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Report: Private equity interest in retail remains high


Despite the mixed outlook for holiday sales, the private equity community remains interested in retail, believing that the sector can offer the opportunity to achieve scalable growth.

That’s among the conclusion of a report from CIT Group Inc. entitled “CIT Executive Insights: Commercial & Industrial – Retail Expectations."

“Listen closely and you’ll hear mixed messages from financial analysts and in the media regarding retail,” said Burt Feinberg, president, CIT Commercial & Industrial Finance, a division of CIT Group Inc. “Despite all this skepticism and potential volatility, the private equity community likes retail.”

As to the reason why, Feinbert says the private equity community believes that the right concept can scale quickly.

“Through the right combination of investment in e-commerce and digital platforms, plus the expansion of the store footprint, revenues can grow dramatically,” he said.

Some of the trends noted by Feinberg include:

E-commerce and Brick-and-Mortar Join Forces: Whether retailers are focusing on near-term tactics or long-term strategies, the increased fusion between brick-and-mortar and web and mobile is key. This combination builds brands, customer loyalty and growth for investors. The companies that achieve this balance will be the winners in the retail sector.

Mobile and Social Grow in Importance: More goods were actually purchased via mobile devices last holiday season than on the original computer-based e-commerce platforms.

In addition, the use of social media has sped up the spread of word of mouth from weeks to instantaneous and could create incredible demand for a new product.

Big Data Gives Competitive Edge: With the ubiquity of Internet and mobile technologies, retailers are leveraging data mining techniques, proving their e-commerce sophistication. Loyalty programs, targeted marketing and consumer profile-based promotions can build momentum and strong revenue results.

Fewer Links in Supply Chain Means Faster Business Cycle: Some retailers, many of them from abroad, have re-engineered the entire supply chain, gaining speed to market and cost efficiencies. Combine that with social media and the entire cycle from production to “sell out” has shortened immensely.

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