Startups In Retail Are Booming And Competing
It has never been easier for new firms to enter and compete in the retail market. VC firms are eager to invest in the retail space, as customers increasingly seek multichannel and direct-to-consumer options. Dive into the research below:
— The competition in retail has never been stronger. Direct-to-consumer brands and new entrants that power small businesses are booming.
— Venture capital firms are investing at record levels, encouraging innovation among retail startups and ultimately benefiting consumers.
— For startups entering the retail arena, “kill zones” are not a concern.
The competition in retail has never been stronger. Direct-to-consumer brands and new entrants that power small businesses are booming.
Big name investors are pumping billions of dollars into mom-and-pop sellers on Amazon, confident in their potential to become global brands, writes Bloomberg’s Spencer Soper. “Investment banks, venture firms and private equity shops are backing so-called Amazon aggregators—often led by e-commerce veterans—that are betting they can take up-and-coming sellers, who often operate out of their garages, and transform them into global brands. The aggregators say they have the expertise to select strong products and avoid faddish ones that flame out before they have a chance to grow.”
Large corporations are adding new technologies to connect small and medium-sized businesses to more consumers. Walmart wants to serve all suppliers, said Janey Whiteside, Chief Customer Officer. “‘As we continue to grow our media business we need to find ways that we can easily serve all suppliers—be it companies who have been Walmart suppliers for years or brand new marketplace suppliers,’ said Janey Whiteside, chief customer officer at Walmart, in a statement. ‘The new display self-serve platform and the integration of Thunder’s technology does just that,’ she said.”
Established online retail marketplaces are connecting small and medium-sized businesses to more consumers, notes Catherine Thorbecke. “Amazon said Tuesday that independent sellers brought in more than $4.8 billion in worldwide sales from Black Friday through Cyber Monday, an increase of more than 60% from 2019… More than 71,000 small- and medium-sized businesses worldwide already have surpassed $100,000 in sales. In addition, American small- and medium-sized businesses have sold an average of 9,500 products per minute this holiday season to date.”
Small businesses and large companies benefit from one another’s success, writes the Wall Street Journal Editorial Board. “Amazon has prospered in part by becoming a marketplace for small business, not by excluding it. Some 1.7 million small and medium-sized businesses sell via Amazon, and the company says more than 200,000 had more than $100,000 in sales in 2019.”
— “Amazon was also a lifeline for many businesses that were forced to shut their storefronts in the pandemic.”
Venture capital firms are investing at record levels, encouraging innovation among retail startups and ultimately benefiting consumers.
VC firms are eager to invest in retail, writes Cara Salpini in Retail Dive. “Over the past ten years, retail has also become more centered around e-commerce and technology, which has given VC firms more of a reason to invest in the space. Eurie Kim, a general partner at Forerunner Ventures, said VCs have become more interested in the retail market as the potential for billion-dollar companies has grown and the speed at which they could become market leaders has increased, with much of VC investment in retail focused around ‘internet retail,’ per PitchBook’s terminology.”
The direct-to-consumer VC market is energized, according to Digiday’s Anna Hensel. “For direct-to-consumer brand founders, venture capital is more readily available than ever before. According to CB Insights, DTC brands have cumulatively raised $3 billion in venture capital funding since 2012, with $1 billion of that coming last year. That’s led to consumer brands with whopping valuations: This year, mattress brand Casper and beauty brand Glossier each raised $100 million rounds, pushing them to unicorn status, valued at $1 billion.”
Internet retail is the most popular sector of VC investment, according to PitchBook:
For startups entering the retail arena, “kill zones” are not a concern.
Global companies that partner with small businesses and invest in them can provide the opportunity to go from “one to one hundred,” said Michael Ronen, Co-Founder and President of Branded. “I think what’s appealing is a vast marketplace that Amazon has invested in and made very vibrant, and a massive community of entrepreneurs that are building businesses and growing. This is a marketplace that in the U.S. alone is $200 billion, and growing at 50% year on year, and it’s really crying for help if you will, from companies that can help scale it further. As you said, these entrepreneurs have done a great job getting from zero to one, and folks like us at Branded can help them get from one to ten to one hundred. I think the opportunity is just amazing.”
Private equity firms and holding companies are more eager than ever to invest in retail startups, write Lauren Johnson and Tanya Dua in Business Insider. “The growth in e-commerce has struck up deal talks between e-commerce companies and buyers like private equity firms and holding companies looking to invest more in e-commerce. In the past year, Martin Sorrell’s S4 Capital acquired Amazon ad agency Orca Pacific and Ascential acquired e-commerce agencies X Target and analytics firm Intellibrand. ‘There’s consolidation and roll-ups happening within the industry,’ said Franz Jordan, CEO of e-commerce analytics firm Sellics. ‘Due to COVID, there is this impression that e-commerce is accelerating, and you have a lot of money with investors and private equity that have discovered e-commerce.'”