CHICAGO -- Investment organizations are bullish on retail and its underlying payments and omnichannel technology, though Amazon's e-commerce dominance is throwing some cold water at the market.
“We look at payments as the next growing area for us as we see the different ways people can pay and how to make that more convenient,” said Ezra Galston, principal for Chicago Ventures investment firm. “It will be a good time to conceptualize on payments with startups and other partners.”
Still, Galston said his venture capitalist group was “selectively bullish” on investing in digital commerce companies. “The problem is Amazon collects about 60 cents on every dollar in online commerce,” Galston said during the OnRamp Retail conference.
Such dominance makes it difficult for other e-commerce retailers to find their place and compete with Amazon’s long reach.
But Matthew B. McCall, partner with Pritzker Group Venture Capital, said his group was “bullish with an exclamation point” regarding retail technology investment, partly because other major retailers are moving into e-commerce and mobile technology to compete with Amazon.
“Walmart took its eye off the ball for awhile , but invested in Jet.com to get its mojo back,” McCall said. Walmart also recently introduced Walmart Pay to its customers, providing a payment option from mobile devices. Walmart agreed to buy e-commerce startup Jet.com two months ago for about $3.3 billion.
Mike Collett, founder and managing partner of Promus Ventures, said that the buying and paying patterns of millennial consumers is changing, thus creating many opportunities for investments.
But he agreed the presence of Amazon as an e-commerce kingpin throws up the caution sign for many investors looking at various retail and omnichannel software providers to support with dollars.
“Amazon is just eating up people out there and it’s leaving many others wondering if they will still be around,” Collett said. “Amazon is really crushing the back-end supply chain process.”
Under all of the technology advancements, investors keep an eye on how technology startups are addressing the buying and paying habits of millennial consumers.
“Millennials like access and convenience,” said Lauren Licata, vice president of marketing for Belly, a digital loyalty platform provider. “They like access to special deals and special events, and they like convenience in ordering and paying.”
In using an example of her own lifestyle, Licata said she uses the Starbucks mobile order and payment app while she is getting ready for work, and after picking up her Starbucks order she gets in an Uber car for her ride to work, another service in which her payment is embedded in the mobile app.
Investors should also keep abreast of companies that provide retailers with “some type of gamification” when consumers place an order or make a payment, Licata added.
“A free item built into a payment or winning something when placing an order are popular programs,” she said.
Another key factor in the future, some investors say, is being able to predict what might be the next wave in retail technology after mobile payments and omnichannel platforms that connect with consumers through every digital platform possible.
“A new comment is that e-commerce is dead,” said J. Skyler Fernandes, managing director, Simon Venture Group. “Many retailer e-commerce sites may not be able to survive.”
It’s likely that the physical retail chain will rise again, considering it still has more transactions than e-commerce, as use of virtual reality and machine-learning artificial intelligence will help retailers monitor transaction behavior and use payment data in ways to expand sales and reach customers with proper messages, Fernandes said.
In addition, investors will be behind companies that use beacon technology as a way to communicate with customers through applications, rather than just as a way to send a message or offer to a customer entering a store.
Essentially, beacon technology has to operate as an application aggregator, interacting with as many as possible on a consumer smartphone.
Facebook and Google, both with various forms of payments technology in place, are building their own beacon platforms, Fernandes said. “There is no doubt they will be looking to lure in millennial shoppers, using data points to drive people into the stores.”
With all of the activity in retail and payments, investors may not always zero in solely on what type of product a startup is creating, or if the product line makes a company worth pursuing as an acquisition.
"We would rather take a company with outstanding founders," said Ryan Broshar, managing director for Techstars Retail Accelerator. "We look at financial returns, but look at those founders to see how they would fit in with a company to accelerate future growth."