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Mooreland Monitor - Future of Payments - Retail (May 2014)

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Mooreland Monitor - Future of Payments - Retail (May 2014)

  1. 1. PROPRIETARY PRESENTATION - DO NOT DISTRIBUTE The Future of Payments Retail 2.0 … an Omni-Channel Future Converged, eCommerce and Retail Systems Payments Monitor, Part 2 May 2014
  2. 2. PROPRIETARY PRESENTATION - DO NOT DISTRIBUTE Contents  Introduction: Mobile Payments Ecosystem  Retail 2.0 Landscape and Ecosystem  Mooreland’s Perspective on Omni-Channel Retail Systems  Retail 2.0 Investment Activity  Retail 2.0 M&A Transactions  Mooreland Partners: Firm Profile 2
  3. 3. PROPRIETARY PRESENTATION - DO NOT DISTRIBUTE  Payments involve consumers making payments, retailers accepting payments, and balances being transferred between banks  When considering mobile payments we need to examine the following three segments to form a complete picture of the ecosystem – mPayment: Solutions that enable the consumer to transact and make payments using their mobile device – Retail 2.0: Solutions, sold to Merchants, that enable new ways to accept payments and manage their business, increasingly enabling the convergence of online and offline commerce towards an “Omni-channel” commerce paradigm – Digital Banking: Solutions, sold to banks, that enhance the “anywhere, anytime” consumer banking experience (includes online and mobile banking) Introduction: The Mobile Payments Ecosystem 3 Retail 2.0 mPayment Digital Banking • Mobile Wallet • Merchant Payment Apps • Mobile Banking • Internet Banking • Mobile Money Transfer • Remote deposit capture • Mobile POS Terminals • eCommerce Platforms • Cloud/Tablet-based POS Solutions • Omni-channel commerce Three Interconnected Segments
  4. 4. PROPRIETARY PRESENTATION - DO NOT DISTRIBUTE Retail 1.0: Legacy Retail . . . Separate Systems & Inflexible Architectures 4 Retail systems, grouped into three major segments, are typically complex, difficult to manage and configure, and not readily adaptable to a converged online/offline environment eCommerce Platforms: • An eCommerce platform is a complete online store application that includes navigation, search, user accounts, shopping cart, and ordering capabilities. POS Software Systems: • Point of Sales systems are computerized systems incorporating cash registers, computers and peripherals. • These systems keep track of sales, labor and payroll, and can generate records used for accounting, ERP, and inventory. Payment Acceptance: • A stand-alone piece of equipment that allows a merchant to process card transactions • Market dominated by Verifone and Ingenico, with ~60% market share globally Off-Line Commerce (In-store retail) On-Line Commerce *Excluding back-office systems such as inventory, order management, logistics, payment gateways, etc. Challenges: 1) Off-line and on-line platforms have been run entirely separately, thus far 2) The legacy architectures are frequently inflexible and would be difficult to evolve to fit with modern approaches The market needs new solutions, build from the ground up, to be more flexible, modular, and seamless across channels *
  5. 5. PROPRIETARY PRESENTATION - DO NOT DISTRIBUTE Off-Line Commerce: Moving from Hardware to Software Systems New Requirements Retail 2.0 Software-focused solution, leveraging consumer hardware 5 Retail 1.0 Payment Acceptance: Hardware-Centric Solution Expensiveandclunky Address the Micro-Merchant Casual merchants can now accept cards On-the-go payments Facilitating mobile bus. (i.e. taxis and taco trucks) Consumer Hardware Savings for merchants via low-cost consumer HW Cloud-based solutions delivered via a tablet interface POS Software: Integrated with proprietary hardware Agile Systems Can be customized + integrated w/ 3rd Party Apps Interactive Experience Social integration, reshaping customer experience Accelerated by Windows XP XP “End-of-Life” makes POS non-PCI Compliant Difficulttoadaptto customer-specificneeds
  6. 6. PROPRIETARY PRESENTATION - DO NOT DISTRIBUTE Online Retail: Moving towards Scalable, SaaS Platforms eCommerce Platform 6 Build a custom website + Integrate a Shopping Cart Notabletoadapt/staycurrent Multi-Channel Online, Offline, & Mobile Global Reach N. America, Europe, and Beyond Ability to Scale to millions of customers Technology Innovation Stay at the Leading Edge 20122008 Other, In-House Major eCommerce Platform New Requirements Retail 2.0Retail 1.0 Growth in % of global top 500 internet retailers using SaaS eCommerce Platforms 74% 26% 63% 37%
  7. 7. PROPRIETARY PRESENTATION - DO NOT DISTRIBUTE Traditional boundaries are blurring and Omni-Channel is the new focus 7 Retail technology vendors are driving towards “Omni-Channel” solutions Customer Frustration Lost Revenue 50% 59% $338 Billion Percentage of customers dissatisfied with cross-channel experience Percentage of multi-channel customers that switch vendors after a single bad experience Revenue lost by enterprises in 16 key global economies due to customer defections and abandoned purchases Customers are Already Shopping Across Channels 51% Research online and visit store to purchase 32% Research online, visit store to view product, then return online to purchase 17% Visit a store first, and then purchase online Source: Oracle
  8. 8. PROPRIETARY PRESENTATION - DO NOT DISTRIBUTE Order Management System Startups will play a significant role in the Omni-Channel solution 8 Companies focused on building best-in-class component systems are best positioned for success UI: Offline Retail Merchant-specific user interface, designed for customer check-out  Order workflow management  Inventory management  Initiate shipment (for online) Customer Other Systems  ERP / Financial Systems  Marketing, CRM, Loyalty Commerce Platform  Product Information Mgmt (PIM)  Uniform pricing & promotions  Personalized recommendations and contextualized experiences UI: Online Retail Consumer-facing interface, designed to engage shoppers and improve conversion Unified Fulfilment  Store-based fulfillment  Drop-ship management Big Data / Analytics Omni-Channel Retail System
  9. 9. PROPRIETARY PRESENTATION - DO NOT DISTRIBUTE Mooreland Summary: Omni-Channel Retail Systems are the Future 9 The Retail Systems industry is in the early stages of a disruption cycle that will reshape the industry landscape, threaten legacy vendors, and crown new champions  The POS landscape is ripe for change – Legacy POS solutions are expensive, slow-moving, inflexible, and outdated – New, tablet-based POS solutions hosted in the cloud offer lower costs and higher flexibility Investment (and M&A) will increase as next-generation solutions gain momentum  EMV deadlines and the End-of-Life for Windows XP are catalysts for change – EMV (Oct 2015) is catalyzing a refresh for the hardware terminals – Windows XP-based POS systems will become non-PCI compliant, forcing retailers to migrate to new systems Legacy POS will have an unusually high rate of total system replacement in 2014-2017  eCommerce is moving towards SaaS platforms – Retailers want low maintenance solutions – Merchant IT departments will be downsized eCommerce platform vendors, especially those focusing on the SMB, will grow rapidly  Merchants will upgrade to seamless “Omni-Channel” solutions – Unifying the back-end (shipping, order mgmt., etc.) for both online and offline platforms remains a challenge – Players that establish complete omni-channel solutions in 2014-15 will emerge as the new leaders It is critical to develop technology leadership early in the cycle New technologies are driving POS disruption … accelerate by EMV and the XP replacement cycle Omni-channel Strategy: the key differentiator TRENDS MOORELAND PERSPECTIVE WINNERS: eCommerce is migrating to comprehensive platforms • Cloud Retail Systems that have solutions for both online and offline commerce via a single platform • Tablet-based POS solutions • Vendors offering best of breed back-end systems that enable online/offline convergence
  10. 10. PROPRIETARY PRESENTATION - DO NOT DISTRIBUTE Retail 2.0 Solutions: Company Landscape is Crowded 10 Mobile Payment Acceptance POS Software Systems eCommerce Platforms Outsourced Solutions On Premises Custom Solutions SaaS Platforms Shopping Carts and Mini-Platforms Clienteling Restaurant and Hospitality POS Hardware / Software Tablet-Based Retail POSPayment Services
  11. 11. PROPRIETARY PRESENTATION - DO NOT DISTRIBUTE $54 $214 $42 $11 N/A $19 $56 $54 $131 $51 $113 $144 $298 $333 $265 $103 $200 $100 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Investments >$100M ($ in millions) Investments <$100M ($ in millions) Number of Investments Retail 2.0 Solutions: Investment Activity is Picking Up . . . 11 Retail 2.0 1999 – 2013 Financing Activity Source: Capital IQ, 451 Group, and publicly available information. Note(1): Values based on public disclosed deal values 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 # Investments 7 16 5 3 1 6 12 7 21 17 17 31 66 77 68 Total value ($M)1 $54 $214 $42 $11 N/A $19 $56 $54 $131 $51 $113 $144 $401 $533 $365
  12. 12. PROPRIETARY PRESENTATION - DO NOT DISTRIBUTE … while M&A activity has focused on filling product / technology gaps 12 Acquirer Target Category Date Transaction Size (EV) EV/Revenue May-2014 $30M Confidential Jan-2014 NA NA Jan-2014 $19M NA Aug-2013 $1.5B 11.0x-13.0x Jul-2013 NA NA May-2013 NA NA May-2013 $28M 8.0x Mar2013 $56M Confidential Nov-2012 $124M 8.0x Nov-2012 $746M 2.0x Sep - 2012 $15-20M NA Jul – 2012 $26M NA May – 2012 $10-20M NM Apr – 2012 $850 0.7x Feb – 2012 $100M Confidential Nov – 2011 Confidential Confidential Aug – 2011 $2.1B 1.6x Jun – 2011 $158M ~7.0x Restaurant POS/Reservations Cloud POS Mobile Payment Acceptance Clienteling Application eCommerce Platform eCommerce Platform Cloud POS eCommerce Platform Cloud POS Mobile Payment Acceptance Order Management System Order Management System Cloud POS Order Management System Retail Management System Retail Management SystemRetail Store Solution eCommerce Platform Order Management System
  13. 13. PROPRIETARY PRESENTATION - DO NOT DISTRIBUTE Mooreland in Brief Technology Focused Digital Media & Internet | Enterprise Software Communications & Mobility | Industrial Technology 100% Partner Owned Founded 2002 One Global P&L Global Reach Serving European, North American, and Asian markets from offices in Silicon Valley, New York, and London Team of 40+ 13 Nationalities 10 Languages Spoken 53 Deals Since January 2012, Ranked #1 in Mid-Market Technology M&A Unrivalled Experience 1,000+ Deals Closed by Senior Bankers 13 Mooreland is one of the most active tech focused M&A advisory firms in the world – differentiated by deep sector knowledge, tier 1 buyer relationships, and a collaborative business model.
  14. 14. SILICON VALLEY 950 Tower Lane, Suite 1950 Foster City, CA 94404 Tel: +1 (650) 330-3790 NEW YORK 537 Steamboat Road, Suite 200 Greenwich, CT 06830 Tel: +1 (203) 629-4400 LONDON 2-4 King Street, London SW1Y 6QL, Tel: +44 (0)20 7016 3380