E-Commerce Poised to Maintain Strong Momentum going into Q4
Panther Equity Insights -- a private equity newsletter covering all things IT & Telecom, Tech & Business Services, eCommerce and Markets.
Happy Thursday folks! Welcome back to this week's edition of Panther Equity Insights, the bi-weekly newsletter from Panther Equity Group.
In this issue, we’re giving you insights and updates on the industries we specialize in. We’re also covering some broader macro commentary that we believe will be valuable to our network of readers.
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 Board Level Role — feel free to reach out and get in touch with us!
Broader Market Chatter
E-Commerce Poised to Maintain Strong Momentum going into Q4
E-commerce growth has significantly outpaced retail in the second half of 2023, achieving high single digit, or even double digit, year-over-year growth figures each of the last five months according to Bain’s latest retail report. This holiday season, Bain predicts that e-commerce sales are “poised to pull the sleigh”, already growing 12.0% in October while retail sales grew by just 0.5%.
According to Bain's Consumer Health Index, upper-class households, constituting over half of expenditure, will drive seasonal spending this year as their inclination to spend has risen significantly compared to last year. At the same time, their disposition to save has significantly decreased since June, indicating an even stronger Q4 for e-commerce.
On the other hand, middle and lower-income households are displaying restraint, likely due to a slowdown in disposable income growth and savings rates combined with a rise in unemployment. Although unemployment is relatively low, it is approaching its highest level in nearly two years and these households are still feeling the lingering effects of inflation.
Given the mixed signals from consumers, consumer e-commerce platforms must execute growth strategies that include more extensive and enticing promotions this season if they wish to finish strong in Q4.
E-Commerce Predictions for 2024
Forrester’s latest e-commerce research provides various predictions for e-commerce operators in 2024, with the most notable being that e-commerce tech leaders need to think smaller. Instead of retailers replacing major e-commerce systems with combinations of technologies,
Forrester believes they will instead invest in targeted technology initiatives that address specific problems that can produce faster return on investment in a simplified manner.
Replacing comprehensive ecommerce systems with modular, lego-like assemblies is challenging, and many companies are turning away from major replatforming efforts.
They can instead choose targeted moves or "point solutions" to enhance their existing systems, which involves identifying specific business problems, determining the required capabilities, and adding technology functions accordingly. Forrester predicts point solutions will replace half of major replatforming projects in the near future.
Forrester also makes the following e-commerce predictions for 2024:
At least one-quarter of digital tech spending will shift away from maintenance. With many tech budgets tight, companies will “put money into things that will move them forward instead of automatically writing that check” to maintain the systems they have in place.
Only one-quarter of businesses will benefit from digital commerce initiatives based on generative AI. Retailers will be constrained by consumers demanding more control over their personal data and new AI-related regulations
Social media giants will partner with three retail media networks for commerce. A Forrester survey found 61% of U.S. online adults under 25 had completed a purchase on a social network.
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:
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Private Market Movements
Private Equity Showing Early Signs of Recovery from 2022 Losses
Though PE deal activity has faltered for most industries in 2023, returns are showing preliminary signs of recovery. Pitchbook’s latest research report estimates Q2 overall PE fund returns at 2.7%, a positive indicator but still too early to signal recovery.
Returns in H1 2023 puts PE’s one-year horizon IRR figures back in positive territory after seeing negative IRR throughout 2022. This places PE further ahead of the pack compared to other private capital asset classes, especially compared to VC’s one-year horizon IRR of -14.5%.
Despite recent short-term volatility, PE funds have still remained resilient across longer market cycles compared to other private market assets. Pitchbook finds that PE's 3-, 5-, and 10-year horizon IRRs all outperformed the overall private capital industry.
These results prove the investment adage that longer return horizons smooth out return profiles across asset classes, and that PE continues to provide long-term value.
The Private Equity Exit Backlog remains Stubborn
PE is showing healthy fundamentals, but the growing exit backlog that is dampening deal activity and creating liquidity issues still hasn’t budged according to Pitchbook. In the last quarter, the exit environment has remained constrained, further extending PE hold periods and deteriorating fund performance.
The exit backlog has also affected fundraising activity, with the amount raised by closed PE funds last quarter down 12.9% from 2022 levels. Fundraising troubles are most concentrated among the top alternative managers, who experienced a 57.4% decline in capital raised last quarter.
Despite these woes, it’s important to remain focused on the long-term and acknowledge these are temporary market issues. PE fund returns have shown positive results throughout 2023 in spite of the market volatility, and they will only improve as macro conditions normalize.
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.
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.