Retail Is Alive & Evolving: Our Investment in Fourpost
For those of you who may (ignorantly) think “retail is dying,” we at Supernode believe just the contrary. If you know me at all, you know I speak in my own language. The acronyms in this post, however, are not Jenny-Speak, rather commonplace abbreviations particular to retail tech.
Here are the most relevant few:
- DNVB = Digitally Native Vertical Brands
- RaaS = Retail-as-a-Service
- D2C = Direct-to-Consumer (throwing this in here to clarify for non-traditional @medium readers i.e. my mom and her friends)
*Shoutout to our DOPE MBA Associate Brittany Walker (Wharton rep for Dorm Room Fund) for helping out with this post.
The Rise of DNBVs Infrastructure & RaaS
The past several years have seen an explosion of DNVBs, the space growing nearly three times faster (44%) than the broader US e-commerce market (16%). These brands are performing especially well with younger consumers, such as members of the millennial generation and Gen Z, who have responded positively to newer brands and perceive them as more innovative. Growth is not limited to these customer segments, however, as “[one-]third of U.S. consumers plan to do at least 40% of their shopping from D2C companies in the next five years, and 81% say they’ll make at least one purchase from a D2C brand within the next five years” according to Retail Dive.
Startups operating in this space have historically been built on the strength of their marketing and customer acquisition efforts, focusing on highly-targeted campaigns using social media channels. As more brands enter a given category, however, search keywords become increasingly expensive — in turn, traditional channels such as brick-and-mortar retail have become more and more attractive as means to expand brands’ customer bases. And, despite the rise of e-commerce, Forrester reports that more than 80% of retail sales will continue to take place in brick-and-mortar retail locations over the next several years. Apart from potentially reducing customer acquisition costs at scale, offline retail also benefits brands by increasing customer retention; anecdotally, founders of D2C brands have reported that buyers who purchased through traditional retail demonstrated a 3x increased likelihood of becoming repeat buyers.
While well-established brands such as Warby Parker and Casper can afford to invest in their own storefronts (from both a financial and a risk-oriented perspective), newer players in the space may be hesitant to place such large bets on building a dedicated offline retail presence. Outsourcing these efforts to RaaS providers,
such as Fourpost, enables these brands to expand their customer bases in a lower-risk, more cost-effective way. Additionally, RaaS platforms help these brands remain focused on what they do best — marketing and customer acquisition — while the chosen RaaS platform incurs the responsibility for non-core competencies such as negotiating leasing / financing agreements, designing store layouts, and managing day-to-day retail operations.
As traditional department stores are abandoning their storefronts, these infrastructure players are poised to take advantage of reduced rents and superior economics by partitioning underutilized retail space into smaller, experiential shops. With the retail category growing 5% year-over-year and the rise of technologies such as AI and the Internet of Things, we also strongly believe in the opportunity for RaaS providers to add even more value for DNVBs going forward through data and analytics. As the lines between online and offline retail continue to blur and brands understand that deploying an omnichannel strategy is crucial to survival, platforms such as Fourpost can give their customers access to unique insights that they can use to further refine their approaches to product development and customer acquisition.
Why Fourpost?
We invested in Fourpost because we believe they are uniquely well-suited to take advantage of these trends and help DNVBs build out their offline footprints.
For all of the reasons stated above, D2C brands who launch their offline retail presence through Fourpost can be more agile and more flexible, while incurring less risk. Brands working with Fourpost can stand up their Studio Shops (Fourpost’s name for its retail spaces) within the span of 24 hours, compared to the 10-to-12 month timeframe required to create a traditional storefront. Studio Shops are also far less capital intensive than traditional offline retail, requiring only 1/10 the investment. Additionally, when a D2C startup signs a short-term lease with Fourpost, the brand isn’t only getting customized retail space — it’s getting access to Fourpost’s hardware and software, support staff, and shared resources such as event space, storage, and a social media manager.
While we invest in companies positioned to take advantage of market-moving trends, we also invest in founders who have conviction around solving a problem and the experience to ABSOLUTELY CRUSH. Mark Ghermezian, Fourpost’s rockstar co-founder and CEO, has extensive previous retail and entrepreneurial experience as a 3x former founder who grew Braze to $40M+ ARR during his time as CEO. On top of that, he has personal connections to the largest shopping centers in America that resulted in Fourpost’s first stores opening at the Mall of America and West Edmonton Mall late last year.
