The digital transformation wave is coming for every industry, even retail. Consumer goods companies are “not at the forefront of disruption but in the transformation phase right now—exploring a new business model, delivery model, software application, driving convenience and access to consumers,” says EY-Parthenon principal Laura McGarrity.
It’s a frontier the industry needs to embrace. Comvest Partners’ senior partner Tom Clark and partner Kevin LaHatte pointed to potential upside from building e-commerce operations for brick-and-mortar companies with strong market positions when they spoke to Mergers & Acquisitions last week. Direct to consumer e-commerce is a particular focus given the opportunity presented by implementing digital sales reporting, ordering, fulfilment and customer experience interfaces.
That makes consumer and retail outliers in digital transformation deals. Companies that used to splurge on building out platforms are turning to investments in running them. Not so in retail, where more companies can still realize cost synergies from digitizing operations.
The sector could still loom as an attractive one for private equity seeking bolt-on technology deals as low-hanging fruit. Especially as PE and corporates alike seek new ways to measure returns on digital investment.
Nearly double the 23 percent of executives polled by a recent EY survey in 2020 now say they are measuring yields on digital investment. And the focus on results shows, well, results of its own. Those companies measuring digital investment returns report yields averaging 3.2 percent higher in 2022 than in 2020.