2023 was a painful year for a good portion of the startup world.
Early stage startups were rattled by Silicon Valley Bank’s collapse in March. Big Tech firms and later-stage scale ups saw massive layoffs in the early months of the year, while inflation and economic uncertainty halted IPO plans and slowed VC funding to its lowest point in four years.
Ecommerce brands and Retail Tech startups were far from immune from that pain. After navigating supply chain problems in 2021 and 2022, many ecommerce brands braced for a recession in 2023. Consumers, impacted by student loan repayment plans and high inflation, changed their spending habits. VC checks into direct-to-consumer brands fell 97% from its peak in 2021, according to Crunchbase, while Retail Tech funding also tumbled.
There were positive signs throughout the sector, said Sid Mookerji, founder and managing partner at commerce-focused venture capital firm Silicon Road Ventures in Atlanta. Mookerji told Hypepotamus that it has been a “banner year for commerce in general,” as consumer spending, US payroll numbers, and real GDP hit all-time highs. Silicon Road saw room for innovation this year, writing 15 checks into new investments or follow-on rounds with teams working on payment processing, data, and AI within the world of commerce.
Over the last year, Hypepotamus tracked both the overall uneasiness and the signs of growth within the ecommerce sector across the Southeast. As 2023 comes to a close, we asked Retail Tech experts and ecommerce founders about how the space is transforming. Here are some of their thoughts:
Where & How We Buy Has Changed
Last-mile delivery demands transformed the world of ecommerce this year, said Jennifer Silverberg, CEO at Atlanta-based SmartCommerce.
“Fast continues to be redefined: Two-day delivery went to one-day then to overnight and now is measured in hours, or less!” added Silverberg. “While the retailers and delivery companies work out how to do this profitably, consumers have already settled into an “on demand” fulfillment expectation. We were joking that we’ll soon be seeing magazine headlines like “How to Turn Your (Unused) Pantry into a Cozy Home Office.”
There has also been a massive shift in how consumers discover new products.
Brands are doing a new cost-benefit analysis around having a presence in a physical store, since most younger shoppers are discovering products through friends, family members, or social media influencers and not while browsing store shelves, added Silverberg.
That social media influencer segment has continued to grow. The number of consumers who say they bought something because of a social media influencer rose 333% year-over-year. TikTok alone creates $10 million of sales each day, and more of its users are buying through the “live” options on the platform.
On top of social media marketing, the in-store and online-focused commerce brands that have done well this year are the ones that have “embraced innovation (AI, video, metaverse, etc), and have been able to work around the new realities of transforming supply chains and labor shortages,” Mookerji added.
Southeast-based startups that have helped brands get in front of new customers this year include The Looma Project (in-store video storytelling startup in Durham), eStreamly (a shoppable livestream platform in Atlanta), Couture Technologies (AI-powered virtual try on platform from Nashville), and SmartCommerce (and ecommerce and digital marketing platform based in Atlanta).
Context Is Everything In Marketing
While product discovery is happening on newsfeeds and not in store aisles, the reality is that customer acquisition costs have skyrocketed. During the pandemic, companies such as BattlBox saw a 13 day customer acquisition cycle, the team said during an event at Atlanta Tech Village about the future of ecommerce earlier this month. That timeline has been elongated closer to three months, leading businesses to spend more to turn someone in their audience into a paying customer.
To combat this new timeline, BattleBox CEO John Roman said it is crucial for his team to “form connections with people” and influencers on social media.
It comes down to the fact that ‘personalization’ is no longer enough when it comes to ecommerce marketing efforts, added Silverberg. A consumer doesn’t need a message that just recommends products, they need those products recommended at specific times based on when they are likely to need something.
“Timing and context is everything,” she added.
A Look At 2024
Silverberg gave us her predictions as well. For her, 2024 will be about integration of AI, on-demand fulfillment, and creating an “easy, frictionless checkout from anywhere.”
From an investors perspective, Mookerji said that cash will be a priority for founders in 2024, as companies are “getting to cash-flow positive as early as possible, and raising bridge rounds well ahead of when it is needed.”
Of course, the ecommerce world will be waiting to see how the US economy moves in 2024.
“In 2022 the pundits predicted a huge recession in ‘23, but it didn’t come. Now they are saying it will hit us in ’24. There is a weird dichotomy where consumers are optimistic (like reported in the TransUnion consumer pulse: 57% of Americans reported optimism about their household finances for the next 12 months) but businesses are ratcheting down predictions, and are tightening belts (curtailing investment in growth) … which might unfortunately help drive some rocky times,” Silverberg added.