Key takeaways from our report:
- The Western European e-commerce market is forecast to expand at a CAGR2017-2022 of 10%.
However, there are some major threats:
- Scaled marketplaces (eg. Amazon) are becoming a primary source for supply & product search;
- Increased competition from leading brands and online players with greater financial resources and operational excellence in logistics, payments, innovation, etc;
- Rising customer acquisition costs (vs. decreasing customer lifetime value) are eating into margins of independent online shops.
Valuations are high in the listed space (the Top 30 players had an average sales multiple of ~1.9x at the end of 2017), which is supporting high transaction multiples in the European mid-market.
Digitalization of brick & mortar retail has become an important M&A driver: traditional retailers are increasingly acquiring e-commerce businesses to develop digital competencies that can be rapidly bolted on to existing operations.
- We saw this when SIGNA Retail acquired outfitter.com in 2016/17 to improve Karstadt Sports’ online presence. [Note: Capitalmind Investec’s e-commerce lead in Germany Jürgen Schwarz advised on this landmark transaction.]
"The e-commerce market is being disrupted after a period of relatively easy growth between 2010 and 2015, as increasingly dominant market players and rising customer acquisition costs reduce margins and win market share from independent e-commerce shops. It's imperative that these businesses reach customer more directly, and M&A is often an effective way forward."