Holiday season predictions: ready, set, shop

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Bonjour everyone,

Is your company solving retailers’ challenges??

Here’s a chance to let the world know about it: Apply to the?2023 Retail Tech 100 , our roundup of the most promising retail tech companies in the world.

On the topic of challenges: The 2022 holiday season certainly qualifies as one.?

This is a decisive period for retailers, which generate close to 20% of their annual sales during this time of year.?

The past couple of years have seen record year-over-year growth in sales. But how are inflation and recession fears going to impact performance this year?

If we use the?latest retail tech funding trends ?as a proxy, it’s not looking too good. After a streak of record-high quarters, quarterly funding to retail tech companies fell to its lowest level in 5 years in Q3.?

But it’s not all negative. Here are 3 positive signals I’m watching:

A return to normal, rather than a collapse, for retail tech investment. Holiday sales could do the same.

Retail tech companies?raised $8.5B across 776 deals in Q3’22 . These numbers are far from the record highs we saw in 2021 but roughly in line with pre-crazy times.?

What that tells me is that retail tech investors are generally being more careful and making smaller bets, similar to what we’ve observed across?global venture funding . That’s confirmed by the 38% QoQ drop in funding from mega-rounds ($100M+ deals). Quality over quantity.?

Anticipate the same behavior from shoppers this holiday season: less splurging, more targeted purchases. I’d expect brands and retailers that have already secured their position on shopping lists (thanks to early targeting) to win over the ones offering heavy last-minute discounts.

Unicorn fatigue is real. We expect investors to favor startups solving retailers’ challenges over shiny valuations.

Another Q3’22 data point worth highlighting: Only 3 new retail tech unicorns emerged, down from 13 births in Q2’22.

Among the new unicorns are India-based fulfillment management tech company? Shiprocket ?(valued at $1.3B) and Italy-based omnichannel payments platform? Satispay ?(valued at $1B).

Both solve a very current challenge faced by retailers: providing a seamless omnichannel experience to shoppers.

Retail tech investors’ shift toward solving real challenges vs. shinier trends (metaverse anyone?) is further supported by the fact that funding to store tech didn’t drop as much as other categories. Despite a boost in e-commerce adoption over the past couple of years, ~80% of retail sales in the US are still happening in stores.?

It’s simple math: solving in-store challenges has the potential to yield greater results.?

It’s not all about cost savings and the recession. There are growth opportunities to seize across Asia and the MENA region.?

Last but not least, there are still pockets of growth despite global recession fears.?

Among last quarter’s 3 new unicorns, two are based in Asia — which is one of the few regions that’s expected to achieve real GDP growth in 2023.

The MENA region is another one. It’s worth mentioning that funding to Africa tripled in Q3’22 compared to the previous quarter.?

While the top deals in Q3’22 followed broader retail tech trends, others pointed to the growing opportunity to digitize retail in Africa via retail distribution tech, accounting platforms, and omnichannel payments tools.

You can dive deeper into all this data by downloading our State of Retail Tech Q3’22 report right?here .

Stay data-driven,?sign up ?to receive this newsletter directly in your inbox!

Thomas Sineau

P.S. We recently published a report on the Future of Fast Food. Check it out here !