-Written by Ben Sun
There’s a feeling you get when you’re surrounded by thousands of like-minded people; a hopeful energy that’s sparked by a common quest for change and fueled by sheer will and imagination. This was the overarching sentiment at last week’s second annual Shoptalk event, which has become the preeminent community gathering for the retail sector. The 5,500 corporate leaders, entrepreneurs and venture capitalists in attendance - all of whom are engaged in the massive wave of disruption afoot in the retail space - was testament to the fact that not only are we in the midst of a sea of great change, but that we’ve only just begun to dip our toe in it.
Anil Aggarwal, Shoptalk Founder and CEO, seems to have a knack for these things. When he started Money20/20 in 2011, he tapped into the massive payments transformation by creating the industry’s definitive gathering space. The key to launching a successful conference, Anil’s always said, is to do so right when an industry is at an inflection point, and to focus not on tactical best practices - as so many others do - but rather on strategic shifts and trends currently disrupting the industry.
With the calculated precision of a concert maestro, Anil has been able to hit that sweet spot again with Shoptalk. As both devoted attendees and investors in Shoptalk, we were proud to see the event sell out for the second straight year, and happily reaped the benefits of its unparalleled networking opportunities, thought-provoking content and all-star attendee roster.
Below are our top takeaways from this year’s conference, some of which reflect our current investment activities, and others that will influence our outlook over the coming year.
1. Food & Beverage and Consumables are still hugely underpenetrated markets.
John Blackledge, managing director at financial services group Cowen and Company, spoke about latest trends in NextGen Commerce growth and disruption. He noted that of all the verticals currently undergoing disruption, Food & Beverage and Consumables are still in the earliest stages of penetration, meaning that eCommerce accounts for less than 10% of total sales.
Cowen and Company; US Census Bureau
As early-stage investors, this is the optimal time for us to jump into a particular industry, as there’s the largest likelihood of breakouts. We’ve certainly been keeping a close eye on these areas, particularly following the early success of entrants like Blue Apron and HelloFresh, and a number of our portfolio companies play into these massive trends. Slice, for instance, is an early disruptor in the pizza market, which has already experienced the first wave of technological transformation. The largest players in this space - Domino’s, Papa John’s and Pizza Hut - have implemented technology that has enabled upwards of 60% of their revenue to come from online orders. Independent pizzerias, which don’t have the resources for such innovation, are doing less than 2% of their business online, and are quickly losing their competitive edge. Slice levels the pizza playing field by bringing Big Pizza technology to the independent guys. With independent pizzerias making up 62% of the $40 billion pizza ecosystem, Slice has a huge opportunity before it.
Consumables are also top of mind for us, especially those new brands that are challenging big players in long-established industries. A couple of our investments in this area include Ollie, which delivers fresh pet food to consumers, and Penrose Hill, which capitalizes on recent regulatory changes in the wine industry to connect consumers with homegrown wine brands outside of the standard distributor and retail channels.
2. Machine learning and AI are critical to business success.
2016 continued to see increased investment in artificial intelligence. Like many of our VC peers, we invested in several new AI platforms last year, including Electric, a 24/7 automated intelligent support channel for immediate response to IT inquiries (imagine being able to avoid the dreaded IT support call!), and Kang Health, which empowers consumers to make informed healthcare decisions with its adaptive, personalized platform.
A recurring theme at Shoptalk was that, in today’s cutthroat business environment, if you’re not incorporating AI into your strategy and processes, you will fall woefully behind. And while retail applications are still in their nascent stages, new AI platforms are beginning to emerge in the areas of fulfillment, warehousing, inventory management and shipping.
3. Rapid content creation and influencer marketing drive sales.
In a time of information-overload and disruption in traditional media, retailers now have just three seconds to win over a consumer. The solution? Influencer marketing and digital brand products, including platforms like Speakr and MikMak, which is focused on video influencers, product metadata and a creating a seamless user experience. As visually oriented social networks play an increasing role in retail, influencers will continue to favor high-quality images over content-based websites.
4. Big corporates go rogue.
Over the past year, there has been a massive shift in the risk-taking behavior of corporate retailers as disruptive forces extend their reach to every corner of the industry. The last 12 months alone have witnessed Unilever's acquisition of Dollar Shave Club; Mars’ purchase of Whistle; and lingerie startup True & Co's acquisition by PVH.
The Jet.com story is another example of the massive shift in corporate strategizing. Founder Marc Lore, at last year’s Shoptalk, spoke about having just launched Jet, and the strategies he implemented to establish the company as the anti-Amazon. (As the only NYC-based seed investors in Jet, you can read our take on that here.) Now, just one year later, after leading the company to a record-breaking acquisition, Lore spoke about Walmart’s corporate commitment to innovation. To truly be effective, he explained, that innovative strategy must necessarily start with and have the unwavering support of the CEO, as it’s such a radically different mindset and investment in change. This aggressive, high-level corporate strategizing is sure to spark continued innovation throughout the retail industry.
A huge thank you to the Shoptalk team for a flawlessly executed event, and to the thousands of retail innovators who descended on Las Vegas to make this such a powerful experience for our industry.
