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2018 Brick & Mortar IT Challenges

Many companies in the Bowery Capital portfolio sell into what we commonly call the traditional brick and mortar industries. Businesses like ActionIQ, MomentSnap, and mParticle power major components of the IT stack for brick and mortar businesses such as J Crew, Darden Restaurants, and Kroger. With most of these industries going through a major overhaul around square footage (hint: a lot less) and digital transformation (hint: a lot more) we thought it would be interesting to showcase some brick & mortar IT challenges from our perspective on the ground with these companies.

1. Customer Oriented Organizations vs. Transaction Oriented Organizations. Historically these businesses evolved from an IT standpoint to have basic databases primarily filled with data around the credit card swipe or transaction. Foot traffic and revenue were king. Why would we need to store more information? There was very little thought paid to all of the customer data. Today, the story is completely different and major brick and mortar businesses are thinking hard about this concept having been being their online counterparts for many years. This remains one of the biggest brick & mortar IT challenges and startups solving this problem will be more important in the next couple of years.

2. Point Of Sale Problems Are Still Major. One of the core systems of record in the category remains the Point of Sale (POS) system. It is incredible the sheer number of vendors and versions that exist in the space. From the big vendors like MICROS to those customized specifically to certain industries like Lightspeed POS, as well as the myriad of managed service providers that created custom builds for their clients, no one has really solved this problem. Can you imagine trying to solve the creation of a single source of truth problem when you have eleven different versions of MICROS installed over 25 years as well as 6 other POS vendors that are all from different vendors? Startups working on data cleansing, aggregation, and single “pane of glass” views should benefit from solving this major brick & mortar IT challenge.

3. Payment Provider Unification Remains Elusive. Brick and mortar locations don’t always use a common payment platform like an online website or mobile application. This payment problem remains one of the biggest to solve in the space, especially for brick and mortar businesses that do business internationally. What happens in a world when there are seven different payment providers and no common platform or provider? Most brick and mortar businesses do nothing and leave the problem to get worse. Companies thinking through and solving this issue will benefit greatly as the ecosystem evolves to unify mobile, web, offline, and other experiences around a single payment option.

4. Digital & Engineering Talent Shortages Create More Inertia. One of the biggest brick & mortar IT challenges we see through 2018 is solving the talent crisis at the digital and engineering level at these companies. Unless you face an impending bankruptcy like Dominos or you have a visionary CEO that turns the company upside down like Starbucks, most businesses don’t believe they have an existential crisis. It takes outside viewpoints and more technology enablers to really chip away at inertia and move the ship in a different (right) direction. Anyone focused on this challenge should see tailwinds through 2018.

Beyond the obvious questions (does anyone sit and eat at a McDonalds any more?) or major challenges (Why would I go to the J Crew store when I could get it delivered in 24 hours?) we hope this helps startups think through some of the brick & mortar IT challenges through 2018 and beyond. It is what we are hearing on the ground and may be helpful in thinking through growth of your startup.

If you liked “2018 Brick & Mortar IT Challenges” and want to read more content from the Bowery Capital Team, check out other relevant posts from the Bowery Capital Blog

Michael Brown
Michael Brown
Michael is a Founder & Managing Partner at Bowery Capital based in New York. Prior to Bowery Capital, Brown was a Co-Founder and General Partner at AOL Ventures. Before AOL Ventures, Brown worked for the investment arm of Richard Branson’s Virgin Group. He began his career at Morgan Stanley as an equity research analyst. Outside of his professional life, Brown serves on the Board of Directors of the National Forest Foundation and the Columbia College Alumni Association. He holds a B.A. from Columbia University.