Retail Reinvented: The Role of Corporate Venturing in Staying Ahead

The retail industry is at a crossroads. Traditional business models, long considered the backbone of success, are being upended by rapidly shifting consumer expectations, technological advancements, and fierce competition from nimble disruptors. For Canada’s largest retailers — the pressure to innovate has never been greater.

To remain competitive, these corporations must embrace retail innovation and corporate venturing as strategic imperatives. This means not only adapting to today’s demands but also investing in tomorrow’s opportunities through partnerships with startups and innovation ecosystems. This article explores the latest trends in retail, barriers to implementing innovation, and why corporate venturing offers a crucial path forward for retailers ready to lead.

 

Trends Shaping the Future of Retail

The retail landscape is in constant flux, driven by evolving consumer expectations and rapid technological advancements. To stay ahead of the curve, it’s crucial for Canadian retailers to understand the key trends shaping the future of the industry:

 

1. The Exponential Rise of E-commerce:

Online shopping continues its relentless growth trajectory. In 2024, e-commerce represented 11.5% of Canada’s total retail sales, valued at C$52 billion. This trend is fueled by factors like increased internet penetration, the convenience of online shopping, and the growing popularity of mobile commerce. While inflation and economic uncertainties are challenging the continued growth of this sector, accessible, fast delivery and competitive pricing are still drivers of demand, making it essential for retailers to prioritize their online presence and offer a seamless omnichannel experience. This means integrating online and offline channels, offering features like click-and-collect, in-store returns of online purchases, and consistent branding and messaging across all touchpoints.

 

2. The Demand for Personalization:

The old ‘spray and pray’ techniques have long outlived their use so today’s consumers expect personalized experiences tailored to their individual needs and preferences. Retailers can leverage data analytics and AI to analyze customer behaviour, purchase history, and preferences to create personalized recommendations, targeted offers, and customized shopping journeys. Imagine a grocery store app that suggests recipes based on your past purchases and dietary restrictions, or a clothing retailer that curates outfits based on your style profile. Personalization is no longer a nice-to-have; it’s a must-have in today’s competitive retail landscape.

 

3. The Mobile-First Mindset:

Smartphones are the modern-day shopping companion. Retailers need to ensure their websites and apps are fast, user-friendly, and offer a seamless checkout experience on smaller screens. This means adopting a mobile-first design approach, with features like one-click purchasing, streamlined navigation, and location-based services. Ignoring the mobile consumer is no longer an option.

 

4. The Rise of Experiential Retail:

In a world dominated by online shopping, physical stores need to offer more than just products on shelves. Consumers crave experiences that engage their senses, foster community, and create lasting memories. Retailers need to transform their stores into destinations, offering interactive displays, in-store workshops, personalized consultations, and pop-up events. Large corporations need to reimagine the role of the physical store, blurring the lines between retail and entertainment, and creating a sense of community and belonging.

 

5. The Growing Importance of Sustainability:

Consumers are increasingly conscious of the environmental and social impact of their purchases. A 2023 study by IBM found that 77% of consumers consider sustainability when making purchasing decisions. This means retailers need to embrace sustainable practices across their operations, from sourcing and manufacturing to packaging and delivery. They also need to offer eco-friendly products and transparently communicate their sustainability efforts to build trust with consumers. Sustainability is no longer a niche concern; it’s a mainstream expectation.

These trends are interconnected and reinforce each other. By understanding them and adapting their strategies accordingly, Canadian retailers can position themselves for success in the years to come.

 

Why Corporate Venturing is Critical in Retail

Retail innovation is no longer a luxury, but a necessity. Consumers are demanding more personalized, seamless, and engaging experiences, while technology evolves at an unprecedented pace. To keep up with these changes and maintain a competitive edge, Canadian retailers need to embrace a new direction of innovation — corporate venturing.

Corporate venturing (also known as corporate innovation), involves strategic partnerships and investments from large corporations into startups and emerging technologies. It’s a way for established retailers to tap into external innovation, gain access to cutting-edge technologies, and inject fresh perspectives into their organizations. This plays a transformative role in retail innovation by enabling established retailers to collaborate with agile startups, helping to overcome traditional barriers to innovation and foster the adoption of cutting-edge technologies and business models.

Advantages specific to the retail sector that corporations may experience by embracing corporate venturing include:

• Overcoming traditional barriers to innovation: Corporate venturing can help overcome these barriers by providing access to external sources of innovation and expertise. By partnering with startups, retailers can tap into a culture of agility, experimentation, and customer-centricity. This can help break down internal silos, encourage risk-taking, and accelerate the adoption of new technologies. For example, a retailer struggling with legacy systems could partner with a startup specializing in cloud-based solutions to modernize its infrastructure and enable the adoption of AI and machine learning.
• Fostering the adoption of cutting-edge technologies and business models: Startups are often at the forefront of developing and deploying cutting-edge technologies and business models. Corporate venturing allows retailers to access these innovations and integrate them into their operations. This could include partnering with startups developing AI-powered personalization engines, investing in companies exploring the use of drones for delivery, or collaborating with firms specializing in blockchain-based supply chain solutions. By embracing these cutting-edge technologies and business models, retailers can enhance the customer experience, improve efficiency, and gain a competitive edge.

• Creating ecosystems of agile startups aligned with their goals: Corporate venturing enables retailers to create ecosystems of startups that are aligned with their strategic goals. This could involve investing in startups that complement their existing offerings, partnering with companies that are exploring new markets or customer segments, or collaborating with firms that are developing technologies that can enhance their core operations. By fostering these ecosystems, retailers can create a pipeline of innovation, access a diverse range of ideas and expertise, and accelerate their growth.

• De-risking experimentation by piloting innovative solutions on a smaller scale: Experimenting with new technologies and business models can be risky and expensive for large retailers. Corporate venturing allows them to de-risk this experimentation by partnering with startups to pilot innovative solutions on a smaller scale. This allows retailers to test new concepts, gather customer feedback, and validate the viability of new technologies before making significant investments. For example, a retailer could partner with a startup to pilot a new delivery service in a specific geographic area before rolling it out nationwide. This approach allows retailers to learn from their experiments, minimize potential losses, and maximize their chances of success.

• Meeting Consumer Expectations in Real-Time: Today’s consumers expect instant gratification and personalized experiences. Corporate venturing can help retailers leverage technologies like AI and machine learning to analyze customer data in real-time, predict their needs, and offer personalized recommendations and promotions. This can lead to increased customer satisfaction, loyalty, and sales. Imagine a grocery store app that suggests recipes based on your past purchases and dietary restrictions, or a clothing retailer that curates outfits based on your style profile and provides personalized styling advice through AI-powered chatbots.
• Combatting E-commerce Disruption: The rise of e-commerce giants like Amazon has disrupted the traditional retail landscape. Corporate venturing can help retailers compete by providing access to innovative technologies and business models that enhance the online shopping experience. This could include investing in startups developing augmented reality (AR) and virtual reality (VR) solutions that allow customers to “try on” clothes virtually or see how furniture would look in their homes, or partnering with logistics startups to offer faster and more convenient delivery options.
• Future-Proofing Against Market Volatility: The retail industry is susceptible to economic downturns, changing consumer preferences, and disruptive technologies. Corporate venturing can help retailers stay ahead of the curve by investing in emerging technologies and business models that can adapt to future market conditions. This could include partnering with startups developing sustainable solutions, exploring new retail formats like subscription boxes or pop-up shops, or investing in technologies that enhance supply chain resilience and efficiency.
• Cultural Transformation: Partnering with startups can help retailers foster a culture of innovation within their own organizations. By exposing their employees to new ideas and ways of working, they can encourage creativity, experimentation, and a willingness to embrace change. This cultural shift is essential for retailers to adapt and thrive in a rapidly changing market.

To truly excel in the dynamic retail landscape, corporations must proactively overcome traditional barriers that stifle innovation. This involves fostering a culture that embraces change and encourages the adoption of cutting-edge technologies and business models. By creating ecosystems of startups that align with their strategic goals, retailers can tap into external sources of innovation and expertise.

Furthermore, partnering with startups to pilot innovative solutions on a smaller scale allows corporations to de-risk experimentation and validate new concepts before full-scale implementation. This approach not only accelerates the innovation process but also provides valuable insights into emerging trends and customer preferences. By actively engaging with the startup ecosystem, retailers can stay ahead of the curve and maintain their competitive edge in an ever-evolving marketplace.

 

The Cycle of Innovation and Financial Gains

Corporate venturing can also lead to a stronger balance sheet for the corporation, which in turn can be leveraged to invest in and support the innovative products of its corporate venture-backed companies. This can be achieved through:

• Increased Revenue and Profitability: Successful corporate venturing initiatives can lead to new revenue streams and increased profitability for the corporation. This strengthens the balance sheet by increasing assets and equity.
• Improved Asset Utilization: By partnering with startups, corporations can leverage their existing assets more effectively, leading to improved asset utilization and a stronger balance sheet.
• Access to New Markets and Technologies: Corporate venturing can provide corporations with access to new markets and technologies, which can create new business opportunities and drive growth. This can lead to increased revenue and a stronger balance sheet.

With a stronger balance sheet, the corporation has greater financial flexibility to:

• Invest in Product Development and Commercialization: The corporation can provide its corporate venture-backed companies with the financial resources needed to develop and commercialize their innovative products.
• Expand Distribution and Marketing: The corporation can use its resources and expertise to help its corporate venture-backed companies expand their distribution and marketing efforts, making their products more widely available.
• Provide Strategic Support: The corporation can provide its corporate venture-backed companies with strategic support, such as access to its supply chain, customer base, and distribution channels, which can help them accelerate their growth and get their products to market faster.

By leveraging its balance sheet through corporate venturing, a corporation can increase the availability of innovative products from its corporate venture-backed companies, which can drive growth and create new business opportunities.

 

A Case for Success

We have already seen several successful examples of corporate venturing in retail. One of such started in 2018 when US-based grocery giant Kroger partnered with Ocado to form a strategic alliance where Ocado provided Kroger with its robotic warehouse technology and online grocery platform expertise. Kroger, in turn, provided its extensive market reach and customer base. This allowed Kroger to significantly enhance its online grocery fulfillment capabilities and compete more effectively in the growing online grocery market.

In 2019 Loblaws partnered with Flashfood, a Toronto-based startup, to reduce food waste. Flashfood’s app allows customers to purchase nearing-expiry items at discounted prices. This partnership not only helped Loblaw tackle sustainability challenges but also maximize the value from unsold inventory, enhancing their brand perception to the cost and environmentally conscious consumers while generating additional revenue for the retail giant.

 

Fostering an Ecosystem of Innovation

Retailers that invest in CV create ecosystems of startups aligned with their goals. Programs like Corporate Accelerators by L-SPARK Select connect corporations with startups specializing in a wide range of tech areas tackling areas from AI-driven inventory management, to supply chain optimization, and personalized consumer experiences. These ecosystems ensure that retailers remain at the forefront of innovation while having a variety of startups on their belt to help them succeed.

 

Barriers to Corporate Venturing in Retail

While corporate venturing offers significant opportunities for retail innovation, it’s not without its challenges. Several barriers can hinder retailers from effectively engaging in corporate venturing and reaping its benefits:

• Organizational Silos: In his book, Driving Growth Through Innovation, Robert Tucker points out that one of the key reasons that innovation has not become embedded as a key driver of growth and profitability in many organizations is because it has been limited by functional and divisional “silos” within companies. Many retailers struggle to align innovation goals across different departments. This lack of cross-functional communication can lead to conflicting priorities and delayed implementation. For instance, a department focused on cost reduction might resist technology investments championed by another department, hindering the adoption of innovative solutions.

 

• Risk Aversion: Retailers often hesitate to invest in unproven technologies due to financial risks and fears of disrupting established operations. For example, some companies may resist adopting blockchain technology for supply chain management, despite its potential to enhance transparency and efficiency. Developing pilot programs with limited scope, as Walmart Canada did with its blockchain freight payment system, can help mitigate these risks and demonstrate the value of new technologies.
• Legacy Systems and Infrastructure: Outdated IT infrastructure is a significant barrier to adopting new technologies like AI or IoT-enabled devices. Replacing these systems requires significant upfront investments and can be disruptive to operations. In fact, a report conducted by RSR research found 77% of surveyed retailers believe their legacy systems are preventing them from providing a consistent customer experience across channels. This goes to show a consistent need for retail innovation and advancements in technology used to bridge the gap between the physical and digital experience for retailers across the board.
• Talent Shortages: The skills required for digital transformation, such as data science, AI, and blockchain expertise, are in high demand but short supply. Collaborating with academic institutions and offering competitive incentives can help bridge this gap by tapping into prospective talent earlier in their career.

Overcoming these barriers requires a strategic approach, a commitment to innovation, and a willingness to embrace change. By addressing these challenges head-on, Canadian retailers can unlock the full potential of corporate venturing and drive retail innovation that meets the evolving needs of their customers.

 

The Road Ahead: Projections for Retail Innovation

1. AI-Powered Efficiency

Artificial intelligence (AI) is revolutionizing retail operations by enhancing decision-making and automating time-consuming tasks. Canadian retailers are leveraging AI to streamline inventory management, optimize pricing, and improve customer interactions.

• Inventory Management: AI-driven systems predict demand and minimize stockouts or overstock situations. One case is to use AI to forecast seasonal demand and adjust inventory levels in real time, ensuring better product availability and reduced waste.
• Customer Service: Chatbots and virtual assistants powered by AI are becoming standard in retail. For example, Indigo Books & Music uses an AI chatbot to assist customers with book recommendations, driving personalized experiences that boost sales.
• Fraud Detection: Retailers have started to employ AI to monitor transactions and identify fraudulent activities, ensuring both customer trust and operational security.

2. Decentralized Commerce

Decentralized commerce leverages blockchain technology to facilitate peer-to-peer transactions without intermediaries, enhancing transparency and security in the retail sector.

• Walmart Canada: To address discrepancies in its freight invoicing and payment system, Walmart Canada implemented a blockchain-based solution. This system reduced invoice disputes and streamlined payments, demonstrating blockchain’s potential to enhance supply chain efficiency.
• OpenBazaar: As an open-source, decentralized marketplace, OpenBazaar enabled users to trade goods directly using cryptocurrencies, eliminating the need for a central authority. Although it ceased operations in 2021, OpenBazaar showcased the possibilities of decentralized e-commerce platforms.

3. Hybrid Shopping Models

The integration of physical and digital shopping experiences—known as hybrid shopping—caters to evolving consumer preferences for convenience and personalization.

• IKEA Place App: IKEA’s augmented reality (AR) app allows customers to visualize how furniture would look in their homes before making a purchase, blending the online and in-store experience.
• Sephora Virtual Artist: Sephora’s app features a virtual try-on tool, enabling customers to test makeup products using AR technology, thereby enhancing the online shopping experience.
• NARS Cosmetics: NARS has been at the forefront of digital innovation, developing virtual stores, VR games, and immersive experiences on platforms like Drest and Roblox, effectively merging physical and digital retail experiences.

These hybrid models provide consumers with flexible shopping options, combining the tactile advantages of in-store shopping with the convenience of online platforms.

 

Why Now is the Time to Act

The imperative for action in retail innovation cannot be overstated. The pandemic accelerated many shifts in consumer behaviour, but these changes are here to stay. Retailers that fail to embrace innovation risk falling behind in a landscape that rewards adaptability and forward-thinking strategies.

Economic Trends

The rapid growth of e-commerce has intensified competition, compelling traditional retailers to innovate. In 2025, user penetration of the ecommerce market is expected to hit 73.5% and grow by over 10% by 2029. These trends are good indicators how how concentrated the demand and competition in this market is expected to grow by within the next couple of years, adding more pressure to retail giants to find new channels of growth and alignment alongside disruptive technologies.

Technological Advancements

The proliferation of technologies such as AI, blockchain, and AR is reshaping consumer expectations. Retailers adopting these innovations can enhance customer experiences, optimize operations, and gain a competitive edge.

By fostering partnerships with startups and participating in accelerators, corporations can also access cutting-edge technologies and new ideas without building everything in-house. This collaborative approach reduces risk while driving faster, more impactful results.

Environmental Considerations

Consumers are increasingly prioritizing sustainability, influencing purchasing decisions. Retailers implementing eco-friendly practices and innovative technologies to support sustainability goals can differentiate to attract environmentally conscious consumers and position themselves as future-forward businesses.

Consumer Expectations

Consumers are increasingly choosing brands that align with their values and prioritize convenience. A report by PwC revealed that 32% of consumers would stop buying from a company after just one bad experience, highlighting the need for seamless and satisfying interactions across all channels.

The demand for personalized and seamless shopping experiences is growing. Retailers that integrate digital and physical channels can meet these expectations, fostering customer loyalty.

Regulatory Changes

Evolving data privacy laws and environmental regulations necessitate proactive adaptation. Retailers investing in secure, transparent technologies like blockchain can ensure compliance and build consumer trust.

In summary, the convergence of these factors makes immediate corporate innovation imperative for retailers aiming to thrive in a dynamic market environment.

 

The summary?

Retail innovation and corporate venturing are no longer optional for Canadian retailers—they are essential for long-term success. The pace of change in consumer behavior, technology, and competitive pressures demands bold action today.

By understanding evolving trends, overcoming barriers to innovation, and leveraging partnerships with startups, Canadian retail giants can build resilient, future-focused strategies. Whether it’s through embracing AI for hyper-personalization, implementing sustainable practices, or collaborating with accelerators to co-develop solutions, the opportunities are immense.

Those who act now to prioritize innovation will not only meet the demands of today’s consumers but also position themselves as leaders in the retail landscape of tomorrow.

 

Want to learn more about how L-SPARK Select can help your corporation unlock growth with Corporate Venturing? Read more.