Digital trends vying for consumer attention may be easy to chalk up as fads, but it’s harder to dismiss tech’s ever-deepening reach into the fashion and retail worlds.
Fundamental changes are happening to the way companies create and sell products like apparel — and the prospect is lighting up investors eagerly throwing eye-watering sums at tech platforms on the edge of this transition.
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In August, fashion design software company Browzwear’s first institutional financing landed $35 million from Radian Capital, a New York City-based growth equity fund.
The tech company, which was founded in 1999, is no start-up. It’s become one of fashion’s best-known software makers for 3D visual applications, mostly as a design suite that helps digitize typically manual processes in production and manufacturing.
Weston Gaddy, cofounder and partner at Radian Capital, described Browzwear as ”a 20-year-long overnight success story,” in the announcement. The company “invented the use of 3D design for apparel and is increasingly being adopted as the design system of record by the largest brands and manufacturers in the industry,” he said. “The company has done something incredible in getting to that position without outside funding and with impressive, profitable growth.”
That may be nothing compared to what Browzwear, now flush with funding, does next. According to the software maker, it plans to double the size of its business over the next two years, aggressively expand its staffing and explore new territory. The company wants to go beyond production and manufacturing to consumer-facing e-commerce features.
“The fashion industry has made great strides toward digital transformation, but there’s so much more we can do,” said Avihay Feld, Browzwear’s cofounder and chief executive offer. “We at Browzwear have an ambitious vision for a future in which systems and tools throughout the ecosystem are connected.”
The proposition could put the 3D platform in pole position, as augmented reality, gaming avatars, NFTs and more set off a race for digital fashion. As it is, the company is already looking at areas like AR try-ons, which have become hugely popular for beauty — driving engagement across Snapchat, Instagram, Pinterest and YouTube — but are a heady challenge for fashion.
At Browzwear, Feld believes a “unification of solutions for the entire value chain is the foundation the [apparel] industry needs to make digital experiences such as true-to-life virtual try-ons a reality.”
Cracking online try-ons for clothes, with the requisite challenges in realistic fitting and life-like fabric rendering, is a complex mission. Major tech companies like Snap Inc., which has been chasing realistic fashion AR, can attest to that.
But the effort is worthwhile, according to many of the brands and tech platforms that have spoken with WWD in recent years, especially for fashion or other items that must be worn to be truly experienced.
The opportunity could be massive: Recent data from Accenture’s Business Futures, Signals of Change report indicates that less than one percent of retailers use augmented and virtual reality to engage consumers. If adoption ticks upward to a mere two percent, the firm contends that it could add an estimated $66 billion in retail sales growth.
Even if virtual fashion try-ons take off, they tend to kick in after consumers are already intrigued by a product or brand. Getting them interested in the first place is another matter. That has always relied on marketers’ nuanced and enigmatic understanding of human behavior and motivations — a soft art in a world of hard numbers.
Technologies today, particularly artificial intelligence, machine learning and other data-driven models, quantify the pursuit and rip insights that predict what shoppers want. Platforms promising to make this a reality include giants like Amazon Web Services, Google Cloud and many others. But large tech players aren’t the only ones, and investors are taking notice.
Martech company Bluecore spun its proposition — that artificial intelligence can predict what shoppers will want to buy next — into a Series E round that nabbed $125 million, bringing the company’s total raise to more than $225 million at a valuation of $1 billion.
Fintech firm Georgian, which doubled its previous investment, led the August funding round. FirstMark and Norwest returned as well, and Silver Lake Waterman made its first Bluecore investment.
The attraction seems The business, which has worked with the likes of Tommy Hilfiger, Perry Ellis, Teleflora, Staples and Best Buy Canada, has already driven billions in gross merchandising value across hundreds of retailers. Its solutions are in use by Jockey, NOBULL, 4ocean, Lane Bryant and Foot Locker, to name a few. It’s also partnered with other major tech players, including Google.
Today, the company believes it operates in a rare transitional environment. Retail sales have shifted from 85 percent in favor of physical stores to a 50-50 split between online and offline channels over the last two years, as shoppers moved more toward convenient, personalized customer experiences, it said.
But no matter where the final purchase happens, Bluecore sees digital channels as the entry point for more than three-quarters of shoppers. For Fayez Mohamood, Bluecore’s CEO and founder, these factors have led to a frenzy of sorts.
“We’re in an era of personal commerce, where retailers are no longer competing solely with other brands; they’re competing with every other digital experience, too,” he said. “As a result, shoppers expect the same level of one-to-one curation from retail brands that they’re getting from platforms like Netflix, Spotify and other exceptional experiences.”
Mohamood wants to use his company’s recent funding to drive e-commerce product development, AI and analytics — which puts it in the playing field of major platforms like Salesforce, Oracle and Adobe.
Bluecore draws a key distinction between his company and the tech behemoths: The company was “built for the world of online shopping,” while legacy rivals are geared more for mass marketing to general audiences, not specifically for direct-to-consumer retail.
“We’ve spent the past eight years building for this inevitable moment where all retailers are driving growth through e-commerce,” Mohamood continued. “Our role will always be to predict the industry’s shifts so we can guide retailers through ongoing transformation.” Predictive models that can anticipate consumers’ wants and needs can surely amplify sales, but they also have implications on other aspects of the business, like demand forecasting, inventory and warehousing.
Bluecore and Browzwear are recent examples from a wave of well-funded companies looking to rewrite the rules. That momentum isn’t expected to cool anytime soon — in fact, it’s poised to burrow even deeper into more areas of retail, from the front to the back of house. The effect puts tech in a position to ease COVID-19 disruptions in the short term, while also creating operational efficiencies likely to last far beyond.
According to CB Insights, enthusiastic investors have been latching onto platforms that drive digital shopping, as well as smarter store operations, supply chains and new approaches to customer loyalty. In its State of Retail Tech Q2’21 report, the firm described a frenetic second quarter that shattered records, with a 4 percent quarter-over-quarter boost igniting $31.5 billion in investments, a more than threefold increase over the same quarter last year.
In-store tech investments between April and June jumped 46 percent quarter-over-quarter, totaling a record $3.3 billion as retailers welcomed shoppers back. E-commerce tech ruled the first half of the year, though — as backing for Amazon brand acquirers skyrocketed $2.3 billion, platforms aimed at online shopping drew a record $16.9 billion.
“E-commerce’s continued growth is driving higher valuations and bigger funding rounds,” revealed the report. “The five highest valued new retail unicorns in Q2’21 span the e-commerce value chain, from online behavior tracking to payments tech to delivery. Meanwhile, the top five mega-rounds (deals worth more than $100 million) in the space all went to e-commerce companies.“
Now the firm projects that, over the entirety of 2021, funding will bring in more than double the annual investment seen in each of the last four years.
All of that cash flowing to tech providers will make their way into future wares and services. But they’re springboarding off of a new reality that’s playing out right now in real time.
Simply put, technology-fueled e-commerce — accelerated by the pandemic-driven surge in online shopping — is becoming more foundational to all retail. Given tech’s penchant to move quickly and constantly innovate, the stage looks set for a wild ride, with change becoming the norm. That’s true across categories, but for fashion, whose business and consumer experiences have been hard to fully translate online, the shifts may be monumental.
In other words, brands and industry watchers who think retail’s evolution has been bonkers so far ought to brace themselves. Because, in all likelihood, they haven’t seen anything yet.