Retail

Updated 22/06/2021

How Private Equity Is Driving Change in Retail

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Retail

Consumers have always demanded innovation from the retail industry. Shopping habits and product demands are constantly evolving, and retailers invest a significant amount of capital to monitor trends and cater to fluctuating behaviors. Recently, advancing technology has quickened the pace of change and made it even harder to win consumer attention in an increasingly crowded marketplace. More than ever, success requires financial and managerial flexibility and adaptiveness—areas where private equity can play a vital role.

Below, read my thoughts on three key areas where our industry is partnering with retailers to help them keep ahead in the fast-changing sector.


Data-Driven Content

Successful brands make smart use of consumer data to inform product decisions and better address changes in taste. Pairing traffic and ticket volume data with advanced analytics is a proven and powerful way to understand consumer behavior and create effective product and experience strategies. In addition, progressive content strategies are increasingly important as consumers lean towards companies that are customer-centric and look for products that they connect with. Data informs retailers’ ability to stay at the forefront of trends and make intelligent forecasts rather than reactive decisions. Private equity provides capital and guidance to retailers to enable them to harness these data-driven strategies. At Eurazeo, we take it a step further by investing in companies that generate these insights. Our Eurazeo Growth investment in Content Square, a user experience analytics and optimization platform for leading brands that wish to understand how customers interact with their products, brings to life our belief in the power of well-harnessed data.

Evolving Distribution

Sophisticated e-commerce capabilities and competition for more efficient delivery logistics are driving a revolution in how retailers operate. The industry is increasingly targeting sales to millennials while deploying "customer-centric" models, resulting in greater digital commerce, both online and via social media. AI is fast becoming a force, used in everything from e-commerce image searches to language processing in chatbots and data analytics in order to reach consumers across every available channel. According to Marketing Dive, retail will soon overtake banking as the biggest investor in AI. The power of AI will allow retailers to create more personalized customer experiences, increase business insights, and enable automation, all resulting in a stronger and more evolved retail market. We are already seeing this with the emergence of more digitally native brands in partnership with concept stores, as more retailers are using physical space to experiment with technology, location size, or customer services. Eurazeo Brands’ portfolio company Bandier has used this strategy to create a thriving e-commerce business, supported by concept spaces that allow consumers to interact with the brand on a personal level before making purchasing decisions.

Building a Community

Why is retail becoming more customer-centric and why is that important? A big part of the shift is due to younger generations’ demand for transparency. Millennial and Gen Z consumers will continue to seek out socially and environmentally responsible practices and transparency in the brands they support. Even beyond younger generations, consumers of all ages are demanding authenticity from brands at every step of the supply-chain process, from sourcing to sales. They expect direct communication and connection with brands, and companies need to use every channel to give them the access that they seek, as well as to articulate their corporate mission and core values through transparent dialogue. A good example of this is Vestiaire Collective, a Eurazeo Croissance investment and community platform on which users can buy and sell pre-owned luxury fashion and accessories. At the center of its strategy and mission is the concept of a like-minded community within which members interact and engage with one another throughout the purchasing process, and which utilizes word-of-mouth to spread the word of its mission and purpose in the fashion world.

The rapidly evolving retail industry requires significant investment in order to stay at the forefront of data analytics, AI-based logistics and distribution channels, and community building. Private equity firms have tremendous amount of capital to deploy, putting private equity in a strong position to partner with retailers to adapt and continue to drive change in the industry. Our investment division Eurazeo Brands is focused on being the partner of choice for brands – using capital and expertise to help brands grow into thriving businesses.

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