Monday 28 October 2019 12:45 am

Online retail acquisitions rise with high streets in decline

The number of mergers and acquisitions (M&A) among online retailers rose markedly in 2019, new analysis has shown, as companies faced shareholder pressure to boost their web-based sales.

Read more: Major UK retailers suffer plunging profit margins

The number of M&A deals among UK online retailers rose to 12 in the year to June, City-based law firm RPC said today, up from eight in the previous year and six the year before that.

RPC said retail groups are under growing pressure from shareholders to focus on online activities with high streets in decline. Retail footfall has fallen by 10 per cent over the last seven years, the British Retail Consortium (BRC) said this month.

Some firms are buying up existing online retailers rather than building their own retail websites and systems, RPC said.

RPC partner Neil Brown said: “The platforms behind online retailers can be hugely valuable in their own right. For retailers under shareholder pressure to deliver increased online revenue, a bolt-on acquisition can quickly deliver the technology and sales boost they need.”

“Investors are impatient with any high street retailer that is only increasing its online sales by low single digits. They want quicker results, and that means acquisitions.”

Some retail groups have also acquired specialist online retailers with a sizeable share of a niche market, such as upmarket footwear.

Brown said: “The size of the online retail market now means that supposedly niche markets can be extremely valuable, especially if one e-retailer has a well-established following and a significant share of that market.”

“Building up a portfolio of these specialist online retailers can be a viable way for a retail group to grow its overall market share and benefit from brand loyalty that has been built up.”

(Image credit: Getty)