The Future of Retail – How Tech is Transforming the Retail Experience

David Mott, Founder Partner, Oxford Capital

Every element of our lives has shifted since March 2020 when the pandemic first hit, from how we work, engage with friends and family to how we shop and the entire retail experience. While the days of living in lockdown are hopefully behind us, the significant shifts made within the retail sector, particularly through ecommerce are here to stay.

While so many people have yearned for their lives to return to some form of normality there are also certain things such as changes to our working and shopping habits that consumers are keen to remain. The most recent EY US Future Consumer Index highlights that 54% of US consumers believe new behaviours adopted during the pandemic feel normal now and 45% don’t want to go back to how they lived before the pandemic.

The growth of the ecommerce sector is not a new trend, online shopping was starting to overtake the physical experience way before the pandemic hit but during the last few years the sector has experienced significant growth. Within the sector, 92% of small and medium sized ecommerce businesses saw their sales numbers rise in 2021 and European ecommerce revenues jumped 30% to $465bn in 2021.

As an early-stage investor in the future of retail sector there are some key questions to ask. How can the retail sector continue to innovate and what is the future of retail technology? How will technology drive growth in the sector and how will companies differentiate themselves in an increasingly crowded market?

Future of Retail Technology – Which Models Are On The Up?

When backing founders of UK start-ups, one of the first things we look at when assessing an investment opportunity is the potential size of the market and how it fits a particular demand or growing trend. One sector which is impacting future technology in retail is the subscription model. Again, this wasn’t a new trend going into the pandemic – subscription services such as TV (Sky) have been a staple consumer retail product for some time but demand for services such as meal boxes has increased significantly in recent years. So significant is the growth in this sector that the UK subscription box market is set to be worth £1.8 billion by 2025.

It’s a trend that we hold a particular interest in and in early 2020 (pre-pandemic) we led a seed-stage investment into sustainable consumer goods company, Bower Collective. Bower offers a range of sustainable home and personal care products. It has developed an innovative approach to ecommerce by providing a closed loop, plastic waste-free solution. Users subscribe to a range of products that are supplied in refill packages. Customers return the empty packages in pre-paid envelopes to Bower for reuse and recycling, ensuring zero plastic waste in their supply chain. While there has been some speculation that the rise of some retail models is purely a pandemic trend that will lose its appeal with consumers, Bower grew 400% in 2021. The company believes that DTC consumer goods provide the opportunity for strong margins which some other e-commerce/ subscriptions companies don’t have.

eCommerce businesses can also differentiate their offerings from traditional retailers. An example in our own portfolio is Spoke, a menswear company that sells trousers in up to 1,000 sizes, offering a perfect fit. No traditional retailer, other than a tailor, can offer such a range. But technology enables this. And with a perfect fit comes loyalty, with customers returning time and again to buy more.

Cutting Through the Noise – The Demand for Sustainable Retailers

Retailers are increasingly under pressure to consider their sustainable impact and how they can utilise technology to deliver more for their customers and the environment. Deloitte recently reported that nearly one in three consumers claimed to have stopped purchasing certain brands or products because they had ethical or sustainability concerns about them. A number of early-stage companies are focusing on achieving B Corp status to ensure they’re meeting the highest possible sustainability standards.

B Corps use the power of business to address society’s greatest challenges, companies commit to meet the highest standards of social and environmental performance, public transparency, and legal accountability to balance profit and purpose. A fifth of companies (19%) in our own portfolio have achieved or are progressing towards achieving B Corp status.

One of the future of retail companies in our portfolio is Artfinder, the first global art company to achieve B-Corp status. Last year it published its 2021 Impact Report and is currently focusing on the positive changes it can make both socially and environmentally. It has partnered with Ecologi and has recently joined the charity Million Tree Pledge, committing to planting one million trees by 2030. It currently plants a tree for every piece of artwork sold on the platform and there are already over 120,000 in the Artfinder Forest, offsetting 339.61 tonnes of CO2e. In 2020, it helped more artists than ever before make a living, 18% of its artists now make the majority of their art income from Artfinder (up 55% since 2019). In addition, 78% of artists say they felt supported by Artfinder during Covid, a testament to their community outreach and support team.

The Changing Face of Retail

In the current environment and with so many new technologies and early-stage companies in development, it feels like there are no limits to the future of retail technology and future retail trends. There have been huge strides made in recent years to improve and streamline the retail experience to make it easier for both consumers and retailers themselves. For example, over the last year Milton Keynes and Northampton have been testing shopping delivery robots. There are now over 200 six-wheeled automated vehicles delivering shopping in these towns, with plans for as many as 500 in five more locations across the UK. The demand for this type of technology only rose throughout the pandemic as consumers became more willing to embrace new technology and it hasn’t dropped off as life has begun to return to normality.

What’s Next for the Future of Retail Technology?

For venture capital investors looking for the next big thing in retail technology and investing in the sector, it’s a really crowded market. The key for spotting those opportunities that are likely to grow and flourish will be in identifying those companies that are capitalising on consumer demand and changes in retail behaviour. While the pandemic has meant that change accelerated far beyond anyone’s expectations, the next big thing in the future of retail technology is just around the corner.