PARIS — Merger and acquisition activity in the retail sector will likely be driven by demand for personalization and “brand affinity” this year, with technology playing a central role, according to a report from Baker McKenzie.
“To remain competitive, retailers need to get a better grasp on what makes shoppers tick,” said Alyssa Auberger, who chairs Baker McKenzie’s consumer goods and retail industry group. The law firm Monday issued its “Consumer Goods and Retail” supplement to the December report “Global Transactions Forecast 2019,” which projects a slight decrease in the value of M&A transactions this year, following a 25 percent rise in 2018.
“The increased consumer desire for personalization — whether around a product or an experience — is one aspect brands need to be sensitive to, as is the desire to share values with a brand — to trust a product and feel a connection, and those are both likely to be drivers in M&A in the sector,” she added.
Technology is central to meeting this demand, allowing for customization of products or serving to build a made-to-measure shopping experience, with data as a tool to help salespeople know what color a client prefers, for example, noted Auberger. Technology also plays a role in tracing the origins of products, meeting another increasingly important consumer demand.
Online commerce is set to growth in the coming year, boosted by accelerating wage growth in advanced economies, according to the law firm.
“Rising e-commerce IPO valuations have been a key trend within the [consumer goods and retail] sector with significant amounts of capital raised in 2018, as companies seek funds to drive expansion into new markets, develop new tech platforms, and roll out new products and services,” noted Adam Farlow, capital markets partner at the firm.
Traditional retailers in emerging markets will push further into e-commerce, including adding mobile payments, he predicted.
The firm predicts an increase in IPOs from $19 billion last year to $21 billion in 2019, with a backlog of IPO candidates in the pipeline. Despite geopolitical uncertainty, IPO momentum is increasing, driven by the Americas and Asia, according to the law firm.