We are thinking a lot more about the future of retail here at Collaborative. The way we buy our food (AmazonFresh, Daily Harvest, Hungry Root), clothes (StitchFix, The Real Real), prescriptions (PillPack), beauty products (Goop, Glossier), mattresses (Casper, Tuft & Needle), and even dental care (Smile Direct Club) continues to evolve. The old school retail brands are struggling, one in four malls are predicted to close by 2022 if they don’t adapt, and direct to consumer brands are driving up acquisition costs as they fight for mindshare on Instagram and Facebook.
We’ve reflected on this major shift in US retail and are convinced that brick and mortar retail is not dead. It just needs to be reinvented.
Walmart is on track to be dethroned by Amazon as the U.S.’s largest retailer of apparel, and global e-commerce is growing at a rate of 20% annually. There is no doubt that the rise of e-commerce has reshaped the retail industry. Still, online commerce is less than 10% of retail sales worldwide. For the next decade, physical retail will continue to retain the majority of purchases.As a result, we believe companies across categories will need to deliver quality customer experiences both on and offline.
Because of this this bimodal future, Amazon is rumored to be leveraging Whole Foods stores to supply and deliver, at the last mile, groceries that have been ordered online. As a result, Amazon could potentially double the implied revenue per square foot for each location. Not to be left behind, Walmart just completed a re-brand of Jet.com, which now features same-day delivery in select cities and localized product offerings in an attempt to “re-humanize e-commerce.” If new retail startups have an opening, this could be it. The near-infinite product offerings of mass market retailers have left consumers feeling overwhelmed by all the noise, and eager to re-connect with people that make, sell, and share an interest in the products they’re buying.
Although these two cross platform retailers are powerhouses, we think think there are still a few angles to win in the space (more on that here). Physical stores can offer a curated selection and sense of community for customers seeking to enjoy the time they spend shopping.The key to success in this new retail world is to provide a superior customer experience in store coupled with a best in class local e-commerce delivery network. The reimagining of brick and mortar and e-commerce as not two competing channels, but rather a synergistic duo, we believe, is just the re-invention that we’ve been looking for.
Our first investment along this theme of new retail is Foxtrot, which we invested in back in February.
Foxtrot is the next generation convenience store - a place where you can shop in person and get the pour over coffee you’re looking for and carefully curated products, but also shop online and get instant delivery of any essentials.
Currently only in Chicago, we can’t wait for them to bring this new model to other cities and transform the retail experience of this $300B convenience store market.
-Taylor and Lily