Retail M&A Surge Redefining the Game?

jigsaw-puzzle-hands.jpgA sigh of relief for retailers who welcomed the new year accompanies a sense of apprehension as brands survey the unsettling waters of the retail landscape for 2018. 

What can be done differently? How can we be better? 

These pressing questions, I’m almost certain, crossed most retailer’s minds.  In a space where competition is fierce, technology is constantly evolving, and the consumer—driving the most change—is unpredictable, retailers failing to adapt will reap the consequences.

We witnessed this reluctance (or inability) to change plenty of times throughout the past year, with more than 8,000 store closures announced and countless bankruptcies. On the other hand, we’ve also seen many businesses thinking outside the box and bending the rules, in an attempt to change the retail game completely.

Now we’re getting somewhere.

Retail M&A Strategy 

While strategies for thinking “outside the box” over the past year varied, one notable tactic was the astonishing number of retail merger and acquisitions announced. Drawn from a review of retail with Deborah Weinswig, Managing Director of Fung Global Retail and Technology, M&A’s throughout 2017 significantly surged. 

Even unofficial chatter around M&A activity seemed to be a frequent topic of discussion, including vague announcements about potential transactions from Nordstrom in June and Deckers Brands in April.

That aside, the list of retail M&A activity over the past year was lonnnnng.

This approach is an unmistakable sign of businesses rethinking their place in this new retail environment. Retailers are beginning to envision a very different future than before.

M&A Provides New Consumer Solutions?

A fascinating article from the Robin Report sparked a thought-provoking interpretation of how we traditionally view the retail and consumer goods industry approaches to M&A’s.

The gist of it is that future M&A’s will introduce new markets and solutions for consumers:

“Future generations will see 2017 as the milestone that marked a new era when M&A evolved from the consolidation of markets—aimed at quickly building scale, cutting costs, or buying time for troubled companies—to the creation of new consumer solutions or ‘neumarkets.’”The Robin Report

Do any monumental retail acquisitions ring a bell?  (*cough cough* Amazon-Whole Foods *cough cough*)

This idea of a “neumarket” redefines the expected between two potentially complementary companies. It’s creating consumer value where it didn’t exist before. The biggest acquisition of the year between Amazon and Whole Foods is the perfect example, which irrevocably shifted the retail landscape:

“At the time, the move was seen in the fairly conventional terms of Amazon moving into the food arena or, depending on the analyst, scaled physical retailing. In retrospect, however, it foreshadowed a fundamental shift to a neumarket wherein a digital consultative personal food shopping service preplans your meals, physically shops for you, adds in health and wellness-inspired nonfood and general merchandise items per pre-set parameters and arranges for everything to be staged for pickup at the supermarket of your choice—all through a centralized billing and fulfillment service.”The Robin Report

Maybe CVS Health’s acquisition of Aetna could be the next example?

Obviously, the challenges burdening many retail companies from a competitive and technological standpoint is unprecedented. The only way to overcome them is to think outside the box. 

“Being innovative in the present is a prerequisite to being competitive in the future. Our customers aren’t going to settle for business-as-usual offers or thinking. […] At its heart, the idea of a neumarket rests on the assumption that no market offering should stagnate over time. All consumer-facing industries need to be centered on creating new forms of incremental—and, where possible, even exponential—consumer value.” The Robin Report

Retailers need to get creative and redefine the game being played. 

The Future of M&A

While this completely warranted surge in M&A activity was a dominant theme for 2017, it’s also expected to continue into 2018.

Aside from this idea of “neumarkets,” there’s also a lot of collaboration happening in terms of partnerships between innovative startups with solutions to some of retail’s most pressing issues. 

Deborah Weinswig sheds some light on this reasoning behind some recent M&As: 

“There’s a long list of things happening in retail, including M&A activity, and I think it’s all positive […] We’re in a new world and there are many interesting startups and smaller companies who are doing some very interesting things as they are able to power larger, more established companies. If there can be partnership and collaboration, whether it’s formal or informal, […] I think that it is significantly positive in terms of driving the top-line, and bottom-line as well. “ Deborah Weinswig, 2017 in Review: The Retail Turning Point

From predictive analytics for optimizing inventory to AR/VR for enhanced shopping experiences, various solutions exist for companies to get innovative and really push the boundaries of traditional retail. 

Enabling these types of solutions to deliver more value to the consumer (which may require collaboration) is key to a successful future for most retailers.

It’s all about pushing beyond the rules to redefine the retail game.

WATCH THE REPLAY - 2017 in Review: The Retail Turning Point Featuring Deborah Weinswig from Fung Global Retail & Tech 

Topics: brick-and-mortar retail, retail spending, retail mergers and acquisitions, retail analytics

Ready for more?

Request a Demo