Tech startups can help optimize retailers' in-store operations and customer experiences, enabling them to keep up with competition from e-commerce companies. This category includes hardware and software such as sensors that track foot traffic, interactive tablets that boost customer engagement, and mobile point-of-sale applications.

Why it's hot: Retailers are preparing to capitalize on the continued growth of mobile shopping and the decline of major chains like Sears, the Limited, and Macy's. Target is testing inventory-taking robots and has partnered with Techstars to support in-store tech startups.

What's required: While technical capabilities are a prerequisite for most industries these days, this is one where experience in the retail business may serve an entrepreneur more. Of course, if you don't know how to develop technical solutions, partnering with someone who does will be necessary to bring your product to market.

Barriers to entry: Offerings in this category tend to collect large amounts of data or employ augmented reality, so expertise in these areas is a must. Entrepreneurs should also have a thorough knowledge of the retail industry to spot opportunities.

The downside: Retailers are still experimenting with in-store technology, so startups need to avoid developing products that won't have value for retailers and keep their customers engaged for the long term.

Competition: Notable startups include Palo Alto-based virtual reality company Jaunt, which partnered with North Face to give customers a virtual tour of Yosemite National Park, and London-based Iconeme, which developed a beacon technology that pushes information about sales and products from in-store mannequins to nearby shoppers' smartphones.

Growth: Funding for in-store technologies has been steadily rising since 2012, when startups raised $221 million globally across 84 deals, according to CB Insights. In 2016, the industry saw a record total of $768 million across 159 deals.

Look inside the Brick-and-Mortar Retail Technology industry


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