A spotlight piece on e-fulfilment

A surge in e-commerce over the last few years has resulted in a growing number of e-fulfilment businesses being set up both in the UK and across the globe.

UK online sales exceeded £28 billion in the first half of 2018. This is forecast to more than treble to a full year of £93.2 billion once results from the festive season are reported.

As specialists in lower to mid-market e-fulfilment and logistics transactions, we look at the explosive growth in e-commerce and third-party logistics as well as the opportunities this brings to those looking to buy or sell businesses in these sectors.

Background

Whilst 2018 has been another tough year for high-street retail, changing consumer shopping preferences continues to drive retailers to reinvent themselves. The internet has given consumers the convenience and flexibility of shopping from the comfort of their own homes, thus resulting in delivery channels being faced with the challenge of coping with this rapid shift. It has also opened up a new world of choice and price comparison that has not traditionally been available.

Consumers are now able to satisfy their growing demands in a way that is more in tune with their busy lifestyles, thereby empowering them to make choices and decisions that are better suited to their needs.

As a consequence, associated sectors such as e-fulfilment and third-party logistics have witnessed unprecedented growth, leading to attractive valuations and multiples in these sectors. The businesses that can differentiate themselves via customer service and demonstrate strong repeat revenue will always command a premium over their peers.

Outlook

E-commerce growth is set it continue and is expected to become the largest channel of retail sales in 2019 for the UK. This is due to a number of different factors as summarised by Figure 1 below.

Figure 1. Summary of factors driving e-commerce growth
Factors driving e-commerce growth

So, what does this mean for e-fulfilment and third-party logistics?

Research by The Ecommerce Foundation indicates that speed and accuracy of delivery ranks highly in end-consumer expectations making them top priorities for successful e-commerce businesses. The e-fulfilment market, currently worth £11 billion, is undergoing a phase of rapid growth, and is increasingly seeing global retailers using it to access UK consumers thus creating further customer choice and market growth.

Resulting in the need for more warehouse space to accommodate the growing demand, as well as better technology to ensure accurate, safe and efficient delivery, e-fulfilment businesses and third-party logistics operators (who previously only dealt with the demands of just final mile delivery on behalf of high street retailers) are now an integral part of the customer shopping experience. Unsurprisingly, this shift has meant that many e-fulfilment businesses find themselves either; requiring capital for expansion, seeking investment in infrastructure, or looking to exit as the business grows beyond their existing resources.

Some of our recent successes

Having successfully completed a range of deals in this sector during 2018, the Corporate Finance team at Quantuma are in an optimal position to help you understand the market and achieve your ambitions. We can work with you to identify acquisition targets, support you in raising funds, or help you if you are looking to exit and maximise your returns.

We recently advised the shareholders of ILG on the sale of their business to a global logistics operator, Yusen for an attractive multiple driven by its specialist services and growth.

We have also advised Whistl on a number of acquisitions as they further grow their e-fulfilment and third-party logistics operations. These acquisitions demonstrate the ambition shown by e-fulfilment businesses in harnessing the differentiated growth in this market.

If you or a client are an ambitious, entrepreneurial business looking to carry out any of the above in this or an ancillary sector, we would be delighted to share our expertise and experiences with you.

Recent deals