Moonpig, The Hut Group, and In The Style. These are just a few of the e-commerce retailers to have gone public since the start of the Covid-19 pandemic. But are they just a few successful outliers, or are they the beginning of a trend of London Stock Exchange e-commerce listings that could cause competitors to follow suit? “I think a lot of the new flotations are being brought on purely by the [e-commerce] surge that Covid-19 has created,” says David John, CEO at the white label B2B engagement platform for retailers, Loyalize. However, he adds that “every IPO is circumstantial in its own right”.
For John, a previous commodity trader turned retail tech CEO, it has been a “wild year” in terms of the market. However, he says that “there is light at the end of the tunnel” for publicly listed retailers, following Boris Johnson’s roadmap to recovery announcements. “I think the market has been very much almost like a V diagram,” he says. “It’s dropped off, certainly, but now we’ve got a structured rollout plan things are starting to work their way back up.
“There is a lot more confidence coming back into retail now than the first six to eight months of last year, which is great to see. It’s nice to see some big organisations that have found it challenging starting to really come back into their own stride.”
For e-commerce retailers especially, John claims that now is as good a time as any to consider a flotation. He says that in a way, an e-commerce float “is almost a hedge against the fact” that business may be disrupted by a return to in-store shopping upon the easing of restrictions. “So, floating now, certainly in Q1 of this year, has proven to be very effective for In The Style, The Hut Group, and Moonpig. They’ve all done it in a way to realise a decent amount of cash they can invest quite heavily in improving their own offering.”
John explains that deciding to float is a “very effective” way for companies to bring in high levels of funding in a short space of time, allowing a group to “ramp up” its operations. Yet, floating on the London Stock Exchange can also provide a raft of other opportunities for businesses, including acting as “a way to reward investors”.
Adam Frisby, who founded Manchester fashion brand In The Style in 2014, said that the group’s admission to AIM is the product of “an incredible journey over the last seven years” that saw the brand grow at a breakneck rate. As well as welcoming new shareholders and cash opportunities, for John, the flotation “provides a very nice exit opportunity” for those involved from the very beginning.
Having established why many brands with strong online channels feel that now is a beneficial time to float, the question of how these companies have reached this point remains. John says that you only have to look as far as Boohoo, ASOS, and the “thriving mammoth” that was Arcadia to gain an understanding of the wider trends.
For John, the online fast fashion retailers’ acquisitions and consequent digitalisations of various aspects of Philip Green’s retail empire “shows that e-commerce is going to be an integral part” of the future of retail. “Covid-19 has created a new wave of e-commerce businesses coming up,” says John. “But it’s also forced a lot of companies that have wider in-store operations to invest heavily in their digital channels.
“For the future, and for the foreseeable, there will be such a focus on digital that it’s just set such a strong foundation for a lot of these companies to list. If you look at the growth levels that many have experienced in the past year, they’ve probably had five-year roadmaps brought forward to 12 months. These companies are now turning into businesses that are bigger than a lot of the previous in-store companies in terms of market capitalisation.”
As for the success of these floats, John argues that things should be analysed on a case by case basis. He says that each business “has its own fundamentals” that it floats on and that investors would look into. However, John adds that “if a company was going to go to IPO,” he would delve into its digital growth plan as a key factor.
“I can absolutely imagine, especially from being in my own startup and speaking to investors, that they would be looking at a big skew towards what your digital channel is like, what your digital infrastructure is like, and if it is something that’s got sustainability and growth to it,” he says. “Rather than if a company was going to IPO and it was pretty much all based in-store, and they didn’t have a huge online or digital channel – I think that’s probably a riskier investment because the past year has proven more than anything that there is just so much that you can’t expect or plan for.”
While the outcome of each individual float hinges on a retailer’s “robust business model or strong growth model,” John says that the recent listings “might plant the seed” for similar brands to follow suit. “I think that these recent [floats] will certainly cause a lot of companies to think and review their position as to what could be right for them over the course of the next 12 to 18 months,” he says. “Whether it will have a direct impact on companies queuing up to go public? I don’t know. But I think it will certainly have caused a few to think ‘maybe we could do something like this’, and forecast it into their plans.”
Without doubt the global pandemic has pushed retailers to further adopt digital channels, provided e-commerce brands with tremendous growth, and even created new purely online retail companies. In turn, the London Stock Exchange is playing host to an increasing number of e-commerce floats, as logic dictates that these are the groups who are now reaching this stage in their growth journey.
However, John notes that there remains an individuality to each of the floats. Simply because e-commerce has experienced a rapid take off over the past 12 months does not make each firm a secure investment. In fact, John expects a slight dip upon the return of the high streets in the coming months, with only those IPOs backed by a strong in-store and digital presence, robust business model, and strong growth strategies expected to make the most of their gambles to go public.