Fifth Wall closes $100M fund to help online retailers open physical stores

fifth wall retail

Real estate focused venture capital firm Fifth Wall announced this week that it closed its $100 million Retail Fund. The fund, backed by retail real estate owners and service providers like Acadia Realty Trust and Cushman & Wakefield, will invest in brands and retail concepts to help them accelerate brick-and-mortar expansion. Retailers that the Retail Fund invests in will partner with Fifth Wall’s strategic consortium that comprises more than 50 corporate strategic investors from 11 countries.

E-commerce has increased from 4 percent to 11 percent of retail sales in the United States over the last decade, thousands of direct-to-consumer brands have started online and it’s never been easier to start a brand digitally. However, it’s become harder to scale and make a brand standout without having a physical store, too.

“What these brands are realizing is that it is so hard to grow online,” Brendan Wallace, Fifth Wall co-founder and a managing partner told The Wall Street Journal. “Competition is intensifying and Amazon is the company that destroys brand differentiation rather than augments it.”

More digital retailers are opening brick and mortar stores

Eyeglasses manufacturer Warby Parker was one of the first retailers that started the exclusively online to brick and mortar store trend. Since then, thousands of originally digital only brands have realized that it’s difficult to develop brand awareness, deliver engaging customer experiences and achieve profitable operations through e-commerce alone. Over the last 10 years, more than 1,800 digital retailers in the U.S. have opened a physical store.

“We started online, but always knew we would have a physical presence to better serve our customers,” Aaron Sanandres, Co-Founder & Chief Executive Officer, UNTUCKit said in a statement. “When Fifth Wall backed UNTUCKit, we had 15 stores and the goal of growing that by another 100 in five years. In part through the help of Fifth Wall’s real estate network in the US and abroad, we’re already well ahead of those ambitious plans.”

Retail Fund will help online brands through physical expansion process

Fifth Wall will also use its real estate expertise to help new brands and retail brands navigate the complexities of offline expansion as part of the Retail Fund’s investment mandate. Additonally, the fund will aim to help retail real estate owners build relationships with brands at an earlier stage.

“New e-commerce brands know the importance of being wherever their customers want them to be at all times – they simply cannot reach their full potential if they remain solely online,” Fifth Wall Partner Kevin Campos said in a statement. “However, digitally native brands often aren’t familiar with the challenges of retail real estate expansion and we’ve observed that many traditional VCs lack the experience to be able to meaningfully engage on issues like site selection, store design, merchandising, and staffing. Fifth Wall aims to support brands on these very issues. We’ve assembled a consortium that includes many of the largest retail real estate owners, and we believe they’ve invested in the Retail Fund because they want to see these new brands earlier and help them succeed with thriving stores.”

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