Equal's POV on Investing in Retail & Supply Chain
What we're excited by in 2024
As we did last year, the Equal Ventures Product Owners will be sharing our perspectives on our key sectors - retail, supply chain, climate, and insurance. Today, I am excited to share our POV on Retail & Supply Chain for 2024!
Things have largely played out the way we thought (see 2023 POV here and here). Within retail, we predicted that the Death of DTC brands would spill over into the enablement ecosystem and the poor performance of brands and ecomm software / applications would result in generalist VCs staying out of retail. Broadly, the industry would shift away from DTC and chasing topline growth and move towards optimizing omnichannel strategies and margins. Within supply chains, a sector VCs fell in love with during COVID, valuations rocketed, particularly for unsustainable models, which resulted in many zombie companies despite sustained investor interest in the category.
So where are we today? Retail & supply chains start with the consumer and there’s real pressure on the consumer right now. Credit card balances jumped more than 8% YoY and while some of that is inflation, we are starting to see the signals that the consumer might be in trouble. Freight demand is still down and the market remains in recovery mode from the overbought freight capacity in 2020 and 2021. We are not out of the woods on what has truly been a historical freight downturn, particularly within trucking and maritime.
With that as the backdrop of the industry, how a retailer or brand executes on their omnichannel strategies determines their ability to weather the storm. DTC brands have continued to struggle and most have no path towards even returning capital for investors. Unsurprisingly, retail & supply chain investment dollars have plummeted.
Who is winning? Platform solutions are dominating and continuing to squeeze their customers which is driving brands, retailers, and merchants to search for new solutions. That’s why Equal is investing in the Art of Keiretsu and building the Equal Retail Keiretsu (see our recent investment in Revive!).
Looking forward, we’re focused on a few major themes for 2024:
The Transactability of Wholesale: Improving the transactability of wholesale will be critical as brands look beyond Direct-to-Consumer. Processes are still incredibly antiquated and brands will need help figuring it out
The CPG Commerce Ecosystem: CPG is a massive part of retail yet most of the existing commerce enablement tools do not serve them. We’ve already invested in this space (to be announced!) but there will continue to be meaningful opportunities here
Coming to America: We anticipate significant implications of (and opportunities in) non-US brands, retailers, and platforms coming to America in search of consumer spending, which despite our concerns, still dominate consumer spending in other parts of the world
Rise of the Individual as the Store Front: The power of the individual is also rising - whether that be individual merchants, sellers, creators - all can now leverage powerful platforms to start stealing a meaningful slice of GMV
Our full perspective is summarized in a deck here. As always, any founders, operators, industry watchers, or other investors interested in chatting further, feel free to reach out to chelsea@equal.vc!