The latest Covid-19 lockdown – and the disruption to the economy – has underpinned the robustness of e-commerce businesses, according to a leading business analyst.
NZ Business Brokers managing director Mark Lewis said strict Level 4 operating conditions for many businesses and their staff in the services, retailing, and trades sectors meant that many had ground to a virtual crawl.
However, businesses with an e-commerce focus had continued to trade – some with minimal interruption to “business as usual.”
“While face-to-face transactions were not an option for most businesses in Level 4, and what will be in Level 3, the digital economy has rolled on relentlessly – with consumers ordering products online, meetings and consultations held online, and product dispatched from highly automated warehouses both here and globally,” he said.
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“This latest lockdown period has once again underscored the societal shift to a digital environment…. and a digital economy for many businesses. Those businesses which analysed the impacts which the 2020 Covid lockdown had on their operations, and adapted their trading model into an e-commerce environment over the intervening year, simply flicked on the switch when this latest lockdown was announced.
“They moved into a ready-made Plan B within a matter of hours – rather than the days and even weeks it took last year.
“For example, most obviously at the top end of the e-commerce pyramid we’re seeing strong national retailing brands such as Mitre 10, Noel Leeming and Trade Depot all pushing their contactless on-line services during levels 4 and 3.”
Lewis said that in the lead-up to the August 17 announcement, NZ Business Brokers was already negotiating the sale of three e-commerce-based businesses - with several more on the market which had gone on to attract potential buyers.
“We’re talking about substantial businesses too – not lifestyle-type ventures selling homemade wax candles or Balinese dresses through a computer sitting on the dining room table,” Lewis said.
“For example, we are marketing a $6million retailing business with three high-traffic websites servicing the New Zealand, Australian and North American markets in addition to two retail stores… all employing a total of 19 local staff.
“The owner has spent the past seven years gradually moving the business online and minimising reliance on a purely high street presence - a process which was expedited since the first lockdown last year and consequently grew turnover substantially. As a result, the operation is now extremely agile and able to cope with the current trading conditions which is why it is attracting strong buyer interest.
“We’re also working through the transaction of a fast-growing mortgage broking franchise business with offices already trading in the North Island. With full back-office and administrative services and support delivered remotely from head office with no disruption to service under Level 4, its branch mortgage advisors have been able to meet clients on Zoom and Skype to discuss loan options as normal.”
Lewis said technology-supported e-commerce had been embraced by a broad section of the Kiwi business community. This was personified by one of NZ Business Brokers listings: an 81-year-old solely-digital retailer operating from his converted garage office in a small Northland town importing and distributing specialist vehicle parts throughout New Zealand.
“More and more businesses buyers are now looking at the digital and online growth capacity for potential acquisition ventures. They are examining how business can be conducted remotely or in an omni-channel manner - avoiding reliance on a one point of contact option for customers,” he said.
While e-commerce businesses for sale were attracting strong interest from entrepreneur investors, central city retail outlets and venues in Auckland were proving harder to market because of the latest Covid-19 restrictions – combing on the back of other disruptions such as construction of the inner-city rail link and its various stations.
“The inner-Auckland retail scene had been trading on a relatively even keel since the city’s partial lockdown at the beginning of the year, and operators we are speaking with were looking forward to the busier spring and run-in to Christmas periods just around the corner. This latest lockdown has obviously derailed that progress somewhat and I expect there will be some reassessment of business valuations from both vendors and potential buyers,” Lewis said.
“The ANZ’s latest economic data noted that adjusted retail sales values were up 3.3 per cent for the second quarter of this year compared to the first three months, and that was certainly the tone coming through from our clients.
“I think now though we will see some volatility in earnings as the economy moves back into Level 4, and eventually Level 3. Our anecdotal research with clients since going into lockdown shows that most believe the economic recovery from this latest period will be far more gradually than the V-curve model experienced in 2020, and that the consumer spending impacts will most sharply be felt in the retail sector.
“However, those businesses with strong e-commerce channels will be immunised against that cycle as their downturn will have been mitigated to varying degrees. They will be flavour of the month among business buyers for quite some time to come.”
-Article supplied by NZ Business Brokers
