Publication: Mergers & Acquisitions

The Secret to Success in Retail

October 16, 2013

PE firms can maximize returns by focusing on the customer experience of retail chains

By Todd Maute

Some observers apparently think that brick-and-mortar retail businesses are a bad bet for private equity.

But by paying close attention to the customer-facing side of the chains they invest in, private equity firms stand a much greater chance of maximizing returns – even in the face of the admittedly daunting challenges arising from e-commerce. After all, high-definition broadcasts haven’t killed live sporting events, and TV evangelists haven’t stopped people from going to church.

When retailers emphasize the point of differentiation their brand offers, and enhance the customer experience and relationship, they give people a reason to come to their stores in precisely the same way. Brand loyalty is a huge factor in the value of any retailer, and Forrester Research has found that the customer experience is the driving factor in determining brand loyalty. “This means companies can’t expect to outperform competition on price while ignoring their customers’ experience,” wrote senior analyst Maxie Schmidt-Subramanian in a May 2013 report.

A report from earlier this year highlighted the particular struggles of specialty retail “category killers” like Toys “R” Us, Sports Authority, Petco, Burlington Coat […]

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