Retail Tech M&A, Part 1: The Internet of Things changes everything


Technology continues to play an essential role in enabling retailers to meet the exacting demands of consumers and to predict their future behavior. While many companies in the sector deploy extensive R&D operations to stay on the cutting edge, they are also forging acquisitions of tech providers, a strategy that often provides the fastest and best path.

Mergers & Acquisitions takes an in-depth look at 7 technologies retailers are investing in through M&A: The Internet of Things enables enhanced personalization, such as custom drive-thru menus. Artificial intelligence applications predict customers’ needs. Modern data centers and warehouses fill orders quickly. Robots assist with sorting and packing consumer goods. Voice- and text-assisted technology provides customers with hands-free shopping experiences. Analytics give retailers a better understanding of consumer behavior and habits. Mobile payment processing provides consumers with on-the-go convenience.

Check back every Friday afternoon from now until late December, for a new installment of our series. Here's our look at IoT.

Internet of Things
IoT is defined as Internet connectivity and communication across devices. For example, Apple (Nasdaq: AAPL) introduced iBeacon in 2013 — a feature that transmits information to wireless devices via Bluetooth technology — and retailers including Target Corp. (NYSE: TGT), Starbucks Corp. (Nasdaq: SBUX) and Walmart Inc. (NYSE: WMT) use beacons to improve in-store experiences.

Nike (NYSE: NKE) is making acquisitions to enhance its customer experiences. Nike bought Zodiac and Invertex Ltd., a pair of innovative digital startups helping the athletic apparel maker get closer to customers. Invertex is a Tel Aviv, Israel-based pioneer in the use of 3D-scanning technology to customize shoes. Founded in 2014 under the name Platform Orthopedic Solutions, Invertex originally used 3D scanning to create customized medical equipment, such as orthotics and braces. The startup evolved to make products for retailers, including an in-store mat that shoppers stand on so they can be precisely measured to help them choose shoes that fit.

McDonald’s Corp. (NYSE: MCD), the world’s largest restaurant chain, is gobbling up digital startups to improve customer experiences by capitalizing on Internet of Things innovations. McDonald's USA president Chris Kempczinski was named CEO after Steve Easterbrook was "separated from the company following the board's determination that he violated company policy and demonstrated poor judgment involving a recent consensual relationship with an employee," according to a company press release. Kempczinski says he is committed to the company's digital strategy.

Technology is a critical element of McDonald's “velocity growth plan,” its strategy of growing to improve service and increase sales. McDonald's is facing slow sales growth, as its competitors adapt online ordering and delivery, and Uber Technologies Inc. (NYSE: UBER) is accelerating its push into food delivery.

McDonald's is buying personalization company Dynamic Yield for a reported $300 million in its largest deal in more than 20 years. McDonald’s will customize drive-thru menus with Dynamic Yield’s technology based on time of day, weather, current restaurant traffic and what the customer has already ordered. McDonald’s will roll out the software in the U.S. and then expand it internationally. The company will also integrate Dynamic Yield in self-order kiosks, the McDonald’s app and other mobile devices.

“Differentiation is always important, and more so now than ever before,” says Steven Agran, managing director of Carl Marks Advisors, a merchant bank. “When a person can order the same or similar product from Amazon, what is going to entice that person to shop in a store?”

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