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Private Equity Interest in Retail Remains High Despite Mixed Holiday Outlook

December 17, 2015

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Now deep into the holiday season, some observers are cautiously optimistic towards the outlook for the retail sector, while others are outright skeptical. At the same time, the private equity community remains interested in retail, believing that the sector can offer the opportunity to achieve scalable growth.

These are some of the observations shared by Burt Feinberg, President, CIT Commercial & Industrial Finance, a division of CIT Group Inc., a leading provider of commercial lending and leasing services, in “CIT Executive Insights: Commercial & Industrial – Retail Expectations” (cit.com/feinberg), the latest piece of market intelligence in the CIT Executive Insights video series.

“Listen closely and you’ll hear mixed messages from financial analysts and in the media regarding retail,” said Feinberg. “Despite all this skepticism and potential volatility, the private equity community likes retail. Why? They believe 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.”

Some of the other trends Feinberg expands upon include E-commerce and Brick-and-Mortar joining 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.

Furthermore, the use of mobile technology and social media has grown 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.

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.

Additionally, 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.