The Coresight Research team attended XRC Labs’ Cohort 6 Demo Day at Parsons School of Design, New York City, on September 27.
- Pano Anthos, Founder and Managing Director of XRC Labs, kicked off the event with his talk on how the store—as a format and an experience—is evolving and how retail is in a dramatic state of change.
- Cohort 6 is a mix of startups from the artificial intelligence (AI), second-hand retail, personalization, health and wellness, interactive tech and digital marketing sectors.
- The 10 participating startups provide solutions that use data analysis for better decision making and for improving customer experience. These startups were: Fabulyst, Holi Chow, IRL, Mayawell, RELOVD, RetailDeep, Simplista, VirtualAPT, VisuWall and eat2explore.
The Coresight Research team attended XRC Labs Cohort 6 Demo Day at Parsons School of Design, New York City, on September 27.
XRC Labs 2018
XRC Labs is an innovation accelerator that partners with Parsons School of Design (Parsons) at the New School and Accenture Strategy’s Kurt Salmon to run two 14-week programs (“Cohorts”) each year. The programs focus on the retail and consumer goods sectors and bring together entrepreneurs, investors and sponsors to foster innovation and unlock new opportunities in retail. XRC Labs’ sponsors include Intel, Lowe’s, the National Association of Chain Drug Stores (NACDS), the National Retail Federation (NRF), RILA, Shoptalk, The Estée Lauder Companies and TJX Companies.
Anthos kicked off the morning by discussing the initial launch day and the following investor preview day and evening for Cohort 6. Before giving an overview of the retail environment, he highlighted the XRC Labs mission statement, which is, “To foster companies and products that innovate the face of consumer goods and retail in a rapidly changing marketplace using design thinking as a key driving process.”
After this message, he discussed the importance of focusing on the customer above everything else. Anthos mentioned that Parsons and Accenture Strategy align with this mentality, and XRC Labs is thus able to create a unique ecosystem of brands, retailers, mentors, venture capital and startups.
XRC Labs Is Evolving and 54 Out of 55 Startups from the Cohorts Are Still Active
Anthos spoke about the evolution of the XRC Labs program. More than 400 companies had applied to the program in 2018, 54 startups (out of 55) from the six cohorts are still in business, and half of Cohort 6 is international, which is a first for XRC Labs. The top focus areas included: retail and consumer goods, fashion, mobile, e-commerce and, although only a small component, social media. Overall, 46% of Cohort 6 and affiliate companies have female CEOs, Anthos informed the audience.
Anthos continued by saying that XRC Labs is opening up a growth fund and heavily investing in entrepreneurs with the goal of furthering design-thinking-based innovation. He spoke about the new relationships that XRC Labs has built, including its strategic innovation partnership with The Wharton School, University of Pennsylvania. XRC Labs continues to work with NRF and NACDS, has a new relationship with the Fashion Tech Forum, and sponsors now have access to workshops in which XRC Labs’ perspectives on its startups are presented and there are conversations about broad, unclear trends, such as artificial intelligence (AI) in retail.
The Store Format Continues to Evolve and Retail is in a Dramatic State of Change
Anthos emphasized that retailers are struggling to create engaging and experience-driven store experiences. As a result, consumers are not shopping at traditional retailers like they did in the past, and there is a “hollowing out of the retail middle,” with middle market retailers suffering because of the off-price and premier ones.
He spoke about how “scarcity is the new inventory,” referencing smaller niche brands, such as Supreme and KITH, that have high sales, small store footprints and high customer loyalty. According to Anthos, consumers are looking for unique experiences and products that are rare or have been personalized for them. Currently, the store experience at legacy retailers faces challenges, including poor merchandising.
Loyalty has evolved, said Anthos, and it is not about points. For brands, “the whole notion that you’re building community is super important.” He referenced exemplary brands and retailers, including Glossier, Patagonia, TOMS, Warby Parker, The Body Shop and Brandless, with Brandless announcing an investment of $240 million in Series C funding from SoftBank’s Vision Fund in July this year.
Engaging discovery in stores often involves unconventional forms of entertainment. Anthos highlighted American Girl—a store that sells dolls to children—and noted how busy the store is and how many non-product purchases can be made in the store, including haircuts or lunches with purchased dolls.
Innovation in retail is taking place at a slower pace than technological innovation, Anthos said, but the industry is indeed changing. He noted that stores are evolving in five key ways; they are: serving consumers through flexible formats, offering unique experiences, operating as platforms, operating as services for consumers and serving as factories where consumers can purchase items on demand.
Anthos then spoke about retail trends in relation to Cohort 6, citing XRC Labs’ continued belief that time is the most valuable commodity for most consumers and they are looking for companies that offer efficient shopping experiences. XRC Labs is also looking for companies that make stores more experiential, but with minimized friction
- IRL and VirtualAPT are both working to allow consumers to more directly interact with products, with the former offering physical product experiences and the latter offering virtual ones.
- RetailDeep is aiming to fulfil the need for more personalized shopping experiences, allowing retailers to identify and track their in-store shoppers.
- Holi Chow also aims to personalize products for its consumers, who happen to be dogs.
- Anthos also believes voice technologies, among others, will continue to grow and that AI—like Fabulyst’s computer vision technology—will change retail.
- He focused next on stores as platforms, and how Simplista and VisuWall are changing the way in which products are merchandised.
- He then shifted to the trend of rental and subscription services in retail, highlighting RELOVD and eat2explore.
- Finally, he spoke about stores as plants and referenced Mayawell—one of XRC Labs’ main startups in this segment—which uses a proprietary, globally patented prebiotic ingredient to create low calorie, low sugar beverages that are naturally nutritious and rich in dietary fiber.
10 XRC Labs Companies Presented Their Pitches, Planning to Innovate a Sector of Retail
Given below are brief descriptions of the 10 companies that participated in XRC Labs Cohort 6 Demo Day.
Founded in 2016 by Komal Prajapati, Raj Parakh, Vikas Jethnani, and Vishal Chitravanshi, Fabulyst increases sales and conversion rates for e-commerce retailers by improving online search capabilities. Fabulyst uses computer vision technology to tag product images with natural language keywords. The process replaces the traditional (manual) tagging process and allows customers to find products more quickly and intuitively. Fabulyst has worked with Myntra.com and Flipkart.com in India and says it has increased both the e-commerce companies’ conversions and revenues by 10%.
Founded by David Kovacks and Wesley Chiang, Holi Chow provides on-demand, personalized dog food that is delivered to pet owners. The company acts as a digital veterinarian nutritionist, and the dog food it manufactures is customized to meet each dog’s individual requirements. At Holi Chow, a dog’s physical condition, age, breed and blood-test results determine how its food and topper are formulated. There are around 90 million dogs in the US, of which a majority is owned by millennials, and the Holi Chow team is confident that there is a growing market for their subscription service that is set to launch early next year.
Founded by Genevieve Liston and Josh Howard, IRL is a product placement platform that connects brands to customers in contexts that are targeted and relevant. IRL works through millennial channels, such as Airbnb and WeWork, placing products in natural environments where consumers can engage with brands organically. The IRL team believes in the analogue experience of “try before you buy.” It has worked with many emerging brands, including Purple, Dirty Lemon, L’Oréal and Red Bull, with a 98% repeat rate so far, according to IRL.
Founded by Oliver Shuttlesworth, Vincente Reyes and Samantha Lee, Mayawell provides a naturally nutritious water product. The company’s water contains a proprietary and globally patented prebiotic ingredient, which is used to create a low-calorie, low-sugar beverage with high levels of dietary fiber. Mayawell plans to launch its product in Texas in the first quarter of 2019, and then nationally in Q4.
Founded by Haley Lieberman, RELOVD serves as an online marketplace that connects moms within social circles, facilitating clothing exchanges in easy and engaging ways. RELOVD is customizing second-hand shopping experiences for cool, savvy moms (of children under seven years of age) who need better ways to exchange quality clothing within a trusted network of friends. The company launched its website for a pilot test group on September 26.
Founded by Hai Hu, RetailDeep is a platform that uses existing facial recognition technology to gather and analyse in-store shopper data. The platform integrates facial recognition services with retailers’ backend systems, providing information about customers when they walk through the door. Customers sign up for the loyalty program and then take a picture at the time of the first purchase. During the pitch, RetailDeep management talked about how 70% of customers walk out of stores without buying anything and only 22% say that they are satisfied with current levels of personalization in stores. Retaildeep has increased conversion by 5%–8% across 50 stores in China, and it is piloting in luxury jewellery stores in the US.
Founded by Evan Silver, Simplista is a listing platform that simplifies and automates product listing and item master management. It is purpose-built for grocery, pharmaceuticals and general merchandising, and helps retailers realize greater margins by getting new items from suppliers to retailers’ shelves within days instead of weeks or months, which is the time it currently takes, said Silver.
Founded by Bryan Colin and Filippo Alimonda, VirtualAPT translates physical spaces into virtual ones by replicating in-person experiences over the Internet by using content produced by their proprietary, 360-degree video robot. Providing a comprehensive virtual tour and potential to interact with items in the online space provides a more engaging experience to consumers and can increase conversions.
Founded by Kobi Wu, VisuWall is a data-driven marketplace that helps brands find vacant storefronts where they can advertise. The platform allows brands to target neighborhoods they want, place eye-level advertising in windows there and measure related ROI. With its sensors placed next to the advertisements, VisuWall can track the passing foot traffic and an individual passersby’s engagement with the advertisements. The platform also benefits landlords with vacant locations. VisuWall’s clients include Apple Music, Celine, Kellogg’s and the CFDA. According to Wu, the company is on track to generate over $700,000 in annualized revenues.
Founded by Rowena Scherer, eat2explore is a subscription-based business that delivers difficult-to-find ingredients and shopping lists to customers. It also provides customers with information about the cuisine and the country of origin with each order, along with a collectible. The company emphasizes how cooking can facilitate an exploration of other countries and cultures, while also bringing families and friends together.