The world has completely changed.
We saw it happen day by day, first with the closing of restaurants, then the closing of schools, then the closing of society as we knew it. Many people believed this would a momentary shift in life but as I write this article, I realize it has been almost 12 months since the world changed. A change that has transformed every aspect of our life from how we interact with each other, to how we learn, to how we consume. We will never return to life as we knew it, however, in many ways technology and automation have allowed us to stay connected in this new world and find new kinds of joy.
Retail was an industry that I was fascinated to see a massive transformation. Even before the COVID-19 Pandemic, it was an industry that was stubbornly stuck in the ways of the past, an antiquated industry that has relied on human interaction at every part of the supply chain to exist. This is an industry that was forced to evolve or die.
Today, I’m writing about the demise of the current retail model that has been accelerated by a global pandemic, why I see us at the foot of an industry revolution, and the opportunities that exist to invest in the future.
Some numbers to wrap your head around:
COVID-19's impact on the worldwide retail market is projected to be worse than the 2008-09 financial crisis.
Global total retail sales are expected to hit $23.4 trillion in 2020, down 5.7% from 2019.
The Market Opportunities:
The Global Retail Automation Market is forecasted to grow to US $23.2 Billion by the Year 2027
In the peak of the COVID-19 Pandemic, 10 years of e-commerce growth happened in just 90 days.
My Thesis: The retail industry is shifting to rely on autonomous solutions to create a seamless in-store customer experience, increase cost efficiencies for the retailer, and expedite delivery for the customer.
There are three whitespaces that I see exist in retail automation:
Frictionless Checkouts – Enabling frictionless checkout experiences creates an easy and seamless experience for customers
AI & ML enabled predictive inventory platforms to demand forecast – Increasing production efficiencies by forecasting demand to improve operational efficiency and reduce errors
Warehouse Automation Technology - Automation of warehouses decreases transport times increased efficiency for the customer and retailer
To provide context, below are the Macro/Micro beliefs/assumptions that the thesis is established on:
COVID-19 accelerated the disruption in the industry
Antiquated industry
Tech innovation can be applied to every stage of retail
AI & ML is enabling this shift
Whitespace 1: Frictionless or Cashierless Checkout
This trend has been socialized by the cashierless checkouts you have seen for years at Walmart or Target. We are seeing innovation in this space at three levels:
1) AI-powered shopping carts that enable simple self-checkouts - I’m seeing a lot of innovation here from autonomous checkout tech to AI-powered shopping carts, to full stores that are equipped to have you walk in and out without interacting with a human being or the hassle of pulling out your wallet.
From now on, I’ll call companies that are trailblazing in this space “The Innovators”. There are three Innovators that I’ve loved in this lane:
IMAGR - Developer of autonomous checkout technology designed to make setting up a new store is as simple as bringing in carts and a charging station. Funding: Jan 2020 –$9.31M – Series A
Caper AI - Developer of an AI-powered shopping cart designed to simplify and digitize the consumer's shopping experience. Funding: July 2019 – $10.45 M – Series A
Standard Cognition - Developer of autonomous checkout technology intended to streamline operations for brick-and-mortar retailers. The company's technology uses artificial intelligence and lets consumers shop and pay without scanning items or stopping to pay in addition to accepting both cash and credit payments, enabling retailers to reduce labor costs, improve the customer experience and increase profit margins. Funding: July 2019 – $97M – Series B
2) Autonomous smart retail utilizing kiosks for self-check and gathering information on your end customer
Innovator: PopCom - Developer of automated retail technology software and hardware intended to provide deep consumer data and insights and engagement for vending machines and kiosk operators. Funding: June 2020 – $1.95M – Early Stage
Also, this company was started by one of my favorite founders that I’ve had the opportunity to meet and work with, the truly remarkable, Dawn Dickson.
3) “Pick and Go” allowing customers to step into a store, grab their items and leave by leveraging computer vision and camera technology to track customer acquisitions
Innovator: AiFi (Business/Productivity Software) - Operator of an Artificial Intelligence technology company intended to automate the world's stores for retailers and brands of all sizes. Funding: May 2020 – $15M Series –Early Stage
Whitespace 2: AI & ML enabled predictive inventory platforms to demand forecast
Another whitespace within retail automation is demand forecast applications enabled by AI and ML to increase production efficiencies by understanding customer consumption. At the end of Q4 2020, I spoke with the CEO of Under Armour, Patrik Frisk and he confirmed that the biggest impact that automation is having for his company and the industry is through leveraging predictive inventory platforms to understand inventory and consumer consumption.
Innovators:
PredictHQ – Developer of intelligent event data platform designed to help businesses better understand demand and plan for the future. Funding: February 2020 - $22M – Series B
Clari - Developer of revenue operations platform designed to drive pipeline, improve productivity, forecast revenue and reduce churn. Funding: October 2019 – $146M – Series B
Faire - Developer of an online wholesale marketplace designed to mitigate the burden of inventory risk for retailers. The company's marketplace leverages artificial intelligence and predictive analytics to forecast which products will fly off its virtual shelves to source and manage inventory as efficiently as possible, enabling retailers to aggregate merchandise from several wholesalers and distributors and reduce the time and money they spend on finding goods to sell. Funding: November 2020 – $435.48M – Series E
Whitespace 3: Warehouse Automation Technology
The third space I see opportunity in retail automation is warehouse automation technology. COVID-19 has accelerated the rise of e-commerce and Amazon Prime has created a culture of immediate delivery.
Taking into accounting that 1) according to McKinsey’s “Future of Retail Operations” Report, young, urban, and folks with time constraints are willing to pay more for same-day delivery and reliability. 2) 46% of shopping carts are abandoned due to long shipping times - Retailers understand the massive loss of revenue at the last stage of the customer shopping experience and are leveraging warehouse automation to push for decentralized fulfillment and decrease shipping times. Meaning they are moving towards the use of smaller micro-fulfillment centers in urban locations to enable faster delivery.
Innovators:
ShipBob - Provider of SaaS logistics technology designed to facilitate e-commerce businesses. The company's services include warehousing, custom packaging and package delivery in addition to its software for combining orders, inventory management, customer communication, predictive data and insights, enabling customers to better predict trends, shopping habits and geographic insights across multiple industries and selling channels. Funding; September 2020 – $130.67M – Series D
Dexterity - Developer of robotic systems built for logistics and supply chains. The company's robotic system allows customers to unlock the maximum value of their workforce by automating repetitive pick-pack tasks, and deliver full-stack, end-to-end systems for kitting, picking, packing, counting, sorting, palletizing, and order fulfillment, and also excel at handling packaged foods, consumer packaged goods, industrial and automotive parts, parcels, and boxes, enabling clients to unleash human potential by delegating repetition to robots. Funding: July 2020 – $98.45 M –Series A
My final thoughts: I’m writing this article after not seeing a single human being in person for 5 days (yes I live alone in a tiny NYC apartment during a global pandemic) and I think it just sunk in last night that things will forever be different. The world will never go back to how things were before. In that reality, there is grief but also the opportunity to do things differently.
The destruction of the current retail business model has forced the industry to do or die, to change or no longer exist. Automation has provided the industry the opportunity to evolve and there are three places that I see huge innovation.
1) Frictionless checkout enabling frictionless checkout experiences that create a seamless customer-focused experience
2) AI & ML enabled predictive inventory platforms to demand forecast increasing production efficiencies by forecasting demand to improve operational efficiency and reduce errors
3) Warehouse Automation Technology decreasing transport times increased efficiency for the customer and retailer.
You are seeing market validation through money flowing into these individual white spaces. However, I have yet to investors thinking about a full retail industry revolution through the lens of investment throughout the vertical.
Complete industry revolution is where we can capture a huge market opportunity.