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  • Why 2022 is a Good Year to Own a Retail Business

    Apr 26, 2022

    Starting in Q4 of 2021 the brick & mortar segment of the retail sector started to return from the low tide created by the 100-year event of the COVID-19 pandemic.  This is evidenced in recent Census Bureau data adjusted for seasonal factors which document in the height of the pandemic the share of retail sales that happened online surged to an all-time high of 15.7%, this figure regressed to 12.9% by the last quarter of 2021 and the most recent holiday season.  The trend was further evidenced by Mastercard SpendingPulse which reported that March 2022 was the first month since the pandemic hit during which e-commerce sales declined from the same period, March 2021, a year ago while in-store sales rose.  The drop in online spending was 3.3%, the first year over year decline for a monthly period since November 2013. Comparatively the rise in sales for brick & mortar stores for the same comparison of March 2022 to March 2021 showed an 11.2% growth in spending.

    Utilizing another metric, foot traffic, Placer.ai, a data analytics firm, reported that monthly visits to the top indoor malls grew nearly 17% in March from February, while open-air lifestyle centers grew approximately 18% and outlet malls 26% in the same period comparison. Additional information on these retail trends is conveyed in the following excellent Wall Street Journal article, https://www.wsj.com/articles/the-pandemic-was-supposed-to-push-all-shopping-online-it-didnt-11650081652.

    IBA, with its corporate headquarters in the Seattle metropolitan area, is well positioned to track specific sector trends through active monitoring of actions and strategies employed by local, industry leading companies like Amazon, Microsoft, and Boeing.  In the retail sector it did not go unnoticed that Amazon posted over $200 million in operating losses in the United States in the fourth quarter with the revenue in its online stores segment falling by 1%, the first year-over-year decline since the metric was first disclosed in 2016.  The problems for Amazon, although admittingly small given the strength of the behemoth, are being compounded by increasing delivering costs resulting from enhanced fuel expense as a result of the energy policy decisions of the Biden Administration, https://americansforprosperity.org/biden-policies-raising-gas-prices/.  These economy repressing government policies are resulting in a need for businesses to reallocate this increased operating cost to consumers.  Amazon is doing this by assessing a 5% fuel surcharge on third-party vendors who use its online platform, https://www.cnbc.com/2022/04/13/amazon-slaps-us-sellers-with-5percent-fuel-and-inflation-surcharge.html, a cost that will inevitably be passed onto customers by the businesses.  Taking a more collaborative approach with its customers to address rising transportation costs, Domino’s is presently offering a $3 incentive for people to pick up their pizza at the store rather than having it delivered,  https://www.kiro7.com/news/trending/dominos-pay-customers-forgo-delivery/Q7ST5BSMCZCDFKCC57MMK5JJCI/.

    All of the above information is good news for local retail brick & mortar businesses in 2022.  Mentally and emotionally, people like to shop. The process offers both social and personal gratification benefits.  In addition, given high fuel prices economic benefits likely exist for consumers willing to go to their purchases rather than having them delivered.

    IBA, as a market leading business brokerage firm serving retail sector entrepreneurs since 1975 in Washington & Oregon, identified this trend in the second half of 2021 at the small business level through direct engagement of our retail industry transaction team with business owners and analysis of financial trends in the review of confidential documentation from privately held companies operating in King, Multnomah, Spokane, and other counties in the Pacific Northwest.  Savvy business buyers also were aware of this consumer preference shift acquiring companies early in the trend.  The transactions successfully facilitated by IBA recently that involved businesses that sold retail products directly to consumers included Ballard Consignment ( https://ballardconsignment.com/), Play-It-Again Sports of Woodinville (https://www.playitagainsports.com/locations/woodinville-wa), Performance Footwear & Outdoor Gear (https://performance-footwear.com/), Ravenna Gardens (https://www.ravennagardens.com/), and Washington Generators (https://www.washingtongenerators.com/).  Current projects include several multiple location chains, one selling outdoor/recreation products and the other tourist merchandise, and quality, established single location businesses selling apparel, furniture, cannabis, and construction equipment.

    Harry Truman famously said, “There is some risk involved in action, there always is. But there is far more risk in failure to act”.  Opportunity is knocking in the retail sector with market forces driving consumers back to traditional retail shopping venues.  Entrepreneurs who have the ability to open doors and support this customer demand will benefit.  If you are interested in selling or buying a retail business in the Pacific Northwest, the knowledgeable, experienced, highly skilled members of our retail industry transaction team would welcome the opportunity to meet with you and provide an overview of our services. President Truman famously had a sign on his Oval Office desk which said, “The Buck Stops Here”.  The sign referred to the responsibility of his office, but in a business sense, wouldn’t it be wonderful if the buck, meaning dollars, stopped their shopping journey at your store allowing you to satisfy customer need and demand, provide a valued vendor and offer jobs in your community, and support your family financially while offering a personally fulfilling career path opportunity.

    IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, and mergers & acquisitions community on subjects relevant to the purchase & sale of privately held companies and family-owned businesses.  IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.

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