June 21, 2017
Holden Page is a Crunchbase News editor and columnist.
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Mainstay brick and mortar retailers are struggling to maintain profits and sales. But tech, which is likely responsible for retailer woes, might also play an ironic part as the industry’s savior.

With news of Amazon’s surprise acquisition of Whole Foods, tech has continued moving beyond the virtual shopping experience. And while retail sales are being gobbled up by digital hubs, venture capitalists and entrepreneurs still see modest opportunity in helping retailers improve and scale retailers who operate primarily in the meatspace.

Bringing Tech Money To Retail

Using Crunchbase data, we evaluated investments made into the retail technology sector from 2014 through 2017. Retail technology, as defined by Crunchbase News, is any startup that works primarily with brick and mortar retailers to increase sales, improve customer interaction, or improve retail’s infrastructure.

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In 2014, sixty startups in the retail technology space received funding, totaling over $158 million. These investments were predominantly made in Seed-stage startups, accounting for 43 percent of known funding stages.

The only documented Series C stage funding round was raised by Powa Technologies to the tune $80 million then to-date. But the company, which made a mobile application that complimented retailers physical advertising efforts, did not make it through to 2017.

The one-time London-based unicorn has since closed its doors in 2016 due to reports of financial mismanagement, poor leadership, disappointing technology, and a distasteful company culture. The closing cost Wellington Management, Powa Technologies only reported backer, $156 million.

Moving into 2015, investment into retail tech stayed steady. While deals in the retail technology space increased to eighty-seven startups, total funding only increased by approximately $2 million dollars to approximately $161 million. Of total known funding stages, Seed-stage startups only slightly increased, while Series C stage funding events experienced a slight decrease, a sign that follow-on investments and interest in the space is still nascent.

Markedly, the retail technology space saw a major, positive shift in 2016. Even amidst a poor funding year for VC, and Powa Technologies dramatic closing, retail technology startups saw over $384 million in funding—$66 million more than 2014 and 2015’s total funding hauls combined.

The largest recipient of 2016’s major funding haul was Bonial, which raised $60 million in a private equity round. The company, which digitizes circulars and makes them available through a digital app that is location aware, even promises retailers foot traffic with its “Retale Store Traffic Guarantee.” The company is also the developer behind Out of Milk, a popular list shopping app for Android users.

The 2016 startup cohort is also interested in helping retailers clean up retailer data stored through loyalty programs. Index, which raised $19 million as part of its Series B, “helps retailers create and grow a powerful online and offline customer database,” according to its website. The startup also offers point of sale software and marketing solutions.

Listing apps and loyalty programs aside, how does the future of retail tech look as we navigate through 2017?

Retail Gets Digitized And Follows Familiar Trends

As we approach the halfway mark in 2017, deals being made into the retail tech sector are expected to fall under 2016’s total funding haul, with nearly $132 million invested this year into 59 startups.

Once again, a European-based startup has taken the top spot for funding in retail technology. Ecrebo has raised over $14 million for its custom digital receipt software as part of its Series B announced in February. The company also counts Pandora, a major retail jeweler, as one of its customers.

But improvements to point of sales systems is not the only aspect of the retail experience that investors and entrepreneurs are looking to disrupt. Increasingly, startups that can track customers in real time are being noted and funded.

One such company, Bluefox.io, tracks mobile devices using bluetooth to identify potential customers in-store—no app required. For its tracking software, the company has raised $7 million as part of its Series A. Bluefox.io claims it does not store any personal data without consent.

Dor Technologies, which raised a $3.8 million Seed round in May, also intends to help retailers accurately track customer foot traffic based on thermal scanning. The company aims its foot traffic analytics services to small businesses, with the Dor starter kit costing $190. It app also claims to help small business owners determine appropriate staffing levels, measure marketing impacts, as well as how events such as the weather impact foot traffic.

But whether or not retail technology will help improve brick and mortar retail sales remains to be seen. Regardless of how much entrepreneurs raise from VCs in the retail technology sector, online sales are expected to continue to grow unabated. And with the failure of Powa Technologies, an expected downturn in funding into the space for 2017, and competitive pressures from ecommerce, the likelihood that VCs will continue to fund entrepreneurs in the space en masse looks slim.

Illustration: Li-Anne Dias