Consumer Sector Comment – April 2016

Dato

It cannot be overstated how much the internet has impacted the consumer world of retailing. It has changed the way we shop: regardless of whether we actually buy online, many of us use an online search to check out prices and offerings before heading to the store. However, it was only just over two decades ago that most of the population were unaware of the existence of the internet as a place to shop, and many current sites that we use on a daily basis didn’t even exist. To put this into perspective, it wasn’t until 1995 that Amazon launched as an online book seller and not until 1996 that Google opened its doors.

Since then, online shopping has evolved dramatically with consumers now using online platforms for shopping, price comparisons, booking restaurants and holidays, and ordering takeaways (Domino’s Pizza recently revealed that e-commerce sales now account for 77% of all of their UK deliveries).

The UK e-commerce market is still experiencing strong M&A activity. Deals this year alone include:

  • The purchase of Lifealike, the operator of onefinestay, a website dedicated to hotel bookings, by listed French hotel group Accor;
  • The acquisition of Bookatable, the online restaurant reservation service company, by French tyre manufacturer Michelin;
  • The purchase of PriceRunner, a price comparison website, by Sweden-based investment company NS Intressenter;
  • The acquisition of Skyscanner, a search engine providing price comparisons for various flights, hotels and car hire, by a consortium of investors; and
  • The purchase of Travel Chapter, an online marketing platform for holiday lettings in the UK, by Phoenix Equity Partners.

The majority of retailers not only have internet sites but also have apps which have become somewhat of a necessity in recent years. Roughly 2.6 billion people now own a smartphone (which is arguably the reason behind the online shopping revolution) and retailers are using apps as a way of gaining access to a permanent spot on a consumer’s phone.

Many different types of retailers have embraced this world as a way of interacting with their customers. Waitrose is currently trialling its ‘scan as you shop’ Quick Check app which is designed to allow myWaitrose customers to scan product barcodes on their smartphones as they place goods in baskets. 72% of smartphone owners now use their phones while shopping in stores in relation to a purchase.

Some retailers have not only embraced the world of e-commerce and apps but are also using in-store technology. Last month, shoe retailer Clarks signed a three year deal to deploy in-store tablets and Wi-Fi across its 566 retail and franchise stores in order to engage better with customers. Fashion retailer Ted Baker has gone one step further with the introduction of beacon technology in the mannequins at its Westfield White City shop in London, which sends details such as clothes’ prices and in-store locations to any customers with their app. Also since last year, furniture retailer Heal’s has been presenting its shoppers with tablet devices, giving customers an opportunity to find out more information about the products as they browse.

The problems of not embracing the continually evolving shopping revolution can be detrimental for business.

Selected UK consumer deals

US private equity giant Lone Star Funds, the firm behind the SSE Arena at Wembley, acquired travel company Shearings, which offers coach, air, rail, cruise and hotel breaks to more than 170 destinations in the UK and overseas. Subsequently, Shearings completed the acquisition of coach tour operator Equalmatch, which operates the Travelstyle and UK Breakaways brands.

Listed South Africa-based fashion retailer Foschini acquired British fashion chain Whistles, adding 46 stores and an e-commerce platform to its estate. The acquisition followed the purchase of fellow UK fashion chain Phase Eight in 2015.

Private equity firm ECI Partners acquired a majority stake in pet food manufacturer MPM Products. MPM exports to over 30 countries worldwide including the US, Europe and Asia.

Mid-market private equity firm LDC exited its investment in beauty products business Original Additions, the company behind popular eyelash brand Eylure. The company was brought by PDC Brands, the US market leader in the beauty, personal care and wellness space, backed by private equity firm Yellow Wood Partners.

Following on from this, it was announced that LDC had supported the management buyout of cycling accessories, components, and clothing distributor Zyro. The deal also saw LDC back Zyro’s acquisition of Fisher Outdoor Leisure to form Zyro-Fisher.

Pet retail chain Pets Corner purchased competitor PamPurred Pets in a move to build the UK’s second biggest pet chain, after Pets at Home. The transaction adds another 51 stores to Pets Corner’s existing UK portfolio of 110 shops.

Verdant Leisure, an operator of four holiday parks in South Scotland and Northumberland, was acquired in a secondary buyout backed by Palatine Private Equity. The deal provided an exit for RJD Partners which backed the original buyout in 2010.

Also in the holiday market, luxury holiday park operator Park Leisure continued to expand with the purchase of North Wales-based Brynteg Holiday Home Park, in an €14.7m deal. The five star park, which has around 300 homes, is the second North Wales-based purchase that Park Leisure has completed in the last 12 months, following the acquisition of fellow five star holiday park Plas Coch.