According to the National Retail Federation, in 2021, retailers saw a 26.5% increase in organized retail crime (ORC) incidents. Retailers credit ORC for the year’s 4.1% increase in losses ($94.5B in total) over 2020. 

Companies from REI to Starbucks are also grabbing headlines as they close stores and cite crime and theft as a reason. Others, like Ulta, are simply locking up more products to keep them out of thieves’ hands.

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While economic growth in advanced markets like the US and France is set to see a notable slowdown in 2023, per the IMF, the picture is more positive in emerging markets like China and many countries in Africa.

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Using CB Insights data, we dug into the retail tech and innovation landscape in Q1’23, including:

1. The continued decline in retail tech funding in Q1’23, to its lowest level since Q2’16
2. Early-stage deal strength in retail, and where the money is going
3. A steady quarter for exits, with 9 IPOs and a slight uptick in M&A activity
   
4. The handful of mega-rounds that buoyed food & meal delivery funding
5. The 11% quarter-over-quarter increase in US funding
   

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Last week, the retail giant sold Bonobos for $75M, a 76% markdown from the $310M Walmart paid for the men’s fashion brand in 2017.

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Over its 20+ year history, the China-based company has ventured into more and more industries, including cloud computing, healthcare, travel, and entertainment, among others — growing influential enough to attract intense scrutiny from a tech-wary Chinese government in recent years. And in March 2023, Alibaba announced it would split its sprawling business empire into 6 separate units.

At least 3 of these new units will focus on Alibaba’s core retail business. And they’re likely to remain committed to the behemoth’s vision for “New Retail” — a long-held aim to integrate Alibaba’s advanced e-commerce data and analytics into offline commerce to create a seamless omnichannel experience.

Using CB Insights data, we uncovered 5 of Alibaba’s most important strategic priorities in retail which will remain top-of-mind even as the company restructures. We then categorized companies by their business relationships with Alibaba across these priorities.

• Cross-border commerce
• E-commerce
• Express logistics
• Omnichannel retail
• Online grocery

This graphic includes investments, acquisitions, and business relationships for Alibaba Group, Alibaba Entrepreneurs Fund, and Tmall. These designations are not exhaustive of Alibaba’s investment and partnership activity in the analyzed period.

Cross-border commerce

Alibaba has formed several strategic partnerships via its logistics arm, Cainiao, to reach shoppers outside of China (as well as to connect foreign brands with Chinese customers). The company is particularly focused on less-mature markets where it can capture new growth.

It has partnered to enable cross-border logistics and shipping to South America (Atlas Air Worldwide Holdings), Japan (SGH Global Japan), Europe, the Middle East, and North Africa (Saudia Cargo). 

Alibaba has also formed smaller-scale partnerships with organizations like the Zhejiang China Commodities City Group Co. with the goal of helping small businesses extend their reach outside of China.

E-commerce

Alibaba’s investments in e-commerce platforms have focused on growing its reach in high-growth markets and in key product categories.

For instance, over the last 2 years, the retailer increased its stakes in Turkey-based online fashion marketplace Trendyol as well as in Singapore-based mass online marketplace Lazada. In addition to the potential for growth in Singapore, Lazada reaches even further across the competitive Southeast Asian retail landscape. Alibaba wants to extend the marketplace’s reach into Europe and other new markets as well. 

Alibaba’s investments also signal that it’s doubling down on growing categories. Its investment in online luxury marketplace Farfetch in November 2020 points to the importance of luxury shoppers and products in Asia. The deal included not only a $300M investment in Farfetch but also a $250M stake in a new joint venture called Farfetch China, both investments were in partnership with the Swiss luxury holding company Richemont. 

Express logistics

In recent years, Alibaba has increased its ownership stakes in the biggest express logistics companies in China. The companies offer fast logistics and delivery capabilities and have grown dramatically as a result of an increase in the use of e-commerce across China. 

Notably, the company fully acquired China-based logistics provider ALOG in August 2020. ALOG had been the main warehouse management provider for Tmall Mart, Alibaba’s online supermarket. 

Omnichannel retail

Alibaba continues to focus on grocery as a key building block for its store footprint and New Retail online-to-offline strategy. 

Since 2016, Alibaba has run its high-tech supermarket Freshippo, which deploys tech like electronic shelf labels, facial recognition, and robotics to enable more efficient shopping in stores as well as faster delivery. The chain now has nearly 300 locations.

Alibaba’s investments in recent years have added to its physical grocery footprint, with the aim to extend New Retail capabilities. The company’s biggest move in the sector was a $3.6B investment in Sun Art, one of the largest mass merchandiser and supermarket chains in China, in October 2020. The deal added nearly 500 stores to Alibaba’s brick-and-mortar network. Since then, Alibaba also led a $100M round for China-based T11 Food Market. 

Online grocery

Alibaba’s online grocery initiatives offer the company more ways to make New Retail connections between stores and online. They also enable the company to take advantage of the growth in online grocery, which expanded in China during the pandemic.

Its investments have reached across the grocery value chain. For instance, in February 2021, Alibaba took a minority stake in Caihuasuan, which builds pieces of the fresh food supply chain. 

Alibaba also invested 4 times in the group grocery buying platform Nice Tuan, which has since dissolved. But Alibaba’s attention to the company points to its interest in new online models like group buying, which has caught fire in the fast-growing lower-tier cities in China (as well as in India, South America, and elsewhere) where Alibaba is looking for growth.

A social commerce partnership may prove most fruitful for Alibaba’s online grocery ambitions. In August 2022, Alibaba’s online grocery platform Ele.me launched a presence on Douyin, the Chinese equivalent of TikTok (also owned by ByteDance). Douyin users can place grocery and restaurant orders directly via Ele.me on the video platform.

Other

Beyond these 5 strategic focus areas, Alibaba has made noteworthy investments, partnerships, and acquisitions across a range of other categories.

E-commerce enablement: In July 2020, Alibaba invested in the Australia-based cross-border payments processor Airwallex. Then in March 2021, the company invested $30M in China-based Leyan Tech, which makes AI-powered e-commerce customer service software. 

Media & content: Alibaba has made a few investments that indicate interest in advanced e-commerce content and the metaverse. In November 2021, the company backed a Series A round to China-based DGene, which makes mixed reality content for several industries, including AI-generated actors for film and TV, as well as digital influencers. Then in March 2022, Alibaba participated in a $60M Series C round for the mixed reality equipment and tech company Nreal, which is based in China. 

Sustainability: Sustainability has come into focus for Alibaba as it grows in importance for Chinese consumers as well as for the Chinese government. Along with a 2020 investment in Hong Kong-based green packaging developer Ecoinno, Alibaba also formed a “Waste Free World” partnership with Unilever in 2021. The companies designed machines that use AI to identify types of plastic and sort them to be recycled. Users get Unilever coupons and rewards on Alibaba’s payments platform AliPay.

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Many of this year’s winners focus on boosting the efficiency of retail operations across channels. To this end, AI is being deployed by winners across categories, to automate everything from inventory forecasting and management to counterfeit tracking. Additionally, platforms that integrate tech stacks — whether in stores or for digital selling — are gaining traction in developed as well as emerging markets. 

Other companies in this year’s winning cohort help retailers create more engaging shopping experiences, via tools like chat commerce, shoppable video, and NFTs. Sustainable shopping solutions for both consumers and retailers make a notable appearance as well.

Using the CB Insights platform, our research team picked these 100 private market vendors from a pool of over 7K companies, including applicants and nominees. 

The list includes early- and mid-stage startups driving innovation across store tech, e-commerce, loyalty & rewards, supply chain & logistics, and digital engagement. They were chosen based on factors including funding, proprietary Mosaic scores, market potential, business relationships, investor profile, news sentiment analysis, competitive landscape, team strength, and tech novelty. The research team also reviewed hundreds of Analyst Briefings submitted by applicants.

Clients can access the entire Retail Tech 100 list and interactive Collection here. (If you don’t have a CB Insights login, create one here.)

Companies are categorized by their primary focus area and client base. Categories in the market map are not mutually exclusive. Please click to enlarge.

Want to be considered for future rankings? Fill out this initial application form (it’ll take no more than a few minutes). If selected, you’ll be asked to complete our Analyst Briefing Survey so that our analysts can better understand your products, customers, and market traction.

RETAIL TECH 100 COHORT HIGHLIGHTS

Overall funding & valuation trends: The cohort has raised nearly $5B across more than 250 equity deals since 2019 (as of 3/2/23). In 2022 alone, companies on the list raised more than $3.1B across 106 deals. This year’s list features 3 unicorns: self-checkout company Mashgin, delivery management platform Veho, and omnichannel operations and loyalty tool Swiftly. 

Funding leaders: Cart.com, which makes end-to-end e-commerce technology, is the most well-funded company on the list, with $323M in total equity funding. Delivery management unicorn Veho comes in second with $299M in funding. New unicorn Swiftly rounds out the top 3 with $216M in total equity funding.

Global reach: This year’s winners come from 20 different countries. Fifty-six of the selected companies (56%) are headquartered in the US. The United Kingdom comes in second with 6 (6%) and China and Australia are tied for third with 5 companies (5%) each. 

Notably, 12 companies on the list (12%) represent emerging market economies. Local companies in these markets are increasingly looking to deploy tech to make fragmented and informal retail processes more efficient and trackable.

Some of the companies in these geographies — like Majoo (Indonesia) and Dot (India) — offer omnichannel retail operations platforms that help retailers digitize operations across in-store and online channels. Other solutions — such as Khazenly (Egypt) — are focused on delivery management.

Top investors: Insight Partners is the top investor in this year’s list. It has invested in 8 of this year’s winners since 2019, including 3D digital content producer and manager nfinite, food traceability solution iFoodDS, and delivery management platform Shipium. Tiger Global is close behind with 7 companies, followed by Accel with 5.

Digital content and engagement rules: The biggest category for this year’s list is digital shopper engagement, which has 16 companies (16%). The companies in this category allow retailers to connect with shoppers across platforms and channels, with a focus on personalization and loyalty. 

For instance, Charles and Postscript both make chat commerce platforms that enable marketing and checkout via text. Meanwhile, Arianee, METAV.RS, and Novel help brands develop NFTs and use Web3 tools to boost loyalty and authenticate their products. 

Automation is driving efficiency: Automation solutions reach across categories on this year’s list as retailers and brands look for tools to make their operations faster and smarter. 

Alloy, for instance, makes a platform to connect e-commerce teams’ apps and automate tasks. Several other companies build supply chain integration platforms that aggregate tools and use AI to optimize decision-making. Meanwhile, Vue.ai, Lily AI, and Pixyle use AI to automate product tagging and broader catalog management online, which can ultimately boost the accuracy of shoppers’ searches and drive more buying. 

Early-stage innovation: More than half of the winners in this year’s cohort are early-stage companies (seed/angel or Series A). These companies are developing innovative solutions to promote more specialized and personalized shopping experiences.

For example, EQL’s e-commerce platform is specialized for “hype commerce,” or limited-time drops for hot products. EON creates digital IDs (or digital twins) to make apparel traceable. And Nibble Technology uses AI and chat commerce to inject negotiation into e-commerce shopping.

What we didn’t find: Despite retailers’ acute challenges in a few areas — namely loss prevention and employee empowerment — our research turned up fewer-than-expected earlier-stage companies solving these problems in new ways. 

However, a few tools still stood out in these areas. For example, Spot’s AI-powered video intelligence system helps retailers track everything from shoplifting to employee issues. Meanwhile, SparkPlug’s platform helps retailers reward employees in a tough labor market through the gamification of tasks.

THE RETAIL TECH 100 CLASS OF 2022: WHERE ARE THEY NOW?

The 2022 Retail Tech 100 winners have accomplished a great deal since March 2022. Together, they have seen:

• Over $2.5B in equity funding across 25+ deals (as of 3/2/23)
• 10 mega-rounds (deals worth $100M+), including a $300M round to cross-border payments company Xendit
• 2 exits: 1 merger and 1 acquisition
• 1 new entrant to the $1B+ unicorn club

If you want to learn more about the Retail Tech 100 Class of 2022, check out the full list of previous winners.

The post Retail Tech 100: The most promising retail tech startups of 2023 appeared first on CB Insights Research.

Now, it’s establishing itself as a tech provider — similar to the likes of Amazon — by launching high-margin, high-growth-rate tech businesses for the retail industry. This could change financial markets’ perception of the company’s growth potential and help it achieve a higher valuation than traditional grocery retail.

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However, even with quarterly revenue growth in the double digits, the company is facing increasing profitability challenges. And the number of Amazon Prime members in the US reportedly fell to 168M last year from 170M in 2021 — the first drop since the program’s launch. 

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Retailers are facing last-mile pressures on all sides. Consumers have grown accustomed to the free and fast shipping options that giants like Amazon, Walmart, and Alibaba provide, while execution has grown increasingly expensive for retailers due to inflation, fuel costs, and labor shortages.  

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Instacart is stepping up to help grocery retailers enhance the omnichannel shopper journey. 

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As uncertainty and volatility grew in 2022, retailers and brands zeroed in on tech to boost conversion and grow revenues.

No matter the environment, our research helps retail players make tech-buying decisions. For example, discover tech solutions in merchandising in our merchandising tech market map, determine which tech markets to prioritize with our corresponding MVP framework, and decide which companies are ideal for partnerships or investments with our market-specific ESP Vendor Rankings, including this one covering trade promotion optimization.

Looking ahead to 2023, we’ll be watching:

• Tech that helps build new revenue streams as well as the solutions that help retailers cut costs and drive efficiency, across stores as well as e-commerce.
• Continued growth in emerging markets across the globe, creating new opportunities for digitization.
• New media platforms and modes of digital content production.
• New types of customer journey tracking and personalization tech.

The points above are in focus as we develop the 2023 Retail Tech 100, our annual list of the most innovative B2B retail companies in the world. Look for it in March 2023.

In the meantime, we’ve created a guide below to help you check out our top research in retail and e-commerce — and prep for the year to come. 

OMNICHANNEL RETAIL 

• The Big Tech in Retail Report: How Meta, Amazon, and Google are transforming retail
• The Retail Tech 100: The top retail tech companies of 2022
• 13 tech solutions to help recession-proof retail businesses
• The Future of the Post-Purchase Experience: How technology is transforming the way we shop
• The Future of Fashion: From design to merchandising, how tech is reshaping the industry
• The shift to a circular economy: How tech is shaping the future of sustainable retail
• [Client Research] Analyzing Walmart’s Growth Strategy: How the retail giant is building e-commerce and boosting profits
• [Client Research] Unbundling Sephora: How the beauty retail experience is being disrupted
• [Client Research] Tech Market Map Report: Merchandising Tech for Brands & Retailers
• [Client Research] These 15 technologies are helping brands & retailers supercharge merchandising — here are the ones to prioritize
• [Client Research] Tech Market Map Report: Hourly Employee Management Tech
• [Client Research] Prioritizing the 13 technologies combating labor shortages for hourly employees across industries
• [Client Research] Analyzing Alibaba’s growth strategy: How the tech giant is reimagining retail to drive its global ambitions 
• [Client Research] 157 companies helping grocery leaders adapt to the omnichannel shopper journey
• [Client Research] How grocery retailers should prioritize these 11 technologies supporting omnichannel enablement
• [Client Research] Analyzing Carrefour’s growth strategy: How the retailer is digitizing its operations to improve profitability
• [Client Research] Tech Market Map Report: Loyalty & Retention Tech in Consumer & Retail
• [Client Research] 10 technologies that strengthen customer loyalty and retention — and the ones retail leaders should prioritize now
• [Client Research] Analyzing 7-Eleven’s growth strategy: How the world’s largest convenience chain is improving customer experience and engagement
• [Client Research] 70+ early-stage companies reimagining luxury retail
• [Client Research] Analyzing Kering’s growth strategy: How the luxury giant behind Gucci and Balenciaga is innovating across sustainability, the metaverse, and more
• [Client Research] Tech Market Map Report: Customer Service in Consumer & Retail
• [Client Research] MVP Technology Framework: Customer Service for Consumer & Retail Leaders
• [Client Research] 54 companies using AI to automate customer service interactions
• [Client Research] Analyzing H&M’s growth strategy: How the fashion giant is innovating in sustainability and omnichannel commerce
• [Client Research] These 134 companies are transforming how brands & retailers acquire customers

E-COMMERCE AND DIGITAL SHOPPING

• The Future of E-Commerce: How AI advisors, crypto wallets, and the metaverse will enable shopping in 2030
• Unbundling SHEIN: How fast fashion is being disrupted
• [Client Research] The virtual fitting room: How Amazon, Walmart, Alibaba, and others are using AI and AR to transform shopping
• [Client Research] Unbundling TikTok: How influencer marketing and the creator economy are getting disrupted
• [Client Research] 74 companies powering super apps like WhatsApp and WeChat
• [Client Research] Analyzing Shopify’s growth strategy: How the e-commerce platform is expanding its merchants’ reach and speeding up delivery
• [Client Research] Tech Market Map Report: E-Commerce Tech in Consumer & Retail
• [Client Research] MVP Technology Framework: E-Commerce Tech for Consumer & Retail
• [Client Research] 100+ startups driving innovation in recommerce tech
• [Client Research] Analyzing eBay’s growth strategy: How the company is prioritizing category specialization & luxury authentication

STORE TECH

• The Future of the Supermarket: How technology is making grocery shopping more personalized, efficient, and sustainable
• 5 new formats reinventing the physical retail store experience
• [Client Research] 160 companies making retail stores more profitable, efficient, and engaging
• [Client Research] Prioritizing 13 technologies digitizing and automating retail stores

SUPPLY CHAIN, FULFILLMENT, & DELIVERY

• The Future of the Fleet: How technology is making transporting freight more efficient and sustainable
• The Future of Last-Mile Delivery: How technology is tackling the complexity and cost of fulfillment
• [Client Research] What are Walmart, Kroger, and Albertsons doing in microfulfillment?
• [Client Research] How American Eagle and Gap are entering the third-party logistics space
• [Client Research] 218 companies helping retail leaders make last-mile operations faster, cheaper, and more efficient
• [Client Research] Analyzing DoorDash’s operational strategy: How the delivery leader is investing in local commerce
• [Client Research] Tech Market Map Report: Supply Chain Optimization in Grocery
• [Client Research] MVP Technology Framework: Supply Chain Optimization for Grocery Retailers
• [Client Research] Analyzing Ocado’s growth strategy: How the grocery tech giant is shaping the future of the supermarket
• [Client Research] 60+ early-stage companies reshaping food & meal delivery

DIGITAL CONTENT & MEDIA

• • Unbundling Meta: How the tech giant’s digital advertising business is being disrupted
  • What L’Oréal, Nike, and LVMH are doing in Web3
  • [Client Research] Tech Market Map Report: Retail Media Networks
  • [Client Research] These 14 technologies are helping retailers build out their media networks — here are the ones to prioritize
  • [Client Research] 171 companies helping brands scale and automate their digital content offerings
  • [Client Research] 95+ early-stage companies using AI to create and edit digital content

The post Our top retail & e-commerce research and trends to watch appeared first on CB Insights Research.

On one hand, physical retail is absolutely necessary: Around 85% of all retail sales in the US happen in stores. 

On the other, despite a slowdown in growth, e-commerce’s proportion of retail sales is higher than it was pre-pandemic. Technologies from text commerce to virtual worlds are making digital shopping more immersive and seamless. And many retailers are culling their fleets: CVS, for instance, will close 900 stores by 2024, while Amazon shuttered all of its existing non-grocery stores in March 2022.

Yet store remodels, new formats, and store openings are still a prominent part of retail executives’ conversations heading into 2023. In fact, the ongoing challenges that retailers face have made it more important than ever before to invest carefully and purposefully in stores.

One approach is to remodel stores and find ways to squeeze more out of retailers’ existing assets. For instance, Walmart spent $3.3B on store remodels in 2021 — 52% more than it spent in 2018. In 2022, the retailer is on pace to spend nearly 20% more than it did in 2021. Target also plans to remodel another 200 stores in 2023. 

But several retailers are aiming to elevate the in-person shopping experience further by launching entirely new store formats. They’re turning to new layouts, services, assortments, and technology to give shoppers a distinctive reason to visit a store — and more importantly, the right experiences to drive them to make purchases.

In this report, we examine 5 new store experiments that will level up brick-and-mortar shopping in the coming year by creating exciting, efficient, and necessary stores:

• Expertise-driven experiences
• Omnichannel natives
• Shop-in-shops
• Smaller stores
• Specialized spin-offs

The formats emphasize the need for more consistent and in-depth employee training as well as the importance of customer data as a foundation for decision-making.

Tech solutions will be fundamental in advancing these new formats. Each breakdown in the report will also direct you to CB Insights research that can help identify the right tech and vendors to create these IRL experiences. 

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Demand forecasting and inventory optimization platforms utilize sales data and other relevant metrics to improve the inventory planning process.

Artificial intelligence (AI)-based demand forecasting solutions help retailers enhance supply and demand planning, pricing and promotion initiatives, and replenishment efforts. As a result, they have the potential to reduce waste and out-of-stock events and, ultimately, boost the bottom line for retailers across categories.

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A physical point-of-sale (POS) system is the hardware and software that help businesses accept payments from customers in person.

Companies in this space focus on brick-and-mortar POS services and solutions. These include card and chip readers, which are often bundled with tablet-based business management solutions.

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Grocery microfulfillment centers (MFCs) are small fulfillment centers, often located in warehouses or within grocery stores themselves. These centers help grocery retailers quickly fulfill online grocery orders.

Many microfulfillment options use robotics to automate the process of picking up orders and preparing them for delivery. Currently, MFCs are most efficient with consumer-packaged goods, which tend to be relatively uniformly shaped and durable, making them easier for robots to handle.

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Auto-replenishment tech uses machine learning to automatically ship orders to customers for frequently purchased items, often on a subscription basis. In forward-looking applications, auto-replenishment tech can include smart containers that utilize Internet of Things (IoT) technology to automatically reorder products that are running low.

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Employee task management platforms provide retailers with digital tools to manage and communicate with store associates, boosting employee efficiency and productivity.

These platforms consolidate many tools in one place, including messaging between associates, managers, and retailer HQs; task trackers; and performance monitoring.

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Omnichannel clienteling solutions help store associates personalize the shopping experience for customers and connect their online and offline behavior by delivering them a 360-degree view of the customer. This equips them with mobile tools to build customer relationships and increase sales.

Virtual shopping tools are becoming the standard, as is the “endless aisle” that enables convenient in-store online shopping for a consistent omnichannel experience.

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Contactless self-checkout tech enables fast and touch-free checkout by minimizing interactions between shoppers and employees and preventing the hassle of check-out lines.

Computer vision systems that track shoppers through stores and allow them to simply “walk out” with their items have gained the most attention. These platforms often integrate shelf sensors. Other tools, such as mobile self-scanning apps and smart self-scan shopping carts, are helping the concept gain more traction with retailers.

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Unattended checkout companies develop various forms of unmanned point-of-sale and checkout technology, deploying artificial intelligence (AI), computer vision, and other technologies that help shoppers leave the store faster. These companies seamlessly integrate loyalty accounts and payment options for consumers’ omnichannel journeys.

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Amid this slump, the deals that investors did make are focused on new sources of growth: levers that retailers and brands can pull to boost conversion and grow revenues in an uncertain environment.

Using CB Insights data, we surface 3 retail trends to watch this quarter, and highlight what’s next across:

• E-commerce efficiencies
• Small business digitization
• Monetizing retail real estate

E-COMMERCE EFFICIENCIES

Tech to watch: E-commerce analytics and shopper marketing

Why we’re paying attention: Funding to e-commerce analytics and shopper marketing companies nearly tripled last quarter, hitting $672M.

Deals for companies that use consumer data to automate and enhance content on e-commerce sites drove quarterly growth.

Germany-based Conversion Maker AI, which raised a seed round of $4M in July, uses customer data to automate and optimize online text, including product descriptions. Turkey-based Artifica also raised a seed round in Q3’22. The company uses AI to improve e-commerce data, which can enhance product listings and improve site navigation. Meanwhile Vizit, which uses AI to track how shoppers respond to images, allowing lets brands and retailers to choose the best visuals to drive conversion, raised an incubator round in September 2022.     

Tech solutions to track consumers’ behavior online also drew attention in Q3’22. ContentSquare’s $400M Series F in July was the third-biggest retail tech round of the quarter. The company’s technology tracks clicks and mouse movements to analyze shoppers’ journeys. Fermat, a social commerce platform that gives influencers and brands more data to track which products and partnerships perform best, raised a seed round in September 2022.

Why it matters: Retailers and brands are continually looking to lower e-commerce costs and boost conversion. Tech that automates e-commerce operations and enhances the experience will remain in their crosshairs.

What’s next: Sophisticated shopper data analytics tools are becoming essential as data collection regulations continue to shift and the cost of customer acquisition grows. 

Retailers and brands will next turn to synthetic media — content that has been generated, edited, or enabled by artificial intelligence — to quickly enhance and personalize experiences at scale. 

SMALL BUSINESS DIGITIZATION

Tech to watch: Omnichannel management platforms

Why we’re paying attention: Early-stage deals have made up a higher share of retail tech deals so far in 2022 than they did in 2021, when 60% of deals were early-stage. Median funding for early-stage companies was also up by 9% YTD (to $2.5M).

Notable among those early-stage deals were a range of companies whose tech solutions digitize operations for small merchants and businesses, particularly in markets where informal, analog retail operations are still the norm.

For example, Indonesia-based Majoo raised a $10M Series A round in August 2022. Its platform gives small businesses access to a payments platform, advertising, an online procurement marketplace, and even capital. India-based WINDO, which helps small retailers launch online stores quickly, raised a second seed VC round worth $1.5M in July 2022. In the UAE, Dukkantek offers small merchants a cloud platform for POS, inventory management, and e-commerce, all accessible through its app. The company raised a second seed VC round in August, for $10M. Nigeria-based Kippa enables payments systems for “micro businesses” in Africa, along with digitizing bookkeeping. and raised an $8.4M seed VC round in September 2022. 

Why it matters: Global brands will benefit from more standardized retail operations in emerging markets. Distribution and performance data collection will become easier and more reliable. Overall, improving digital access for small merchants could open more new markets for retail tech investment and help brands connect with new groups of shoppers.

(Read more here on how this shift is taking place in India.)

What’s next: As more mature markets face economic uncertainty, emerging markets offer opportunities for growth. In addition, the adoption of new modes of shopping in these markets — for instance, mobile-only payments — may also provide signals for evolution in consumers’ behavior elsewhere. 

MONETIZING RETAIL REAL ESTATE

Tech to watch: Retail media networks (RMNs)

Why we’re paying attention: Amazon effectively introduced a new revenue stream across retail with its successful ads business, which made $30B+ in 2021. In the last few years, a steady parade of major players, including Walmart, Target, Dollar General, and others, have established or expanded their own media networks in an attempt to capitalize on their store and digital footprints. 

Over the last few months, the flood of retailers joining the fray continued. For instance, Ahold Delhaize’s US business brought its media operation in-house, reporting that it planned to triple its internal retail media team over the next year. 7-Eleven launched its own platform, called Gulp Media Network. RMNs also drew less traditional bedfellows, as DoorDash rolled out self-serve advertising solutions and Uber introduced its own advertising division. 

Source: DoorDash

Retailers also continue to beef up their media network tech stacks and reach. Best Buy, which launched Best Buy Ads in January 2022, announced that it will work with software platform DoubleVerify to track data on its brand partners’ ads as well as its own campaigns. Kroger expanded its ad network’s reach into connected (streaming) television as well as video. And Lowe’s One Roof Media Network is partnering with Yahoo to reach more consumers outside of Lowe’s own platforms.

Why it matters: In an inflationary and uncertain economic environment, retailers are on the hunt for new revenue and profit sources. RMNs offer high-margin revenue that leverages existing assets. Retail media ad spend in the US is expected to increase by $10B this year, representing 17.2% of total digital ad spending (up from 14.9% in 2021), according to eMarketer. 

Our RMN Tech Market Map and MVP Framework reports outline the tech that retailers are using to build their own media platforms. 

What’s next: Right now, the better question might be which retailers haven’t launched media networks. The landscape is crowded and will get even more competitive, particularly as other consumer-facing digital platforms get in the game. While it makes sense for retailers to take advantage of their rich first-party data, they and their brand partners run the risk of overloading consumers. 

Watch for the retailers that make strong connections with loyalty programs. More targeted campaigns that reach retailers’ most valuable customers can drive better returns.

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This is an even greater challenge as customers have grown accustomed to the free and fast shipping options used by the likes of Amazon, Walmart, and Alibaba to lure shoppers. 

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The majority of sales and profits still come from stores. But keeping brick-and-mortar locations as their profit centers is becoming increasingly difficult as retailers face ongoing inventory volatility, shrink-related losses, and labor shortages. 

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Investors are making smaller bets: funding from mega-rounds ($100M+ deals) dropped 38% QoQ. And only 3 new retail unicorns emerged in Q3’22, down from 13 births in Q2’22. The new unicorns are India-based fulfillment management tech company Shiprocket (valued at $1.3B), Thailand-based food delivery company LINE MAN Wongnai (valued at $1B), and Italy-based omnichannel payments platform Satispay (valued at $1B).

Below, check out a few highlights from our 127-page, data-driven State of Retail Tech Q3’22 Report. For deeper insights, all the record figures, and a boatload of private market data, download the full report.

Q3’22 highlights across the retail tech ecosystem include:

• • • The top 3 most active investors in Q3’22 invested in 38% fewer companies than the top 3 in Q2’22.
    • Europe led in mega-round funding, with $1.5B spread across 3 deals. In Asia, the number of mega-round deals collapsed 81% from its peak in Q3’21.
    • E-commerce was the only sector with a funding increase (10%), with investment reaching $4.6B across 372 deals in the quarter.
    • Supply chain & logistics tech funding fell by 57% QoQ. Deals were concentrated primarily in the US and Asia.
    • In 2022 so far, early-stage deals are making up a higher share of retail tech deals (64%) than they did in 2021 (60%).

Download our Q3’22 State of Retail Tech Report to learn more about all these trends and more.

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But conventional production approaches might not be able to support brands and retailers delivering personalized, engaging digital content at scale. Synthetic media — content that has been generated, edited, or enabled by artificial intelligence — could be the solution. 

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