A MAD World
No, not the Tears for Fears song or the much darker (and superior) version from Gary Jules. We are talking Mergers, Acquisition & Divestitures (MAD). The retail ecosystem is amidst a massive shift which has caused retailers & consumer goods companies to galvanize their ‘north star’ and build towards that new future causing them to refocus efforts and rethink many of their previous decisions.
As you can see above the amount of total transactions for 2021 is pacing well above typical and we took a look at two expert perspectives on why that is in retail and consumer markets:
“A seller’s market is booming as companies and investors shed select assets from their portfolios and search for new growth opportunities." - Kearney
"Deals are being accelerated by the demand of high-quality assets and the increasing willingness to sell as companies assess their right to when and where to play" - PWC
Both companies were in complete alignment that the next 12+ months transactions will accelerate but differ somewhat on the rationale.
Kearney
- A seller’s market
- Divestitures will grow
- Leaders seek “defined optionality”
- Alternative transaction thrive
- M&A activity for localization
PWC
- Evolving nature of capital
- Commitment to purpose & talent
- Geopolitical and regulatory shifts
- Innovation and transformation
- Inventory & labor shortages
PWC went one step further and dove deeper into what consumer companies vs. retailers need to consider.
Consumer companies must reshape portfolios & strengthen brands
- Reshape the portfolio with high-growth brands that strengthen core market positions.
- Healthier
- Sustainable
- Socially conscious
- Dispose of non-core assets
- Reduce supply-chain complexities
- Targeted debt reduction
- Build for scale
- Achieve synergies
- Generate efficiencies
Retailers must innovate and mitigate supply-chain risks
- Build capabilities and competencies that create a differentiated customer experience
- Investments in digital tools
- Personalize the experience
- Building supply-chain resilience to offset inventory and labor shortages.
- Localized operations and vertical integration
- Robotics and automation tech
- Enhanced reverse logistic capabilities
- Explore new business models and alternative revenue streams
- Capitalizing on data and analytics investments
- Expand e-commerce and direct-to-consumer capabilities
- Partner with digitally native brands
- Rethink the role of the store
- Right-size the store footprint
"If the past crises have taught us anything, it is that a dramatic new wave of change and innovation typically follows tumultuous times like 2020." - Kearney
Final Thoughts: In 2020, due to the pandemic, many leaders understandably moved their strategy to playing defense to face the immense challenges that were thrown at them. Early 2021 was a period of reflection quickly followed by a tremendous amount of change, which continues to accelerate.
In the March 8th edition of our WeeklyWit we stated that Q1 is typically a pivot point where companies reflect on the year that was and plan for the year that is. They evaluate both “what” their strategy is as well as “who” will help them move it forward. We knew this year was going to be an exceptional year for change and a M.A.D. heavy year for organizations everywhere, and it seems clear that many organizations are also finding they don’t have the right personnel to execute. They aren’t just rethinking their strategies they are retooling who is in their boardroom, their C-Suite and the structure of their organization – which is potentially one of the most telling trends we are seeing.
Kearney summarized it best in their quote below.
"Over the coming months the 'winners' will combine a clear strategy with disciplined execution while being selectively opportunistic. Leaders will prune their portfolios, invest in both growth and optionality and leverage new deal and integration structures. The capital allocation decisions executives make now will set up their companies for years to come" - Kearney.
For those of you keeping score at home, RetailDive keeps a running list of the transactions in retail.
Didn’t get enough? here are some articles to dig into.
And here are the top retail news stories from last week:
Instacart announced their next-gen automated fulfillment initiative, they will partner with Fabric Software and Robotics to bring this technology to both existing retailers and dedicated warehouses. This is yet another example of Instacart working hard to stay ahead in the fulfillment and delivery game, with the hopes that some retailers choose to let Instacart own this part of the process so they don’t have to figure it out themselves.
In what is likely to be a fantastic partnership, the Ulta “store within a store” concept is set to open inside 100 Target stores (and on Target.com) next month with the long range plan of hitting 800+ stores in the next few years. This is super smart for both retailers, giving Target another premium offering and helping Ulta have more coverage and accessibility.
Uber expands their partnerships by joining forces with both Albertsons and Costco. The Albertsons relationship will cover 1,200 stores, and will double Uber’s coverage by offering delivery within 400 cities in the US. The Costco partnership will offer delivery from 25 stores in Texas. Don’t count Uber out of the grocery delivery game, this gives them huge coverage and some very strong retail partners.
As announced with the monthly release of retail sales… Retail sales were up 0.6% from the previous month, and saw a 15.6% increase compared to June 2020. eComm made up 16% of all sales in the month of June and was up 11.9% from June 2020 as well, suggesting that the 2020 growth wasn’t the digital bubble many said it was.
Other stories that caught our attention.
Here is a super simple and smart innovation that could lead to big things. A “Borrow Button”. Rebecca Minkoff (the high-end clothing retailer) Offers a Borrow Button that allows customers to rent without a subscription. The service is enabled through technology from CaaStle. Recommerce is a very hot trend that isn’t slowing down anytime soon.
Feeding America launches online grocery ordering system. Hunger relief organization Feeding America announced on Tuesday the launch of its online grocery ordering system. The OrderAhead system allows people facing food insecurity to place orders for pickup and, in some places, home delivery from Feeding America’s food banks and partners. Feeding America plans to roll out the system, which it started piloting a few years ago, to more food banks in the months ahead.
No Comments
Leave a comment Cancel