Commerce Spending & Trends - Will We Rebound in 2023?
Panther Equity Insights -- a private equity newsletter covering all things IT & Telecom, Tech & Business Services, eCommerce and Markets.
Welcome back to another edition of Panther Equity Insights! If you're new here, we're thrilled to have you on board. We offer industry insights and thought leadership on IT & Telecom Services, Tech & Business Services, and eCommerce.
In this week’s edition, we’ll dive into the following:
Commerce trends and challenges for 2023
Growth trends for the IT services sector
Industry commentary from fellow investors and operators
If you find the content valuable, feel free to share it with your network!
Before we begin, if you’re a company Founder / Shareholder interested in working with Panther, a deal maker interested in connecting or with a deal to share, or an Operating Executive looking for a part-time, full-time, or a Board Level Role — feel free to get in touch with us!
Broader Market Chatter
2023 Commerce Trends
Despite recent commerce pullbacks and a tightening in consumer spending, it has become clear that eCommerce growth has stabilized. Growth is projected to be 5% higher than before the pandemic and will stabilize in the years following. eMarketer estimates that social commerce sales in the US alone will double in 2023, exceeding $56 billion.
Shopify's latest trends report sheds light on the expected growth of the industry, along with trends and challenges impacting both retailers and commerce businesses navigating the space.
The biggest trend impacting digital retailers in 2023 is the role of social media in the retail journey. Every month, 95% of working-age internet users visit social media platforms. Not to mention that Gen Z now uses social media to research brands more often than they use search engines.
Almost one-third of businesses expect to increase social media marketing to drive company growth over the next few years. This is partly because having a good experience with a brand on social media makes:
78% of consumers more willing to buy from them,
77% more likely to choose them over a competitor
72% to spend more.
How Can Companies Adapt:
Companies that want to grow & thrive online have to proactively target, acquire and convert new digital consumers who have a "shrinking" wallet. Now more than ever, it’s important for companies to understand digital trends and shifts in order to gain a competitive advantage and better serve customers. A few tactics include:
Provide options to interact with customers in real-time
Streamline social commerce with integrations
Retail Trends & Challenges
Although the foot traffic data provided is a bit dated, it provides a great indication of the impact that has been played out on retailers. The chart below chart indicates that although foot traffic was up mainly for 2022, it was still well below pre-pandemic levels.
That being said 82% of brands surveyed are confident physical stores will continue to play an important role in future commerce growth.
Now that shopping can happen anytime, anywhere, the primary function of retail stores is no longer transactional. Enjoying the experience is the primary reason 35% of consumers shop in store, and another 24% want to interact with products before buying.
Not to mention, the “halo effect” of brick and mortar, persuading more digitally native brands to expand offline.
Recruiting and retaining talent is an ongoing challenge for brick-and-mortar as the younger generations of employees have become even more demanding for benefits, flexibility, and compensation:
69% of surveyed brands say it’s difficult to find and retain talent in this market, and, 67% say they’re short-staffed as a result.
How Can Companies Adapt:
Design in-store magnetic experiences
Attract and retain exceptional talent
Provide customer service across channels
How does Panther think through this?
At Panther, we continue to track hold closely held relationships with both digitally native (online only) + retail-based companies looking to navigate the choppy waters ahead.
If you are part of a Retail or eCommerce company (or know of one) that would like to discuss plans for marketing, expansion, or financial planning for 2023 / 2024, we’re always happy to connect.
About Us
Panther Equity Group is a private equity firm focused on making investments within the IT & Telecom Services, Technology Services, Business Services & eCommerce verticals.
Our team and Operating Partners have decades of experience within the mentioned verticals along with a vast network of experienced operators and LP investors.
We have the Operational, Technology, M&A, Business Development, and industry-specific Strategy expertise to help companies accelerate their growth and reach their full potential. Learn more about Panther Equity Group by heading over to our website:
A Trusted Partner For Founders, Companies & Entrepreneurs
📍Chart of The Week: IT Growth Trends
Despite mixed signals, the IT market has grown when compared to 2022. Gartner estimates that the global IT market size for 2023 will be $1.23 trillion, an increase of nearly 10% when compared to 2022. Furthermore, it is predicted that 2024 will experience double-digit growth at 10.2%.
Within this, software experienced the most growth at 12.3% followed by IT services, thanks to infrastructure-as-a-service (IaaS).
While there is growth in the market, employers have begun reducing the number of positions, with large groups like Accenture planning to cut 2.5% of its workforce within the next 18 months.
Panther’s Perspective:
As companies wish to continue having ‘asset-light’ footprints, IT category spending follows with less device/hardware spending (to a degree functional) and increased spending around virtual appliances, SaaS, licensing, Managed Services, and cloud-based environments.
At Panther, we understand & love all things IT and tech — we are happy to chat with you or a relationship within IT if we can be a helpful sounding board.
We’re Looking For Deals 🎯
Our team is focused on making investments within the IT & Telecom Services, Technology Services, Business Services & eCommerce verticals. Along with our operating partners, we have decades of experience within the mentioned verticals paired with a vast network of experienced operators and LP investors.
Size: EBITDA of $2 million – $12 million / $10M to $100M enterprise value
Geography: U.S. or Canada headquarters
Target Transaction: Majority, significant minority, and structured equity investments
Business Profile: Founder or closely-held ownership with an experienced management team
If you’re a Founder / Shareholder interested in working with Panther, or an intermediary with a deal to share — feel free to reach out and get in touch with us! We are happy to compensate fees to intermediaries & referrals at market levels.
Industry Commentary
CyberSecurity: 9 Hot (and not) cybersecurity trends
eComm: PE Rollups
SaaS: Public SaaS Comparables
Podcast Feature: Panther Equity highlighted on Axial’s Masters in M&A Podcast
Topics covered:
Biggest changes as CEO – standardizing SLAs with customers
Leveraging remote talent in Serbia for most customer service issues
2022’s interest rate increases and their impact on deal structure
Private Market Movements
IT Services M&A Update
M&A in the IT service industry continues to see a slowdown, one that began in the latter half of 2022, with major headwinds being inflation concerns along with fears of a potential recession.
There was a 19% decrease in transactions between the first half of 2022 and the second half of 2022, from 551 deals to 448 respectively. Furthermore, M&A transactions fell 16% in 2022, down from the average annual growth rate of 8% between 2015 and 2021.
The challenging macroeconomic outlook caused buyers to adopt a more conservative strategy, placing a higher premium on cost savings and organic growth rather than expanding through M&A
In spite of this, many agree that once the business climate stabilizes, there will be a large jump in M&A activity. Moreover, global IT spending is expected to reach $4.6 trillion in 2023, a 5.1% increase when compared to 2022. Overall — we’re bullish and excited to get deals done in this vertical (IT, Engineering, ERP / EMR related, Software Dev, Security Services, Unified Communications, and related)!
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About Panther Equity Group
Panther Equity Group is a private equity sponsor seeking to provide capital, strategic support, and resources to healthy & well-positioned private companies in the lower middle market. We typically focus on companies with $2 million - $12 million in EBITDA and seek to make majority or significant minority equity investments.