What you need to know:

• Skin health is seeing rising attention, with early and mid-stage startups using telehealth business models, AI analytics, and biotech to create new solutions.
• Emerging focus areas span virtual dermatologist consultations, AI-enabled remote skin health monitoring, at-home skin analysis for care routines, new healthy aging therapies, and microbiome-balancing solutions.
• Looking ahead, watch for solutions using smartphones for at-home diagnostics and AI-enabled analytics to gain traction, driven by demand for access to professional, science-based, and personally targeted skin care.

The skin is our largest organ. Maintaining healthy skin is crucial to our overall health and wellness, particularly given that 1 in 5 Americans will develop skin cancer in their lifetime. 

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Meanwhile, the pressure to adopt sustainable business practices is mounting with the rise of new legislation. For example, in the coming years, the EU is expected to require the implementation of digital product passports (DPP) across a number of categories, which will affect retailers in areas like apparel and consumer electronics. DPPs use QR codes and technologies like blockchain to trace individual products throughout the entire supply chain as well as post-purchase. These solutions can help ensure that products are sourced sustainably, and they can also be used to verify product authenticity for resale.   

To help retailers strengthen circular practices in order to keep up with evolving regulations and achieve their sustainability goals, tech vendors are developing a wide variety of solutions. These tools enable retailers to exercise sustainable production and transport, identify opportunities for repair, authenticate products and profit from resale, responsibly dispose of goods at the end of their lifespan, and more.

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For example, Coca-Cola launched a generative AI marketing campaign to connect with younger consumers this year. In fashion, H&M has partnered with Snap to create a virtual try-on filter.

By using AI-powered tools to deepen and broaden customer engagement, brands can open the door to a wide variety of additional benefits, such as increased loyalty and conversion, reduced returns, and new data to inform brand strategy.

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The beauty giant paid $2.5B — nearly 23x Aēsop’s valuation of $110M when its former owner Natura took a majority stake in 2012. 

But with such a large price tag, did L’Oréal overpay for Aēsop?

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While Andreessen Horowitz’s total annual deals fell in 2022 — by 17% year-over-year — the firm still participated in 22 investment rounds in the consumer & retail sector. Its bets spanned a range of categories that serve the travel, food, beauty, and retail industries. 

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This technology will become increasingly important as labor shortages and the rising volume of customer service requests from e-commerce push brands and retailers to improve customer satisfaction while keeping costs under control.

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Despite a slowdown in the rate of growth, e-commerce’s share of total retail sales remains higher than it was pre-pandemic — and associated revenues in the US are projected to keep rising. Funding to e-commerce enablement companies topped $11B last year as an increasing number of vendors entered the market.

Reflecting this growth, e-commerce tech stacks are becoming much more complex.

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Embracing Web3, which involves tech such as the NFTs and the metaverse (collective virtual worlds), isn’t just hype: it’s a matter of brand relevance and revenue opportunities. To date, leading retail brands have cumulatively earned more than $250M in revenue from non-fungible tokens (NFTs), according to data from Dune Analytics.

Web3 concepts are driving a shift in how brands and retailers interact with and sell to consumers, creating new opportunities when it comes to revenue streams, marketing channels, community building, and loyalty plays. 

The importance of digital identity and self-expression presents unique opportunities specifically for fashion and beauty players. According to the 2022 Fashion Metaverse Trends report from gaming giant Roblox, nearly half of Gen Z users say they dress their avatars as a way to express themselves.

Source: Roblox

There is a sense of urgency for these players to figure out how to leverage Web3, especially after many companies, particularly luxury brands, missed the initial shift to e-commerce and were left playing catch up. Now, brands are eager to avoid making the same mistake again.

As Web3 tech takes hold, engaging with users’ digital selves — from selling digital goods to using virtual worlds as new marketing channels — presents huge branding and monetization opportunities for brands and retailers across the beauty and fashion spaces.

How are L’Oréal, Nike, and LVMH approaching Web3?

There is no uniform approach to how the leading fashion and beauty companies are embracing Web3, though most are primarily experimenting through partnerships to discover the best strategies for their brand, as partnerships offer a low-cost way to test and learn.  

L’Oréal is focused on reaching new audiences in digital environments, through moves like offering digital assets on metaverse platforms and exclusive NFT drops. The company has heavily focused on working with startups that create interoperable virtual goods, digital assets used across different virtual worlds. 

Meanwhile Nike has been one of the first movers among large retailers to explore virtual goods as a new revenue stream and to establish its stake in the metaverse. The company acquired virtual sneaker startup RTFKT in December 2021, positioning the sportswear giant as a leader in adopting Web3 tech. 

Finally, one of Moët Hennessy Louis Vuitton (LVMH) ‘s main priorities is using blockchain to authenticate luxury goods, tracing product journeys from raw materials to distribution.

L’ORÉAL

L’Oréal has been a forerunner in adopting digital beauty trends since it first announced its intentions to become a beauty tech leader in 2018.

Now, the beauty conglomerate is embracing Web3 and the next digital frontier. The company coined the term “on-chain beauty” to describe the emerging platforms where beauty brands, creators, and consumers will interact, shop, and engage.

L’Oréal has partnered with several Web3 and metaverse startups to reach new consumers and create new beauty experiences. These moves align with the areas the company identified as potential opportunities in the metaverse, including virtual collectibles, avatars, influence, and products.

L’Oréal further solidified its commitment to exploring these areas by forming a Web3-focused accelerator program in partnership with tech giant Meta and Incubateur HEC Paris in October 2022.

Ready Player Me 

Relationship: Partnership

In November 2022, L’Oréal partnered with Ready Player Me, releasing 3D hair and makeup looks that users can use to customize their avatars as they explore different virtual worlds. 

Source: L’Oréal

Estonia-based Ready Player Me allows users to transform selfies into highly customizable cartoon-like avatars. The company aims for users to use its avatars across different virtual worlds and experiences, allowing them to maintain a singular identity as they move across various digital platforms. 

According to the company, Ready Player Me currently has over 3,000 customers, including fashion brands (Adidas), virtual worlds (VRChat), and digital collectible platforms (Nike-owned RTFKT). The avatar startup most recently raised a $55M Series B round in August 2022 from investors including A16z Crypto and Roblox CEO David Baszucki. With the recently raised funds, it plans to improve its creation tools. 

By partnering with Ready Player Me, which focuses on interoperability, L’Oréal is maximizing the opportunities for consumers to use its virtual assets across platforms. The company has stated that it plans to add more of its brands to the Ready Player Me platform in the future.

On a related note, L’Oréal has announced a partnership with avatar startup Animaze, which also focuses on interoperable avatars — underscoring this area as a priority for the company.  

Arianee

Relationship: Partnership

L’Oréal worked with Web3 startup Arianee to create digital wallets to allow Yves Saint Laurent (YSL) Beauté brand shoppers to collect NFTs. France-based Arianee helps luxury brands with creating NFTs and tokenized content for Web3 consumer experiences, such as making product digital twins.

In L’Oréal’s case, NFTs will be linked to real-life and online experiences — such as product drops and exclusive events — when consumers connect their digital wallets to the brand’s online Web3 hub.

Source: YSL

Beyond engagement, L’Oréal is using NFTs to pursue loyalty plays. NFT loyalty programs allow brands to provide a differentiated value proposition by offering unique rewards and experiences, virtual or otherwise.

The Sandbox and People of Crypto

Relationship: Partnership

In June 2022, L’Oréal-owned makeup brand NYX Cosmetics partnered with The Sandbox and blockchain company People of Crypto, which focuses on diversity in Web3 spaces. 

The Sandbox is one of the most well-known decentralized virtual worlds. Through the partnership, L’Oréal revealed a collection of non-binary NFT avatars designed with virtual makeup looks.

The NFT drop of over 8,000 avatars coincided with the creation of The Sandbox’s Valley of Belonging, which was designed as the first metaverse hub focused on diversity, equity, and inclusion.

Source: NYX

Partnerships with metaverse platforms such as The Sandbox point to L’Oréal’s goals to reach consumers in new landscapes and rethink the consumer journey.

OpenSea

Relationship: Partnership

L’Oréal partnered with the NFT platform OpenSea in December 2021 to release a collection of 5 NFTs. The NFT collection themes were shades of red and female empowerment, inspired by the L’Oréal Paris Colour Riche “reds of worth” lipstick collection. The starting price for each collectible was $1,500.

By cultivating its presence on new and emerging platforms, L’Oréal is actively developing new marketing channels and engaging new audiences, including Web3 enthusiasts. To date, L’Oréal has previously stated that targeting gamers is an emerging marketing channel for the company, which is underscored by its partnerships with other startups such as Ready Player Me.

Modiface

Relationship: Acquisition

Since purchasing augmented reality (AR) tech provider ModiFace in 2018, L’Oréal has become a leader in integrating AR into the beauty shopping experience.

Beyond pursuing virtual try-on tech, L’Oréal has also acquired technology to power virtual products and looks that are gaining prominence in immersive environments like virtual worlds.

The company is already making virtual makeup looks for fully digital interactions a higher priority, blurring the lines between physical and digital environments. It has also rolled out virtual looks that players can use while gaming (similar to a social media filter), as well as virtual looks users can style on their in-game avatars.

Source: L’Oréal

NIKE

Nike was one of the first major retailers to signal interest in virtual spaces and goods. In 2021, it filed several trademark applications outlining its intent to make and sell virtual branded sneakers and apparel. It also established Nike Virtual Studios to focus on blockchain, Web3, and the metaverse in January 2022.

The sportswear giant is already seeing top-line impact from its Web3 efforts. According to crypto market data startup Dune Analytics, Nike has earned over $185M in revenue and royalties from NFTs. This is more than 7X the amount of income earned by the next closest brand, Dolce & Gabbana ($24M).

Nike’s subsequent partnership activity points to the company’s intention to bring its existing community into new digital spaces while also reaching new shoppers. Overall, Nike aims to make digital assets and economies a more significant part of its business model going forward. 

Qartium

Relationship: Partnership

In November 2022, Nike partnered with startup Qartium, a decentralized commerce platform, to sell its NFTs. 

A decentralized commerce model allows consumers to transact directly with sellers. In this way, the two transacting parties bypass centralized e-commerce platforms that traditionally take a cut by transacting on the blockchain, lowering transaction costs and tightening transaction security. This balances authentication, visibility, and community to enable reliable and consistent commerce experiences. 

Qartium token is a fairly new blockchain project that is purportedly able to sell a wide variety of items, including both digital and physical goods. Partnerships with well-known companies like Nike and Amazon may bring legitimacy and critical masses of shoppers to decentralized commerce platforms. 

RTFKT

Relationship: Acquisition

Nike acquired RTFKT, a creator of virtual sneakers and collectibles, for an undisclosed amount in December 2021. The NFTs created by RTFKT are blockchain-based, which allows users to prove ownership of their digital assets.

Since buying RTFKT, Nike has continued to come up with new ways to monetize its brand in the digital realm and engage its customers. 

In November 2022, the company announced its new Web3 platform, dotSwoosh, where consumers can buy, design, and trade virtual assets. The platform is designed to make NFTs more accessible, allowing those who aren’t as familiar with Web3 to still interact with and purchase digital goods.

The platform will also allow fans and creators to participate in design contests for different virtual assets and potentially split a portion of the money earned on the sales of their designs with Nike. 

Nike has stated that all its virtual creations, from jerseys to sneakers, will be able to be worn across different games and immersive experiences.

Roblox

Relationship: Partnership

While gaming platform Roblox isn’t currently considered a Web3 platform, it serves as a bellwether for a successful Web3 metaverse, with an active user base and a thriving virtual economy that brands seek to tap into. The company states over 11M creators designed virtual fashion items on its platform in 2022 — a number that it estimates is more than 200X the number of fashion designers in the US creating real-world clothing.

Nike partnered with Roblox to build “Nikeland,” a world where users can buy Nike outfits for their avatars, in 2021. The 2-month experience saw over 21M visitors in its duration.

Nikeland also featured mini-games and digital experiences that corresponded with real-life events, such as a Roblox version of Lebron James making a guest appearance in the virtual world during NBA All-Star Week.

Source: Nike

Nike constantly introduced new experiences within the virtual world to satisfy consumer demands for dynamic virtual experiences and fresh content.

Roblox has become a popular marketing channel for brands and retailers who see it as a testing ground for brand activations to reach younger audiences (two-thirds of its users are under 16 years old). To this point, Roblox has partnered with the likes of Burberry, Tommy Hilfiger, Walmart, and Gucci this year alone.

The gaming platform is also enhancing its capabilities for fashion and beauty digital assets. In 2022, it introduced a Layered Clothing system, which allows in-game avatars to wear digital apparel, layering up to 6 items at once. In 2022, over 62M virtual fashion items and accessories were created on the Roblox platform. 

Source: Roblox

LVMH

LVMH — the world’s largest luxury group by revenue, with over $68B in 2021 — has been defining luxury and supplying luxury goods to consumers globally for decades. 

Now the company is entering virtual worlds and exploring Web3 technology.

While its approach to the metaverse and Web3 is slightly more cautious, LVMH has stated that it sees itself playing in the future of Web3 in key areas like traceability, immersive experiences, and digital twins. In the future, the company also plans to allow consumers to pay with cryptocurrency and build a virtual world for its jewelry brand Bulgari.     

RTFKT

Relationship: Partnership

In November 2022, Nike-owned RTFKT and LVMH launched an NFT collection based on the latter’s luggage brand RIMOWA.

The collaboration was interactive, requiring consumers to solve challenges to mint their NFTs. 

The partnership also connected the physical and digital worlds: alongside the NFTs, the company also released a limited-edition suitcase.

Altava Group

Relationship: Partnership

Singapore-based Altava, which raised $9M in seed VC funding in March 2022, develops customized digital environments for brands. LVMH created its first metaverse ambassador, Livi, with Altava in May 2022.

Livi co-hosted the company’s awards ceremony at the Paris technology conference VivaTech the following month.

Source: LVMH 

Virtual influencers are becoming increasingly popular, particularly in Asia. These computer-generated personas can offer the appeal of a human influencer, often with fewer risks and limitations. 

With the rise of metaverses, virtual influencers like LVMH’s Livi could become prominent figures in these virtual worlds, as they serve as new platforms to interact with fans, followers, and consumers.

ConsenSys

Relationship: Partnership

In 2019, LVMH joined with Microsoft and blockchain startup ConsenSys to create Aura, a platform to authenticate luxury goods through blockchain. Aura allows customers to trace their products from design to distribution, while providing LVMH additional protection from counterfeit goods and fraud.

In April 2021, other brands like Prada and Richemont’s Cartier joined LVMH to form the Aura Blockchain Consortium. The alliance effectively opens the Aura platform to any luxury brands that want to utilize its blockchain-based solution to track their goods.

Source: Aura Blockchain Consortium

Similarly, in November 2022, LVMH partnered with public company Security Matters to track its raw materials more closely and reduce waste using blockchain.

These partnerships show that LVMH is placing high importance on authenticating luxury goods, down to the raw material inputs. This focus should continue to gain traction across the industry as companies ramp up sustainability efforts. 

Looking ahead

Today, brands and retailers are competing with streaming giants, gaming platforms, and social media for consumers’ attention through digital content. This challenge will only grow as the rise of shared virtual spaces further transforms how consumers spend their time.

Embracing Web3 technologies can bring brands new opportunities across revenue streams, marketing, and brand relevancy as competition for consumer attention intensifies.

As more players enter virtual worlds, standing out from the pack to drive engagement and generate conversions will require increasingly creative and targeted audience approaches. Companies will need to understand the communities they’re trying to engage — or they risk alienating users instead of winning them over. 

Going forward, expect to see more companies experimenting in areas outside their traditional areas of expertise. For example, L’Oréal has stated that the company is exploring creating the first “decentralized record label for creators in Web3.”

As virtual goods continue to gain popularity, interoperability across virtual worlds — so consumers can take digital assets across platforms — will open up even more possibilities for Web3 and the metaverse. With the line between the digital and physical worlds blurring, digital twin products will gain traction. Shoppers will expect to be able to purchase virtual goods and receive a real-life copy or related experience they can take part in, or vice versa. 

Eventually, brands may work directly with users-turned-creators (like the ~1.3M developers on Roblox) who have the skills and gaming experience to develop these goods and installations, according to predictions by Meagan Loyst, Gen Z VCs founder and Lerer Hippeau investor. Gucci, for example, partnered with popular Roblox creators and designers cSapphire and Rook Vanguard to develop its virtual items. 

As the Web3 space evolves, investment and M&A activity beyond partnerships will signal more concrete roadmaps for how companies will incorporate this tech into their business models. Companies like Ulta Beauty, which formed Prisma Ventures in August 2022, will also test corporate venture capital and accelerator programs as a way to explore Web3 and the metaverse.

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However, with technology becoming more foundational to successful operations in both good and bad times, sending tech spend to the chopping block amid recession fears is no longer an option. Rather, investing in tech has become even more necessary to propel efficient, scalable operations. According to a survey by the CNBC Technology Executive Council, more than 75% of companies expect to increase their tech spend this year. 

In a challenging macro environment, leaders will want to consider whether their technology spend is helping to deliver meaningful cost savings and protect their margins.

We examined 13 tech solutions retailers should evaluate in the coming months, based on their cost savings potential and time to implement, across 3 categories:

• Labor & store operations
• Supply chain & inventory
• Marketing & digital engagement

Rankings are relative to one another and not on an absolute scale. Technologies evaluated are considered across two metrics: 

Time to Implement — Estimates time needed to implement the technology, based on factors like the type of solution (e.g., hardware vs software) and data submitted in proprietary Analyst Briefings.

Cost Savings Potential — Estimates potential bottom-line savings based on factors like cost savings metrics found in case studies and data submitted in proprietary Analyst Briefings.

If you’d like to conduct a briefing with our analysts on your company, submit an Analyst Briefing here. 

Labor & store operations

1. UNATTENDED CHECKOUT

Quadrant: Strategic moves

Cost savings potential: Medium

Time to implement: 1 — 6 months

What is unattended checkout? These companies make solutions that speed up checkout by largely eliminating interaction between shoppers and employees and preventing line formation. So far in 2022, these checkout startups have raised $175M in equity funding vs. $256M in all of 2021.

Computer vision systems that track shoppers through stores and allow them to simply “walk out” with their items have garnered the most attention. These platforms often integrate shelf sensors as well. Other tools are also helping the concept gain more traction with retailers, including mobile self-scanning apps and smart self-scan shopping carts.

Timeline & benefits: Unattended checkout tec offers both short- and long-term cost savings. These solutions generally require implementation times of anywhere from 1 to 6 months, which depends in part on store size, the specific technology solution, and the number of locations where it is being deployed. Solutions that can be easily retrofitted to existing stores are likely to see faster deployment times.

Additionally, unattended checkout solutions can help redistribute labor to more productive uses elsewhere, with some stores reporting 9 staff hours saved every week. These solutions also have top-line benefits, such as larger basket sizes, and can improve the shopping experience by improving one of in-person shopping’s biggest bottlenecks: over half of consumers say they would switch stores for a better checkout experience.

Companies to watch: 

• AiFi raised $65M in a Series B that drew participation from Aldi, HP Tech Ventures, and Verizon Ventures, among others. AiFi has recently expanded to offer stores for music festivals and NFL stadiums, reducing average transaction and queue wait time by 50%. The company recently partnered with Carrefour in France to launch a 10/10 Flash concept store.
• Companies like Grabango use a combination of smart cameras, shelf sensors, and AI that allow in-store shoppers to grab products, walk out, and be charged automatically. The company has implemented its solution in a GetGo Cafe + Market, a convenience store run by midwest grocer Giant Eagle.
• Israel-based Trigo, a computer vision-powered retail platform, has raised $105M in total funding. It is used by retailers like Tesco, Aldi, and Rewe. 

For more of these players, see our contactless self-checkout ESP. 

2. LOSS PREVENTION TECH

Quadrant: Long-term plays

Cost savings potential: Low

Time to implement: 2 — 3 months

What is loss prevention tech? Retailers use loss prevention tech to monitor, deter, and stop shoplifting (or “shrink”). The tools in this category take on a variety of forms. Some solutions deploy AI through store cameras to monitor and identify shoplifters. Other firms make loss prevention management software. Solutions also include smart anti-theft sensors that attach to vulnerable items, like apparel or liquor bottles; the tags release when shoppers use mobile PoS systems to buy the items.

Preventing shrink has increasingly become a concern, with 75% of retailers citing an uptick in organized retail theft over the last year.

Timeline & benefits: These solutions aim to reduce shrink, which costs around 1.6% of retail profits every year. Implementation times vary, but some solutions point to around two months for deployment. 

Companies to watch:

• Ireland-based Everseen‘s platform leverages AI and works across sensors, cameras, and devices in both the front and back of the store to manage loss prevention. The company has partnered with Kroger as well as stores across Europe and the US.
• Rapitag combines mobile checkout with anti-theft security sensors that allow consumers to purchase products without staff assistance or waiting in line. After deploying its solution for consumer electronics company o2 in Germany, the store reportedly experienced no thefts during a six-month trial phase.

3. ON-DEMAND STAFFING

Quadrant: Home runs

Cost savings potential: High

Time to implement: <1 month

What is on-demand staffing? On-demand staffing platforms allow companies to find workers that can either fill temporary positions or cover shifts on short notice. 

Some platforms offer metrics on workers, like reliability ratings, or use job-worker matching algorithms that increase the chances of finding high-quality workers with relevant domain experience. 

This space has seen heightened deal activity in 2022. So far this year, on-demand staffing platforms have seen 12 deals, compared to 5 deals in 2021. 

Timeline & benefits: Retailers can expect relatively fast implementation times (one month or less), given that most of these solutions are ready-to-use software solutions that do not require significant input data or integration with other platforms. 

On-demand staffing solutions could help mitigate productivity losses and store closures stemming from labor shortages. Turnover rates are running high in sectors like grocery and retail, and absenteeism is currently costing restaurant businesses more than 15% of profits annually, according to a study out of University of Maryland Baltimore County. 

Moreover, these solutions could be particularly useful during peak holiday season periods to quickly and efficiently flex hiring up and down with fluctuating demand.

Companies to watch:

• Snagajob, which has helped fill hourly worker jobs at companies like Chipotle and Michael’s, says that it fills 70% of shifts in just 10 minutes.
• Oregon-based Wonolo helped Driveline Retail meet a 7x increase in demand for workers while reducing the cost of hiring by 37%.

For more of these players, see our on-demand staffing ESP. 

Supply Chain & Inventory

4. COLLABORATIVE ROBOTS (COBOTS)

Quadrant: Strategic moves

Cost savings potential: Medium

Time to implement: 1 — 3 months

What are cobots? Collaborative robots (cobots) are smaller robots on the factory floor that generally have a high degree of customization and work alongside people. These are designed to enhance the worker capabilities, not replace them.

Typical features of collaborative robots include customization to various applications, modularity, and varied processing capabilities.

The space has seen a sharp increase in funding and deal activity so far in 2022, with startups raising $827M across 24 deals so far this year (vs. $331M across 15 deals in 2021).

Timeline & benefits: Because collaborative robots are designed to supplement human labor, manufacturers can benefit from higher production output and a quick ROI. For example, OnRobot reports helping one client reduce its cycle time by nearly half, saving 500 worker hours for an ROI of 9 months.

Besides helping to alleviate hiring needs and reducing turnover, most cobot solutions have an implementation time of 1 to 3 months or less.

Companies to watch:

• Exotec develops robots that help move bins around the warehouse for retailers like Gap and Uniqlo. In January 2022, the company raised $335M in Series D funding at a $2B valuation. 
• Seegrid, which raised $30M in Series C funding in July 2022 from investors including grocer Giant Eagle, makes autonomous robots for warehousing, manufacturing, and logistics.

If you want to see more of these players, see our collaborative robots ESP.

5. DELIVERY MANAGEMENT SOFTWARE

Quadrant: Quick wins

Cost savings potential: Medium

Time to implement: 1 — 3 months

What is delivery management software? Cloud-based delivery management providers unify fulfillment and delivery models, allowing retailers to track how an item is ordered, where inventory is located, and how an order will be fulfilled all from a single platform.

Real-time data around shipment tracking and visibility can help retailers make more informed decisions and quickly respond to disruptions. 

Last-mile delivery orchestration solutions provide supply chain operators with a number of capabilities and tools, including: 

• Dynamic quoting and self-scheduling
• Intelligent dispatching and routing for on-time delivery at a low cost
• Real-time delivery tracking and live updates both for shippers and end customers

Timeline & benefits: Retail customers report substantial benefits from delivery management software solutions, including transit cost savings, reduced shipment exceptions, improved workforce efficiency, and increased delivery accuracy. There is particularly an urgent need to reduce costs at the last mile.

Some startups here have pointed to stats such as a 15% reduction in fleet miles or a 25% reduction in extra resource costs from deploying their delivery management software. Most solutions take 1 to 3 months to implement.

Companies to watch:

• Companies like LogiNext Solutions and Bringg are developing delivery automation platforms to more effectively connect the various stakeholders involved in last-mile delivery and speed up delivery times.
• UK-based Sorted, which has raised $81M in total funding, offers delivery management and post-purchase tracking. It is used by retailers such as Asos, Asda, and Farfetch.
• Onfleet raised $23M in Series B funding in June 2022 to help retailers plan and optimize their delivery routes to increase delivery capacity. 

If you want to see more of these players, see our delivery management software ESP and market trend report.

6. DEMAND FORECASTING & INVENTORY OPTIMIZATION 

Quadrant: Home runs

Cost savings potential: Medium

Time to implement: 1 — 3 months

What is demand forecasting & inventory optimization? Demand forecasting & inventory optimization platforms leverage sales data and other relevant metrics to improve inventory planning.

These solutions often feature: 

• Demand-driven planning
• Automated replenishment and allocation 
• Promotion optimization 
• Supply chain collaboration

The stakes are high when it comes to avoiding both overstocks and understocks: deadstock costs retailers an estimated $50B annually, while out-of-stocks and understocks cost retailers across the globe more than $1T in lost revenue each year, according to IHL Group. 

Timeline & benefits: Most demand forecasting & inventory optimizations solutions offer implementation times of 1 to 3 months, while the fastest solutions can be deployed in as little as 1 to 3 weeks. 

Categories where waste is a growing concern, such as food and grocery, may see higher returns from these platforms, with newer entrants creating more targeted solutions (e.g., focusing on perishables) that leverage more sophisticated AI and predictive analytics. 

Companies to watch:

• Pensa Systems, which offers an indoor flying drone that uses cameras to provide live inventory visibility in stores, has worked with Johnson & Johnson to monitor its in-stock rates at its biggest retail partners. The company reported that Johnson & Johnson could increase sales by 5% if it changed reordering practices to improve on-shelf availability. 
• Using fixed cameras that can be secured to existing shelves, Focal Systems  provides real- time inventory monitoring with the aim of increasing on-shelf availability and boosting sales. The company has worked with retailers including Walmart.

For more of these players, see our demand forecasting and inventory optimization ESP. 

7. E-COMMERCE FULFILLMENT & LOGISTICS

Quadrant: Home runs

Cost savings potential: High

Time to implement: <1 month

What is e-commerce fulfillment & logistics? As e-commerce adoption accelerates, various e-commerce fulfillment & logistics companies have emerged to help sellers more quickly and easily fulfill online orders, providing services such as storage, order processing, and product shipping.

Typical features of e-commerce fulfillment & logistics solutions include:

• Access to a network of fulfillment centers to enable distributed inventory
• Express shipping (most often domestically, but sometimes internationally)
• Order and inventory management
• Reporting and analytics
• End-to-end customer experience (e.g., customized packaging, order tracking)

There was a sharp influx of funding to these startups in 2021, which saw over $2B in equity funding across 36 deals, compared to $355M across 10 deals so far in 2022.

Timeline & benefits: Profit margins tend to take a hit with rising e-commerce penetration, largely due to the cost of fulfilling online orders, while consumer expectations for convenience and fast shipping times are not going away. 

Companies can reduce costs by outsourcing fulfillment to e-commerce fulfillment providers, which can achieve economies of scale by aggregating orders across their customers and integrating with a network of partners (e.g., 3PLs, POS system providers, and retailers). Some solutions say they can reduce shipping costs by 25% and improve bottom lines by 13%. 

Many companies in this tech category are able to get up and running relatively quickly, with implementation times of around 1 to 3 weeks.

Companies to watch:

• Companies such as ShipBob and ShipMonk offer software solutions that combine order & inventory management, warehouse management, predictive data & analytics, and optimized shipping to fulfill orders for e-commerce companies.
• Ghana-based boxconn is an e-commerce logistics startup that has partnered with KFC to provide on-demand logistics services in Ghana. 
• Shipper and Shippo aggregate shipping options on one platform to offer retailers and brands more flexible, affordable, and efficient shipping options.
• Cart.com provides an end-to-end e-commerce-as-a-service platform that enables customers to access and manage all facets of the shipping and fulfillment processes from one central platform.

For more of these players, see our e-commerce fulfillment & logistics ESP and market map of supply chain optimization in retail. 

8. REVERSE LOGISTICS

Quadrant: Quick wins

Cost savings potential: Medium

Time to implement: <1 month

What is reverse logistics? Reverse logistics solutions leverage end-to-end inventory management tools and data analytics to help retailers and brands manage and streamline returns processes more effectively. While some companies offer shopper-facing solutions, others work primarily with retailers on the back end.

Depending on their business model, reverse logistics solutions can offer the following capabilities:

• Real-time data and visibility into the returns process
• Proactive, personalized communication channels with customers
• Physical drop-off/pick-up locations
• Liquidation platforms that allow retailers to offer returned inventory to B2B secondary inventory buyers
• Markdown solutions that help retailers and brands maximize inventory recovery

There have been several deals in the returns space recently, including Affirm‘s $300M acquisition of Returnly and Paypal‘s acquisition of Happy Returns for an undisclosed amount.

Timeline & benefits: Returns negatively impact profits: by some estimates, it costs about $33 to process a return for an item that sold for $50. To combat this, some reverse logistics startups say they can reduce return expenses by 57%. 

And given the explosive demand for e-commerce in recent years, reverse logistics has become a priority for retailers in order to maintain customer loyalty and reduce costs during the return process. Return rates tend to be higher for e-commerce compared to physical retail stores: 15% — 40% for online orders, compared to around 5% — 10% for in-store purchases. 

While pure SaaS solutions are likely to have faster deployment times, with some startups saying they can deploy their offering in less than a week, expect higher deployment times for those that include additional ancillary services such as warehousing and logistics.

The environmental impact in the returns space also makes this technology a promising area of investment, as sustainability remains a major consumer priority.

Companies to watch:

• Optoro‘s service offers customers the flexibility of dropping returns off without using labels or return packages. The service benefits both consumers and businesses in terms of convenience, as well as reducing the packaging costs and carbon emissions. 
• Narvar offers a service that allows customers to drop off packages at 200K+ locations to be returned, schedule home pick-ups for returns, and receive notifications on in-transit returns. The company also gives brands the option to reward loyal and VIP customers with cheaper return policies.
• Ohio-based Loop Returns works with brands on the Shopify platform. It has around 700 customers, including Allbirds, Chubbies, FIGS, Skims, and Brooklinen, among others.
• Return Logic, a SaaS returns optimization platform for online retailers, has raised $6.34M in total funding and focuses on Shopify brands.

For more of these players, see our reverse logistics ESP. 

9. WAREHOUSE MANAGEMENT SYSTEMS

Quadrant: Home runs

Cost savings potential: Medium

Time to implement: 1 month

What are warehouse management systems? Warehouse management systems digitize and streamline warehouse operations by bringing all tasks onto a single platform. These systems typically come equipped with features such as inventory management, order picking and replenishment, and labor optimization.

Warehouse management platforms typically tackle tasks such as:

• Warehouse operations (picking and packing, return management, cycle counting)
• Warehouse productivity (multi-warehouse operations, scaling)
• Warehouse optimization (order routing, inventory allocation, robotics integration)

Timeline & benefits: Given unprecedented e-commerce demand and labor shortages, optimizing warehouse operations has become crucial, with the global warehouse management systems market expected to be worth over $5B by 2025. These tech solutions aim to make warehouse management more efficient and reduce errors. 

Retailers can expect implementation times of around a month, as most of the startups in this category are software-based solutions. These solutions offer benefits such as faster picks per warehouse worker and fewer errors, translating to operating cost savings due to lower shipping costs and higher labor productivity, with some companies claiming to increase labor efficiency by up to 40%.  

Companies to watch:

• Logiwa focuses on cloud warehouse and inventory management for high-volume B2C and D2C retailers. It raised a $16.4M Series B round in July 2022.
• California-based 3PL Central reports that its solution can save customers over $8K in labor every month and increase annual order volumes by 22%.
• Colombia-based Pulpo is a warehouse management system that reports that it reduces operating costs by 30% — 50%. 

To learn more, see our MVP Technology Framework: Supply Chain Optimization Tech for Retailers.

Marketing & digital engagement

10. AI-ENABLED CHATBOTS

Quadrant: Long-term plays

Cost savings potential: Low

Time to implement: 1 — 3 months

What are AI-enabled chatbots? AI-enabled chatbots automate voice- and text-based interactions between customers and companies. These solutions are leveraging advancements in conversational AI, including natural language processing, understanding, and generation.

This category includes both plug-and-play solutions, which are pre-trained to answer most common questions, and tailored solutions that require training on a retailer’s proprietary data.

Timeline & benefits: AI-enabled chatbots can help automate a significant share of customer requests, offer 24/7 support across channels, and scale customer service departments in a cost-efficient way. Most AI-enabled chatbots can automatically answer 60% to 70% of requests, helping to convert more online customers.

Most solutions can be deployed in 1 to 3 months, while the fastest solutions in this category can be deployed in less than a week. Generally, pre-trained bots will be quicker to deploy than those that have to be trained on company data, but the latter will be fully tailored and more accurate in the long run.

In this category, success is often measured by improved productivity, call resolutions, and deflection rates, and these metrics can translate into up to a 30% reduction in customer service costs. Beyond improvements in metrics tied directly to an improved bottom line, AI-enabled chatbots also offer more qualitative benefits such as increased support and reduced stress for customer service staff, as well as improved customer experience.

Companies to watch:

• Norway-based Boost AI works with e-commerce retailers to automate over a million requests during peak season for tasks such as order support and personalized recommendations.
• Singapore-based Wiz Holdings, which raised a $30M Series A in June 2022, reports expected cost savings of 70% from its e-commerce chatbot solution.
• Conversational commerce is growing in this category with startups like Wizard and Kata.ai. Wizard is a conversational commerce software developer that offers AI-powered conversational tools for e-commerce businesses, allowing them to connect with their customers via text messages to accelerate the rate of sales and purchases. It has received investment from New Enterprise Associates and Accel. 

For more of these players, see our AI-enabled chatbots ESP. 

11. FRAUD PROTECTION

Quadrant: Quick wins

Cost savings potential: Low

Time to implement: 1 — 3 months

What is fraud protection? Companies in the fraud protection space provide software-as-a-service (SaaS) fraud and chargeback prevention technology. The tech uses behavioral analysis and machine learning to verify customers’ identities to prevent account hijacking and fraudulent transactions.

Companies in this space may offer tools that protect user accounts and payments, identify illegitimate transactions, prevent abuse of purchase and return policies, and support cross-border expansion.

As more people shop online, e-commerce companies are increasingly targeted by fraudsters. Every $1 of fraud now costs US retail and e-commerce merchants $3.60 — 15% more than it cost 2 years ago. 

Timeline & benefits: Across the retail industry, online return fraud costs an estimated $23B, while startups say they can help retailers recoup 5% — 7% of their revenue. Most solutions can be implemented in 1 to 3 months, with the fastest solutions available 1 to 3 weeks. 

Companies to watch:

• Forter is a fraud prevention platform that works to distinguish fraudulent transactions from real ones for retailers like Nordstrom. The company has a valuation of $3B and last raised $300M in Series F funding in May 2021.
• Arkose Labs provides online fraud prevention technology combining user risk assessment and enforcement challenges. 
• Anti-fraud startup Signifyd has worked with retailers such as Walmart and eBay to determine whether purchases are from legitimate customers. 

For more of these players, see our fraud protection in consumer & retail ESP.

12. MARKETING ATTRIBUTION

Quadrant: Quick wins

Cost savings potential: Low

Time to implement: <1 month

What is marketing attribution? Marketing attribution tech providers offer insights around digital marketing channel effectiveness that can help inform advertisers’ spending decisions. Some of these solutions focus on closed-loop attribution — providing a direct link between targeted ads and sales — to help improve return on ad spend (ROAS) for advertisers.

Marketing attribution solutions typically:

• Track touchpoints and link them back to sales and clicks
• Optimize campaigns based on gathered data

So far in 2022, the space is on track to surpass total funding seen in 2021, with startups raising $369M across 6 deals to date.

Timeline & benefits: This technology can provide better methods of attribution, helping advertisers improve their ROAS thanks to closed-loop measurement (e.g., online ad leads to in-store purchases) among other capabilities. Marketing attribution solutions can boost retailers’ ability to capture a greater share of digital ad spend and increase conversions.

Nearly two-thirds of retailers increased their digital marketing spend this year, per a survey by Digital Commerce 360. These startups also can also help brands and retailers decrease their cost per acquisition (CPA) — an important benefit, as over half of surveyed retailers said that at least 30% of their marketing budget goes to customer acquisition alone.

Most solutions can be deployed in 3 weeks or less.

Companies to watch:

• AppsFlyer, a marketing data analytics and mobile attrition platform, works with companies such as Walmart, Macy’s and Alibaba to help them understand how to increase customer conversions and optimize campaigns. The company has raised $303M in total funding.
• Marketing analytics platform Measured helps retailers understand their marketing spend and how to efficiently allocate it to different channels, identifying areas where ad spend may be being wasted. 

For more of these players, see our marketing attribution ESP.

13. RETAIL MEDIA NETWORKS

Quadrant: Long-term plays

Cost savings potential: High*

Time to implement: 6+ months

*While not a cost-savings tech category, retail media networks offer a new stream of high-margin revenue that leverages existing assets.

What are retail media networks? Retail media networks are digital advertising businesses run by retailers on their own digital real estates, such as websites, apps, and digital screens. By creating their own media networks, retailers can capture a greater share of advertisers’ digital marketing spend while helping their suppliers better target shoppers.

Retail media ad spend in the US is expected to increase by $10B this year, representing 17.2% of total digital ad spending (up from 14.9% in 2021), according to eMarketer. As a high-margin business, retail media networks represent one way to counter falling profit margins that have been negatively impacted by rising online sales.

Amazon is already generating over $30B in annual revenue from its advertising business, while grocery retail giants such as Walmart and Carrefour have announced significant investments in their respective retail media networks over the past year. 

The space has seen a rise in funding this year, with startups raising $323M so far this year across three deals. 

Timeline & benefits: Building out these platforms from scratch can take months or years, depending on the approach and scope. Working with full-stack solutions or partnering with other startups specializing in different technical aspects of building a retail media network can speed this up. Prioritizing the right tech solutions to invest in and tech vendors to partner with will be key to capturing a bigger slice of the digital advertising cake. 

Companies to watch:

• Most full-stack retail media networks are being spearheaded by public companies. For example, French grocery retailer Carrefour powers its retail media network through strategic partnerships with Google Cloud Platform, LiveRamp, and Criteo. Carrefour serves 80M households annually, giving the company one of the largest data lakes in Europe. The company used this data to launch its retail media network platform, Carrefour Links, in Q2’21.
• Advertiser solutions company Epsilon worked with L’Occitane to use its retail media network to acquire new customers.  

For more of these players, see our retail media network tech market map and MVP framework.

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Hims & Hers’ success can be attributed to it being a forerunner on several trends impacting the health and wellness space, including: 

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Imagine getting shoppers excited about buying a plain white t-shirt — or convincing customers to cheerfully post videos of themselves unboxing a mattress.

These “digitally native” brands, typically made by and for millennials, promised to invigorate tired industries and disrupt giants by cutting out the middlemen: retailers. To achieve this, they relied on lavish VC funding, robust digital channels, and potent branding that included minimalist aesthetics, a friendly customer-facing voice, and an obsession with details like packaging to elevate the customer experience.

The D2C narrative has captivated investors and consumers over the past decade, resulting in billion-dollar valuations and record-setting exits. At just 5 years old, stylish yet affordable eyewear brand Warby Parker reached a $1.2B valuation to earn its unicorn horn. In 2017, urban menswear brand Bonobos successfully exited upon being acquired by retail giant Walmart for $310M.

But success is maintained, not achieved, and despite their early wins, many D2C brands have grappled with losing valuation, failing to turn a profit, or shutting down altogether.

In this report, we look at some of the underlying factors making D2C life more difficult. We also analyze the struggles of 5 major D2C brands to learn what can go wrong — and better understand how to avoid the same pitfalls. 

Table of contents

• Why D2C brands are turning to retailers as middlemen 
• Lesson #1: Figure out how you’ll turn a profit before spending lavishly on customer acquisition (Casper)
• Lesson #2: Hedge your bets when consumer demand is in flux (Peloton)
• Lesson #3: Don’t abandon your value proposition when expanding (Dollar Shave Club)
• Lesson #4: Novelty is no substitute for a strong business model (Brandless)
• Lesson #5: Don’t assume that company culture won’t affect sales (Away)

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Virtual try-on uses technologies like augmented reality, computer vision, and artificial intelligence to allow customers to overlay images of clothes, makeup, and other accessories on an image of themselves or an avatar to visualize how an item will look.

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Changes in shoppers’ habits and expectations are also crystalizing after 2 years of a global pandemic, driving brands and retailers to prioritize convenience (see the rise — and recent fall — of ultrafast delivery players) and seamless shopping journeys.

We’ve translated these broad market trends into 5 key business priorities that leading brands and retailers will consider in the coming year:

1. Improving digital engagement capabilities
2. Increasing profitability of e-commerce operations
3. Omnichannel store enablement
4. Building a more resilient and efficient supply chain
5. Solving for labor shortages and rising workforce costs

Tech vendors are playing a central role in helping brands and retailers find meaningful solutions to the above challenges. But identifying the best possible solution and vendors remains a major challenge in itself. 

Using the CB Insights platform and research, brands and retailers can easily discover tech solutions, design a prioritization plan, and decide on which tech vendor to partner with — ultimately helping them address today’s (and tomorrow’s) key challenges.

Clients can find a non-exhaustive list of relevant briefs and reports at the bottom of this brief.

5 strategic priorities for brands and retailers to consider

1. Improving digital engagement capabilities

Today’s shopping journey is undeniably omnichannel, with shoppers spending more money online than ever before: e-commerce is projected to make up 19% of overall retail sales in the US in 2024, up from 15% in 2021. Digital interactions are also translating into in-store sales.

To adapt to the new shopping journey, brands and retailers need to invest in solutions that will allow them to engage with, support, and sell to shoppers where they are. For example:

• Headless solutions create an agile infrastructure, enabling retailers to easily adopt and retire digital channels both for digital content distribution and e-commerce.
• Retailers can also rely on communications platform-as-service (CPaaS) solutions to develop and deploy communication channels on websites and apps as well as integrate new channels into existing tech stacks.

Both of these solutions will help brands and retailers keep up with the ever-increasing number of communication channels available, from automated SMS notifications for online orders to in-app voice calls. 

CB Insights clients can access a full list of relevant vendors in each space in our e-commerce tech market map and our customer service tech market map.

Clients can also access deep dives into the strategy of leading vendors, including CPaaS platform Twilio, to identify key strategic priorities and anticipate future developments in the space.

In addition, online shoppers increasingly expect to be served with hyper-relevant content and experiences while browsing retailers’ websites. Brands and retailers will need to acquire capabilities that enable personalization at scale and in a cost-efficient manner.

AI-generated content solutions are a compelling option, with use cases across marketing, e-commerce, customer service, and more.

We identify AI-generated content as a tech market for consumer & retail leaders to vet, based on the significant uptick in private market activity in the space and the degree of involvement by key leaders in the digital content industry. This solution and others are mapped on the CB Insights’ MVP (Monitor, Vet, Prioritize) Framework to guide which tech solutions require more immediate attention.

CB Insights’ clients can read more digital content solutions in our digital content MVP report and identify relevant vendors using our digital content market map.

These reports also cover some of the necessary tech building blocks — such as 3D asset creation, avatars & digital humans, and NFTs — for brands and retailers looking to engage with shoppers in virtual worlds and get involved with the metaverse.

2. Increasing profitability of e-commerce operations 

The pandemic-induced jump in e-commerce adoption negatively impacted retailers’ margins and required significant investments in technology. 

Past the shockwave, retailers are now focusing on the following areas to increase the profitability of their e-commerce operations:

• To improve fulfillment and delivery operations, brands and retailers should explore solutions such as robotic fulfillment, micro-fulfillment, and on-demand delivery. Grocery retailers along with food & beverage brands can identify relevant tech providers using our supply chain optimization in grocery market map.
• To increase sales conversion rates, retailers can implement AI-powered search & recommendation engines that help surface, feature, and suggest relevant products to online shoppers. These solutions also contribute to increasing the average basket size.

CB Insights clients can identify and rank AI-powered search & recommendation engines providers here.

Returns are another major challenge to achieving greater e-commerce operations profitability that brands and retailers are tackling through the use of technology:

• Reverse logistics solutions leverage end-to-end inventory management tools and data analytics to help retailers and brands manage and streamline returns processes more effectively. These are among a shortlist of 5 tech solutions we recommend retailers prioritize when it comes to supply chain optimization.
• Online visualization tools such as virtual try-on can also help reduce the cost associated with returns. These tools help online shoppers select the right fit or size for clothes, for example, reducing the risk of online shoppers returning items. Online visualizations tools are especially popular among the fashion, home furniture, and beauty categories, with industry leaders such as L’Oréal investing in the space.

3. Omnichannel store enablement

Retailers are transforming stores into omnichannel hubs to adapt to the new shopper journey. Stores are now points of purchase, fulfillment centers, and experiential destinations. 

These shifts are impacting how stores are laid out, what is on their shelves, and what employees do. To get the most out of their stores — which remain significant sources of profit and sales — retailers are investing in tech that helps them run stores more efficiently and drive sales productivity.

Omnichannel clienteling platforms are one of the top tech solutions retailers should vet as part of their store digitization and task automation efforts. These platforms help store associates personalize the shopping experience and connect shoppers’ online and offline behavior, and they will be an integral part of the store of the future.

Adapting stores to boost online order fulfillment capabilities is another key objective among retailers to further adopt an omnichannel approach. 

Robotic fulfillment solutions such as automated micro-fulfillment centers that can be configured to fit into smaller spaces are helping retailers transform stores into fulfillment centers. These systems make fulfilling e-commerce orders faster and cheaper as robots can pick orders faster than human shoppers.

Our research also explores solutions — like demand forecasting & inventory optimization for grocery — that help with omnichannel assortment planning and merchandise management to reduce the risk of out-of-stock events, thus enhancing the customer experience and boosting retailers’ bottom line. 

4. Building a more resilient and efficient supply chain

Shifts in consumer behavior, supply chain disruptions, and labor shortages are creating bottlenecks along the supply chain, driving demand for solutions that improve resiliency, agility, and efficiency. 

Target areas for tech buying decisions include demand forecasting & inventory optimization (as mentioned in the previous section), as well as food waste tracking software and shelf life extension solutions for food. All of these solutions contribute to reducing waste along the grocery supply chain and improving food security.

Increasing visibility across the supply chain is another major area of tech investment for brands and retailers. Real-time tracking and predictive visibility solutions allow them to respond to (and recover from) disruption more quickly, for example. 

Tech vendors offering delivery management software and visibility platforms make it easier for companies to identify and eliminate inefficiencies along the shipping journey. FedEx is one example of a leader investing in supply chain visibility, having partnered with Microsoft in 2020 to create FedEx Surround — a platform equipped with real-time supply chain and delivery analytics.

5. Solving for labor shortages and rising workforce costs

Labor costs increased by 4% YoY in the US in 2021 — the largest increase in over 20 years according to the US Labor Department. Average hourly labor costs rose by 1.7% over the same period in the EU, per Eurostat.

These trends are intensifying brands and retailers’ need to automate and/or eliminate repetitive and time-consuming tasks to keep serving their customers while making jobs more attractive to employees. 

For example, in our customer service MVP Framework, we identify AI-enabled chatbots — which can automatically answering 60% to 70% of customer service requests — as a solution for consumer & retail leaders to prioritize based on market momentum and industry leader adoption.

In-store solutions such as digital shelf displays, shelf management technology, robotic fulfillment, and robotic food preparation hardware are also contributing to automating repetitive tasks.

Worker augmentation is another area where tech vendors can help brands and retailers better manage labor market fluctuations. This includes agent support tools that can quickly provide context to a customer’s request or automatically suggest answers to the agent as well as employee task management solutions that make communication between retailers and their store employees more efficient and consistent.

Client-only research: Key tech reports for brands and retailers

Store Operations

• The Store Of The Future: What Retail Could Look Like In 2030
• What The Omnichannel Grocery Store Trip Of The Future Will Look Like
• MVP Technology Framework — Store Digitization And Task Automation
• Tech Market Map Report — Digitization and Task Automation In Store
• Unbundling LVMH: How Traditional Luxury Retail Is Being Disrupted
• State of Retail Tech 2021: In-Store Retail Tech
• Why Retail Store Leaders Are Prioritizing Shelf Management Solutions
• Unbundling Sephora: How The Beauty Retail Experience Is Being Disrupted
• Why Retail Leaders Are Prioritizing Contactless Self-Checkout

Supply Chain & Logistics

• MVP Technology Framework: Supply Chain Optimization Tech for Retailers
• Tech Market Map Report — Supply Chain Optimization In Retail
• With E-Commerce Skyrocketing, Last-Mile Efficiency Is More Important Than Ever. Here’s How Retailers And Brands Are Staying Competitive
• What Does Walmart’s Driverless Delivery Strategy & Future Look Like?
• MVP Technology Framework: Supply Chain Optimization for Grocery Retailers
• Tech Market Map Report: Supply Chain Optimization in Grocery
• Unbundling Uber Eats: How The Food Service Industry Is Being Disrupted
• MVP Technology Framework: Fleet & Freight Optimization for Retail
• Tech Market Map Report: Fleet & Freight Optimization in Retail
• These 95+ Companies Are Transforming Last-Mile Delivery

Digital Engagement & E-Commerce

• MVP Technology Framework: Digital Content for Consumer & Retail
• Tech Market Map Report — Digital Content In Consumer & Retail
• Analyzing Snap’s Growth Strategy: How The Company Is Becoming A Leading Immersive & Shoppable Virtual Platform
• MVP Technology Framework: Customer Service for Consumer & Retail Leaders
• Tech Market Map Report: Customer Service in Consumer & Retail
• MVP Technology Framework: E-Commerce Tech for Consumer & Retail
• Tech Market Map Report: E-Commerce Tech in Consumer & Retail
• Social Commerce Funding Breaks Records As US Livestream Shopping Heats Up
• Analyzing Walmart’s Growth Strategy: How the Retail Giant Is Building E-Commerce And Boosting Profits
• Unbundling Nike: How Direct-To-Consumer Retail Is Being Disrupted

Payments

• Tech Market Map Report: Payments Acceptance Methods
• MVP Technology Framework — Payments Digitization And Task Automation
• Tech Market Map Report: Digitization & Task Automation in Payments
• MVP Technology Framework — Fraud Prevention & Compliance for Payments Leaders
• Tech Market Map Report: Fraud Prevention & Compliance in Payments
• The Future of the Wallet: How AI advisors, digital IDs, and wearables are turning mobile wallets into the next super apps
• Analyzing Stripe’s Growth Strategy: How The Payments Giant Is Expanding Beyond E-commerce

The post Here are the 5 biggest challenges for brands and retailers this year — and the tech that can solve them appeared first on CB Insights Research.

Fifty-four percent of consumers say they take environmentally friendly packaging into consideration when deciding which products to buy, according to a Trivium Packaging report. The majority (83%) of younger consumers are also willing to pay more for sustainable packaging.

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HOW’S THE COMPANY PERFORMING?

• California-based Future offers personalized and flexible training plans via its app.
• The company charges a membership fee of $149 per month per user for its services.
• The startup’s ARR is expected to exceed $100M by early 2023.
• Future has also announced that it will partner with celebrities Kate and Oliver Hudson to co-host, produce, and distribute a six-episode podcast series.

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Store closures pushed beauty brands and retailers to rely more on digital channels, blurring the lines between the physical and digital storefronts. Meanwhile, consumer expectations for things like faster delivery times and novel, personalized experiences have continued to rise.

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FOOD, BEVERAGE, AND HOUSEHOLD ESSENTIALS

• [Client Research] Next-Gen Nutrition Market Outlook: How Tech Is Making Eating & Wellness More Personalized And Connected
• State Of Food Tech Q2’21 Report: Investment & Sector Trends To Watch 
• [Client Research] 75+ Companies Tackling The $1T Food Waste Problem
• Food Waste Is Suddenly A Priority For Corporates
• [Client Research] Top Food & Beverage Investors Set Sights On Sustainability
• [Client Research] No More Online Quizzes? How Biometrics Is Driving Personalization And Brand Loyalty In The CPG Space
• State Of Agtech Q3’21 Report
• [Client Research] How Vertical Farming Is Impacting The Food Supply Chain And Enabling Taste Innovation
• [Client Research] The Chef Robots Are Coming. Amid A Restaurant Labor Shortage Heres Where Kitchen Automation Goes Next
• [Client Research] The Beverage Market Map: 90+ Companies Changing What (And How) We Drink
• [Client Research] 65+ Companies Transforming Pet Care With Connected Devices & Services
• [Client Research] The Pet Care Oppawtunity: Why Interest In The Industry Is Surging
• Our Meatless Future: How The $2.7T Global Meat Market Gets Disrupted

FASHION, BEAUTY, AND PERSONAL CARE

• [Client Research] AI Is Driving Efficiencies In The Beauty Industry — And How Brands Can Benefit
• [Client Research] What’s Ahead For Beauty & Personal Care: Top Investors Bets Shaping The Landscape
• [Client Research] Unbundling The Bathroom: The Tech Categories Targeting New Opportunities In Hygiene And Self-Care
• [Client Research] 100+ Early-Stage Beauty & Personal Care Startups
• [Client Research] Analyzing L’Oréal’s Growth Strategy: How The Cosmetics Giant Is Becoming A Beauty Tech Leader
• [Client Research] Why Nutrition With Beauty Benefits Is Set To Become The Next Hot Self-Care Category
• The Future Of Fashion: From Design To Merchandising, How Tech Is Reshaping The Industry
• [Client Research] Unbundling Nike: How Direct-To-Consumer Retail Is Being Disrupted
• [Client Research] Unbundling LVMH: How Traditional Luxury Retail Is Being Disrupted

WELLNESS AND FITNESS

• [Client Research] Fitness Tech Market Map: 80+ Early-Stage Startups Shaping The Future Of Fitness Tech
• [Client Research] Consumers Turn To Aromatherapy And Scents For At-Home Wellness
• [Client Research] How Wearable Devices Are Promoting Healthy Sleep & Wellness
• [Client Research] State Of Wellness In Consumer & Retail: The Trends Reshaping Customer Expectations

The post Our Top CPG & Consumer Products Research Of 2021 appeared first on CB Insights Research.

WHO ARE THE PARTIES TO THE DEAL?

• Billie: New York-based Billie sells shaving and premium body care products to women on a subscription basis in the US. The company’s products include razors, shaving creams, lip balms, makeup wipes, dry shampoos, body lotions, and body wash. The company reported generating $90M in revenue last year. The startup plans on entering the brick-and-mortar retail segment in early 2022.
• Edgewell Personal Care: Connecticut-based Edgewell Personal Care is a consumer products company that caters to customers in 50+ countries, including the US, Canada, Mexico, Germany, the UK, Japan, and Australia. Edgewell’s leading brands include Schick, Wilkinson Sword, Banana Boat, and Wet Ones. Edgewell reported $2.1B in net sales FY’21, up 7.1% year-over-year. The company has about 6,900 employees globally.

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In 2018, the company announced its intentions to become a beauty tech leader, and over the last several years has made investments, acquisitions, and partnerships to move toward becoming a digital-first company. Covid-19 only accelerated the company’s push in this regard.

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For example, as consumers become more concerned with ingredient transparency, beauty companies are leveraging AI to track the flow of materials, like palm oil, throughout the supply chain.

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Video content is gaining particular momentum, with the number of times execs have mentioned the term during earnings calls shooting up in Q2’21.

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It has also found itself at the intersection of a number of sustainability trends. 60% of consumers say that they would tweak their habits to have less of an impact on the environment, according to IBM — and given that the bathroom is responsible for the highest water usage (nearly 67%) in the home and is commonly associated with single-use plastic, it is experiencing the effects of these behavioral changes first hand.  

Below, we take a look at how startups and companies are unbundling the bathroom in line with different health, wellness, and sustainability priorities. 

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Sustainability is becoming a key priority for more and more brands across the ever-evolving beauty industry.

In an effort to appeal to a growing population of eco-conscious consumers, companies are looking for ways to emphasize greener initiatives, without compromising on the quality and reach of products.

L’Oréal and Estée Lauder, for example, have announced goals to reach carbon neutrality, while others have started to experiment with biosynthetic ingredients like vegan collagen and palm oil alternatives. Reusable packaging, refill models, and waterless products are also rising in use.

Below we look at 3 sustainable beauty trends to keep an eye on as we head into the second half of 2021.

Synthetic beauty gains traction, riding sustainability and supply chain tailwinds

Biotechnologies are increasingly impacting the production of beauty ingredients. Consumers are continuing to realize that not all synthetic ingredients are detrimental, and that biosynthetic ingredients offer a viable, more sustainable alternative. 

On the business front, using ingredients that are mined or farmed introduces potential supply chain volatility, given the quantity of vendors, farms, and fisheries that have to be involved in supplying ingredients, while synthetic ingredients are made in more controlled environments that can offer consistency. 

Furthermore, the process of growing ingredients in a lab reduces the “devastating impacts of farming, fishing, extraction, or the involvement of intermediaries which can drive up the price and carbon footprint of raw materials extracted from the earth in lengthy, global supply chains,” said sustainability consultant and All Earthlings founder Sarah Jay in an interview with Coveteur. 

Several brands are experimenting with biosynthetic ingredients: 

• Ginkgo BioWorks, which recently announced it will go public in a $17.5B SPAC deal, has genetically engineered yeast fermentation to produce rose oil with new and unique scents without relying on expensive rose petals.
• Biotech “ingredients-as-a-service” company Geltor offers vegan collagen technologies crafted for skincare ingredient applications. 
• Startup C16 Biosciences uses a brewing process to produce a sustainable alternative for palm oil instead of relying on traditional agricultural processes, which have been scrutinized for their damage to the environment and links to labor abuses. 
• Vegan skincare brand Biossance creates its own eco-friendly squalene, an ingredient typically taken from shark livers. 

Source: Geltor

Read our Beauty Trends report to learn more about high-profile partnerships that have been formed in this space.

New sustainable packaging prototypes and business models take off

Sustainability is a hot topic across virtually every sector, but it’s become a particularly important conversation within CPG, an industry with replenishable products historically featuring single-use packaging. 

The beauty and personal care industry generates nearly 120B packaging units every year, and nearly 91% of these fossil fuel-based bottles, wrappers, and other plastic waste are never recycled, accumulating in the ocean and landfills.

Consumers — especially millennials and Gen Zers — are leading the shift away from single-use plastic. Up to 70% of surveyed US consumers said they would pay more for sustainable packaging, per McKinsey. This shift is accelerating as government regulation in the EU and select US states pushes CPG companies toward adopting more sustainable alternatives. The EU, for example, has a goal of becoming carbon neutral by 2050, and the European Green Deal aims to shift to completely reusable or recyclable packaging by 2030. Nine states, including California, New York, and Maine, have enacted statewide plastic bag reduction laws or bans.

Beauty conglomerates and indie brands alike have tapped into this trend: L’Oréal, Estée Lauder, and Unilever have all pledged to reduce single-use packaging, while brands like Pai Skincare and HiBar are reducing virgin plastic use or moving away from plastic entirely. Synthetic biotech company Amyris recently acquired a majority stake in sustainable cosmetics brand EcoFabulous — the seventh clean beauty brand in its portfolio.   

As pledging to reduce single-use plastic becomes fundamental, the shift toward sustainable packaging is spurring new business models. 

Refill models are being embraced across different beauty verticals. Myro and By Humankind allow users to refill deodorant, while Kjaer Weis and Asa Beauty allow consumers to restock makeup.

Source: Myro

In-store refills have yet to pick up — especially after the Covid-19 pandemic — though there is opportunity here. The Body Shop launched its refill stations globally in March 2021, allowing consumers to refill shower gels, hand soaps, shampoos, and conditioners in stores. Chile-based Algramo, which expanded to New York in August 2020, also offers opportunities for refilling household products, though beauty and personal care is likely a future opportunity thanks to its partnerships with Unilever and Nestlé. 

This trend has also led to a reevaluation of recycling models and an increased interest in biodegradable packaging. Read the full Beauty Trends report to dig into innovation in these areas. 

‘Waterless’ beauty as the next big eco trend

A typical bottle of shampoo consists of 90% water, and shipping bulky, water-based products leads to substantial transportation costs, increased emissions, and more packaging. Removing water from product design and shipping is a key emerging theme across beauty brands’ efforts to improve operational sustainability. 

A wave of startups and corporates are developing innovative material solutions to concentrate the active ingredients in shampoo, hand soaps, and more. These companies formulate and package products to improve convenience and user experience, which eases consumers into using more sustainable products without changing their routines to accommodate, for instance, scoopable shower gels or chewable toothpastes. 

Emerging startups and recent corporate developments here include:

• L’Oréal-owned Garnier launched shampoo bars in November 2020. Alongside eschewing plastic containers altogether, the bars can reportedly reduce the environmental impact by 25% compared to liquid shampoos.
• Seed-stage startup Susteau (formerly OWA Haircare) inked a deal with Sephora to launch its waterless haircare products online and in stores for the retailer. These kinds of concentrates blend with the water already being used in the shower or sink. Susteau has applied for a patent for its powderless shampoo. 
• Carbon-neutral brand Everist designs waterless haircare concentrates and was founded by former executives at companies like L’Oréal and Revlon. Everist raised a seed round in January 2021.
• By Humankind, which claims it has reached carbon neutrality, has developed a wide range of water-saving products, from toothpaste and mouthwash in tablet form to shampoo bars.

Source: Susteau via Beauty Independent

Expect to see more major retailers stocking these options in an effort to bring sustainable products under the roof. However, the ultimate impact of these products will depend on how much consumers are willing to change their routines to adapt to these new formats, which may not be as convenient as traditional water-based products.

Waterless or water-reduced initiatives have also made their way into salons. To explore this shift, read our full Beauty Trends report.

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Tech companies’ extensive reach — which can include search data, smart home devices, AI capabilities, e-commerce platforms, and more — offer compelling opportunities to cash in on the beauty market. For example:

• Amazon runs a dedicated beauty supply store that sells salon products and equipment to businesses. It even opened a brick-and-mortar hair salon to showcase its tech.
• Google works with brands to use its search data to better understand beauty shoppers’ preferences.
• Livestreaming beauty shopping is taking off on platforms like Facebook-owned Instagram and Alibaba’s e-commerce site.

Below, we look at where big tech and beauty are colliding.

Big tech offers online beauty retail channels

Amazon has made major strides in expanding its beauty retail channel. It launched a private label beauty brand called Belei in 2019 and recently invested in India-based D2C beauty site MyGlamm.

Source: Amazon

In addition to its traditional e-commerce site, it also sells beauty products on its Amazon Fresh and Whole Foods online grocery platforms — a distribution channel that received a major boost during the pandemic and presents an opportunity for Amazon to cross-sell beauty products alongside consumers’ regular food orders.

Meanwhile, Facebook-owned Instagram has become a strong retail force within the beauty industry.

The platform has played a major role in creating digitally native brands across all consumer categories and is particularly well suited to beauty — an industry that is inherently visual, based on peer recommendations, and has a relatively low barrier to entry.

In 2019, the company launched in-app checkout for shoppable posts and has since rolled out features such as augmented reality shopping, in-app reminders for new product drops, and even shoppable videos — expanding its e-commerce role for beauty products being promoted by brands and influencers.

Big tech platforms forming partnerships to provide virtual try-on experiences

While virtual try-on tech has existed for some years, the Covid-19 pandemic solidified its place in the beauty industry. A growing number of big tech platforms are deciding to partner with companies like Perfect Corp in order to provide a virtual try-on experience to their customers.

Since first establishing itself as a go-to provider of AR for beauty tech in 2017, Perfect Corp has expanded its virtual try-on offering, leveraging 3D face AR technology to let users virtually test an array of makeup products. Key partners include big tech companies like Alibaba, Google’s YouTube and Search platforms, and Snap.

Source: Business Wire

Amazon is also incorporating AR try-ons into the physical retail experience at its new hair salon in the UK. While this is Amazon’s first hair salon, this is not the first time the e-commerce giant has utilized AR tech. In 2019, it partnered with L’Oreal and Modiface to allow customers to try-on makeup products.

As people have spent more time working and socializing virtually, video filters could prove to be another expanding use case for virtual makeup. Microsoft was a first mover in this area, teaming up with telebeauty app with Shiseido in 2016 to create a makeup filter for video conferencing users. Now Shiseido’s filters are available on Snapchat’s Snap Camera and can be used across additional video conferencing platforms, like Microsoft Teams and Zoom.

As big tech expands it is likely to make further inroads into beauty retail, and it could greatly benefit from the adoption of virtual try-on tech. In fact, AR tools have already shown promise as a way to increase conversions for beauty products — L’Oreal previously stated that it found consumers who use AR try-on features were 10% more likely to make a purchase.

Big tech-enabled livestreaming is gaining traction among beauty influencers

Instagram is not the only company using video to sell beauty products. Livestreaming, which refers to livestreamed shopping trips where viewers can purchase the items being featured, is offering a new way to engage younger audiences and boost sales. The approach is already popular in Asia, but it has started to make inroads in markets like the US.

China-based tech giant Alibaba offers livestreaming and AR features which it has used to attract luxury beauty brands to its e-commerce platform.

Much of the beauty livestreaming activity in Asia has been driven by high-profile influencers — known as KOLs (key opinion leaders) — like “Lipstick King” Jiaqi Li, who reaches millions of viewers every month. However, more sophisticated approaches are starting to emerge, such as that taken by early-stage startup Zamface, which offers a platform to help viewers find a livestreamer with similar facial features to them.

Livestreamer Jiaqi Li promoting beauty products on Alibaba’s platform. Source: Alizila

Big tech looking to bring beauty into the smart home

Voice assistants like Amazon’s Alexa and Apple’s Siri present partnership opportunities for big tech and beauty.

Amazon, Apple, and Google all offer voice-enabled smart speakers and have designs on deeply integrating their virtual assistants into peoples’ home lives. At the same time, beauty companies are looking to master voice-based shopping to ensure their brands remain top of mind for consumers.

Sephora, for instance, partnered with Google to offer its own Google Assistant app that allows users to order products, access skincare advice, and view Sephora’s YouTube videos.

Source: Sephora

With smart home concepts continuing to gain traction, beauty brands will have to consider how voice technology — and partnerships with big tech — could be used to address shopper pain points, from personalized recommendations to conveniently booking reservations. (For more on the future of the smart home, clients can check out this report.)  

In addition to voice technology, expect to see big tech get behind companies focused on bringing professional beauty services into the home. Alibaba invested in Helijia, an on-demand beauty app focused on bringing manicure services to consumer’s homes. The Amazon Alexa Fund participated in a Series C funding round for at-home nail machine Preemadonna in January 2021.

Source: Nailbot

While beauty hasn’t historically been a key focus area for big tech, these giants will inevitably continue to extend their influence in the sector.

As the beauty industry becomes more tech-enabled, opportunities for big tech companies to monetize their data, platforms, and devices will only increase — but, even as partnerships abound, they may eventually find themselves competing more directly with increasingly tech-savvy beauty incumbents.

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