M&A Insights – Consumers – More demanding and lazy than ever?

September 1, 2017

In the world of the average 2017 consumer, convenience and immediacy is everything. Almost all facets of the consumer world have evolved or been overrun by companies that offer products in the fastest and easiest manner. The idea that one could live completely satisfactorily without leaving the house is today a reality, and companies continue to evolve to the ever-demanding consumers wants and needs.

Let’s consider a few companies that are disrupting traditional consumer sectors with their strive to continuously satisfy the modern day consumer. In the food world, an obvious go to is ‘Deliveroo’- a word that never featured in our vocabulary prior to 2013 but has redefined the term ‘takeaway’. Via app or computer, you can order from favourite restaurants at the click of a button and await your delivery. Despite some unfavourable press, private equity firms continue to back the break out company – most recently Bridgepoint hedge fund led a $275mn funding round for Deliveroo this time last year.

Now what to watch with your takeaway? Netflix has you covered there. Gone are the days of a family outing to Blockbuster on a Saturday evening to pick out the latest DVD release. In a study led by Deloitte, it was found that 56% of those surveyed now stream movies and 53% stream TV shows monthly, as compared with 45% of those who prefer to watch TV programs live. In the last 52 weeks, the stock has gained over 70%, and in Q2 of 2017 alone Netflix added 5.2 million subscribers.

For general items, it’s hard to see past the seemingly omnipotent Amazon. You can get almost anything you desire – next day, free delivery, a multitude of products packaged into one box, any which way you like it. Amazon’s market cap topped $500bn in July 2017 and the shares have increased nearly 400% in the last 5 years. In the previous month, the company announced a bid to acquire Whole Foods at a 27% premium – Amazon has long flirted with the grocery industry since it launched food delivery service Amazon Fresh in Seattle in 2007 but with this deal it instantly becomes a significant player in the space, and the announcement of the possible merger sent traditional supermarket share prices on a steady descent. Meanwhile, in August this year, Walmart and Google announced a partnership to offer US consumers voice activated shopping via the google assistant platform on phones and home devices adding another front to Walmart’s battle with Amazon and it’s ‘Alexa’.

One feature that permeates the above examples is the increasing integration of technology into the consumer world. Eloquently put in a recent report by Deloitte, ‘today’s buyer is savvy, informed, equipped with the latest technology and has higher expectations than ever before.’ Optimising the consumer experience via engaging websites and providing convenience via apps is almost a necessity to survive the increasingly technologically minded generations. A report by McKinsey considers that 15 years ago only 12% of people owned a mobile phone, whereas now more than 60% do and by 2030 this is expected to increase to 3 in 4 people. Further to this, in 2000 Kmart was the 3rd largest US retailer, but by 2014 its annual revenue had decreased by two thirds and the Chinese e-commerce giant, Alibaba, filed the largest ever IPO, valued at $25bn. Although making advances in technology is a task equivalent to ‘keeping up with the Joneses’ its disruptive effect is already apparent and will inevitably prove pivotal to consumer companies continuing to be competitive with peers.

To conclude, the consumer industry faces a multitude of high impact trends in the future alongside continued industry consolidation. While the headlines tend to be dominated by larger companies like those mentioned above, in an environment of heightened competition, there is rife opportunity for smaller, innovative and more flexible businesses to challenge the traditional players by offering a more optimal experience and product for the rapidly evolving consumer.

 

Beth Cosgrove, Senior Analyst at Bluebox

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