Why Venture Capital is Looking into Retail

Why Venture Capital is Looking into Retail

Why Venture Capital is Looking into Retail
Summary:

Venture capital firms could play a vital role in which retail brands survive the pandemic as they seek out more DTC brands.

When opportunity knocks, savvy investors answer. This couldn’t be more true than what is happening in the retail industry. As venture capital firms are actively seeking out strong direct to consumer brands, what retail brands survive the pandemic could largely rest on which brands venture capitalists acquire.

Pandemic Impacts on Retail

If the pandemic has taught the retail industry one valuable lesson, it’s to not rely on big box retailers to sell your products. As many malls were forced to close for weeks as the pandemic raged in Spring and Summer 2020, smaller brands sold exclusively in retail outlets took a major hit. 

However, direct to consumer brands, especially those with a visible e-commerce platform, experienced record sales as consumers were forced to do all of their shopping online. In fact, Mckinsey estimates that the personal care and home furnishing product categories will likely continue to see at least a 35%+ gain well into 2021. This is in large part due to many direct to consumer brands being able to control their supply chains better and avoid stock outages and shipping delays that have plagued many larger retailers.

Changes in Consumer Buying Habits

As the home-bound consumer has radically shifted their buying preferences to favor more home workout/online fitness brands, casual clothing retailers, and companies that offer some type of at-home entertainment, several D2C brands have experienced 250%+ growth just in Q2 alone.

These include outdoor furniture company, Outer (659% growth), transformable kids playwear retailer, Cubcoats (337% growth), and low maintenance bike brand, Priority Bikes (255% growth). Yet despite the uptick in sales over the past year, for some direct to consumer brands, many are still reeling from double-digit losses from the Spring. And, this is where retail investors are looking to snap up deals.

What’s to Come

The verdict is still out on exactly how the global pandemic has and will continue to reshape the retail industry. However, one thing holds true, REITs and retail investments are expected to surge as many well-established brands and thousands of smaller D2C brands are forced to explore other financial options to stay afloat.

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