The retail and consumer industry includes all retail businesses that directly sell to consumers viz. groceries and food services, consumer electronics, novelty and specialty items, office supplies, tools, hardware, sporting goods, fashion and clothing related merchandise and other consumer staples and discretionary goods not elsewhere classified.
The industry has a wide range of suppliers including farms, agri-businesses, confectionaries, bakeries, textile mills, chemical manufacturers, etc. The industry is currently in its mature stage and is lightly regulated.
The industry is highly fragmented with several small players. Product differentiation is a key success factor in this industry. The industry is characterized by competitive pricing and retailers must constantly adapt to changing socio-cultural attitudes and consumer preferences in order to stay relevant.
Industry players are driven by factors effecting aggregate spending and consumer sentiment within the economy. More specifically, the consumer and retail industry depends on consumer discretionary spending, consumer confidence and the price of the Canadian Dollar.
Disposable Income – Disposable Income Per capita disposable income represents the surplus income available to consumers after essential expenses. As many industries supply non-essential items, increases to disposable income will result in increased spending on industry output. Changes to personal disposable income are positively correlated with increases in demand for this industry.
Consumer Confidence – Consumer confidence is an indicator of the future spending and saving patterns of individuals within the economy. When consumer confidence is higher, consumer spending typically rises, as individuals have more confidence to spend on non-discretionary items. Higher trade would naturally lead to increased profits for industry players.
Strength of the Canadian Dollar – If the Canadian dollar depreciates in value, industry outputs become more competitive on the global markets. Consequently, if the Canadian dollar appreciates, domestic goods become more expensive in foreign economies. As a result, the strength of the Canadian dollar is negatively correlated with demand for industry outputs.
Recent Consumer Brand and Retail Advisory Mandates
Selling a Consumer, Brand and Retail Company
The consumer & retail industry has seen strong growth over the last decade, supported by a global e-commerce boom and developments in online business. The pandemic further accelerated a shift to online business, acting as a catalyst for Consumer, Brand and Retail companies. Retail businesses are important to the economy due to their ability to connect manufacturers to a wide market. As Canada’s leading private market M&A Advisory firm Beacon understands that selling a business is an important decision. A dedicated business owner not only seeks to extract maximum value from the sale of a business but also seeks to sell the business to a competent buyer who can continue the company’s legacy. Beacon has worked on over 100 valuation and M&A advisory mandates in the consumer, brand and retail industry, bringing extensive experience in deal negotiation to the table. Our experienced advisory team will assist your business in navigating the entire sell-side M&A process.
As an entrepreneur or business owner who is exploring a potential sale, it is important to understand some key factors specific to the manufacturing sector that might impact the likelihood of a potential sale. These are factors that determine business attractiveness for potential buyers and investors.
Exclusive Contracts – For a consumer products retailer, having exclusive contracts with key distributors and brands is valuable. Having exclusive territory and contracts not only creates an economic moat and a barrier to entry against competitors, but also allows a company to exploit higher margins. Contracts and agreements also increase certainty of future sales and reduce dependence on owner’s existing relationships with key suppliers.
Product Portfolio – For a consumer brands retailer, depending on the nature of the product and market, it might be suitable for the company to carry a wide range of products as a strategy to reach a wider target audience. While this strategy might work for retailers carrying products characterized by low product differentiation and high price competition, retailers selling a niche product might be better served by keeping a limited product portfolio of premium brands and investing in customer experience and engagement. A retail business must have a good understanding of its target market and everchanging consumer trends and must tailor its strategy to create the best product-market fit.
Location & Facility – For a retail operation, the location and aesthetic of a physical store plays a major role in attracting customers and generating sales. Retail stores with attention grabbing store designs and layouts often use it as a marketing tool to generate brand awareness on social media and other marketing channels. In addition, having a store in a high traffic area with high visibility can warrant a premium. Generally, a desirable location is characterized by a commensurate occupancy cost which can impact margins. Business owners must consider the trade off between location and rent related overhead to maximize profitability. In recent years, a boom in online retail and e-commerce has led to a sharp increase in online retail models which are leaner and highly scalable. Companies with online sales platforms and e-commerce channels trade at a premium relative to brick-and-mortar stores due to their higher profitability and ability to reach a broader market.
Marketing & Brand Awareness – Effective marketing strategies can help consumer retail businesses reach a wide target audience. Casting a wide net is key in attracting and retaining customers and growing a retail business organically. Many retail businesses use aggressive marketing and advertising campaigns to engage with their target customers and keep them engaged. Marketing strategies include promotions, newsletters and other forms of media campaigns. Companies have increasingly been adopting experiential marketing as a form of engaging customers. These campaigns include pop-ups and interactive exhibits that attract customers and increase brand awareness and brand recall. A company that has successfully built a strong social media following and a loyal customer base through successful marketing campaigns is more desirable in the eye of an investor.
With 40 years of combined experience serving businesses within Toronto, Ontario, and abroad, the Beacon transaction team has extensive knowledge and experience successfully working for several consumer, brand and retail companies from a variety of industry verticals. Whether it be a valuation or sale, our team can provide expertise and resources found only at larger corporations, paired with the personalized touch of our M&A Advisory team. Contact us today to get in touch with one of our advisors.