How consumer and retail incumbents are using transactions to stay competitive
Consumer and retail businesses are feeling the impact of disruptive forces as keenly as companies in any sector. Markets and processes are being digitized, competitors are exploiting data that provide unparalleled insight into consumer behavior, old sources of competitive advantage are becoming sources of disadvantage.
Large incumbents are turning increasingly to three strategies, in particular, to stay competitive: strategic partnerships and alliances, strategic M&A, and venture investing. Through such alliances they’re finding the expertise they need in data and analytics to gain customer attention and build loyalty, the well-springs of creative ingenuity to launch breakthrough products and services, and access to online sales platforms to connect with more customers.
A brand new KPMG report, Consumer & Retail: beating disruption through partnerships, M&A and investments [report name to be finalized] looks at how these three strategic transactions are being used to accelerate innovation and position retail and consumer companies for the new competitive landscape. In each case we examine the pitfalls and challenges, as well as opportunities and best practices for realizing strategic and financial value.
The growing appetite for M&A
In a recent KPMG survey, global CEOs said that they expect the No. 1 source of growth for their companies in the next three years will be strategic partnerships, followed by organic growth, M&A, and joint ventures. While only 16 percent cite M&A as their most important growth strategy, more than a quarter (27 percent) of CEOs indicate a high M&A appetite over the next three years.
Walmart’s transactions in recent years show what’s possible in the face of digital disruption. The traditionally bricks-and-mortar giant’s game-changing acquisition of Jet in 2016, in combination with other strategic acquisitions in 2018, have propelled the company’s digital and e-commerce capabilities. Walmart is now number three among America’s biggest online retailers.
To succeed and drive value, companies pursuing these strategies must, of course, be able to count sourcing, pricing, executing, and managing deals among their core competencies. Deals capabilities can have as much impact on performance as traditional industry expertise, such as merchandising or package design.
In the report, KPMG discusses the challenges, opportunities, and keys to success associated with each of the three deal categories presented. Each strategy has its pros and cons, but all three give traditional organizations the ability to experiment and test innovative concepts and technologies before they make long-term or significant financial commitments.
An ongoing quest for talent, knowledge and skills
New technologies and business models and shifting consumer demands will continue to shape consumer and retail businesses. The speed of change will largely be driven by nimble young players based on unconventional thinking, swift innovation, and the skill and determination to exploit new marketing and sales channels.
Large incumbents are recognizing that to stay competitive they must access talent, knowledge, and skills at the leading edge. And the surest, fastest way to do this is through M&A, investments, and strategic partnerships.
Find out more
The consumer and retail companies that learn how to find the right deals and partnerships and manage them effectively will be the winners, even as they continue to leverage the power of their scale, supply chains, distribution networks and customer bases. To explore some real-life examples and find out more, read To beat disruption, use partnerships, M&A and investments.