppers.
- Retailers will use more augmented reality and virtual reality tools, both in stores and online, to enable try-ons, and product interaction.
- Stores will function as return depots, and startups will promise solutions to reduce returns.
- Robots will used to fill orders behind the scenes in warehouses, and be visible in stores, scanning shelves. Retailers will also increasingly be testing autonomous vehicles and robots for last-mile delivery.