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AI is being harnessed to power a new tool designed to support the M&A process for ecommerce businesses.
The news:Flippa, a marketplace where people can acquire online businesses and digital assets, launched an AI-powered recommendation feature that is designed to match buyers and sellers. Leveraging data gathered about user activity on the marketplace, the tool is designed to speed up the M&A process.
How it works: The recommender is designed to help business owners, advisors and brokers find prospective buyers within Flippa’s marketplace.
The algorithmically-based tool matches the buyers with suitable listings based on their actions and behavior within the Flippa marketplace. This process discovers what is known as latent intent in potential acquirers. Flippa Head of Product Tony Xu said the feature has gone through “a significant amount of training to help the model understand the intricate connections and interdependencies within our platform.”
On the marketplace, buyers can click “Invite to Deal,” and will be notified when a potential match is identified by the AI recommender. To date, Flippa said the AI-powered invite emails sent to potential buyers from the tool reached an 85% open rate, and a clickthrough rate (CTR) of 40%.
Key quote from Flippa CEO Blake Hutchinson: “Expectations are rising in today’s fast-paced online business M&A market, and buyers and sellers want to find the right deal partners fast. When business owners decide to exit, they want to quickly find qualified buyers who are likely to buy their business. Prospective buyers, especially institutional investors and family offices, want access to high-potential deal flow on tap. Flippa’s new AI-powered recommender tool uses machine learning to get even more specific about surfacing potential M&A targets, with high accuracy and at scale.”
AI for the aggregator? The tool arrives amid an active period for M&A in ecommerce businesses. Seeing the power of scale and shared resources at companies like Procter & Gamble and Colgate Palmolive, a new generation of consumer goods companies is aiming to create a portfolio of brands that have operations backed by data and technology, while being optimized to thrive on ecommerce marketplaces, particularly Amazon. Others are acquiring direct-to-consumer businesses. After a fast rise of this aggregator model in 2021 amid the pandemic ecommerce boom and frothy venture capital market, funding declined by 80% in 2022 when the market turned, according to Marketplace Pulse. However, the firm also found that the number of acquisitions declined by only 10-20%, even though valuations came down.
It means that aggregators still see opportunity, but they will need efficiency to keep growing. After all, more ecommerce brands are emerging, and many will go through the cycle and seek an exit.
Data-powered M&A: Flippa doesn't only cater to ecommerce brands looking to sell. With an aim to democratize M&A, the marketplace is also a destination to find websites, blogs, apps and even social media accounts. It is also seeing an influx of activity, as 300,000 new buyers entered the ecosystem in 2022. In the digital marketplace, M&A is built on speed and scale. That means dealflow volume is important, but the ability to find the right companies in a host of options also matters. M&A has long run on relationships, but it is increasingly also being powered by data. Flippa is showing how AI can be employed for this landscape.
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Campbell Soup Company CEO Mark Clouse offered thoughts on messaging amid inflationary shifts in consumer behavior.
After months of elevated inflation and interest rate hikes that have the potential to cool demand, consumers are showing more signs of shifting behavior.
It’s showing up in retail sales data, but there’s also evidence in the observations of the brands responsible for grocery store staples.
The latest example came this week from Campbell Soup Company. CEO Mark Clouse told analysts that the consumer continues to be “resilient” despite continued price increases on food, but found that “consumers are beginning to feel that pressure” as time goes on.
This shows up in the categories they are buying. Overall, Clouse said Campbell sees a shift toward shelf-stable items, and away from more expensive prepared foods.
There is also change in when they make purchases. People are buying more at the beginning of the month. That’s because they are stretching paychecks as long as possible.
These shifts change how the company is communicating with consumers.
Clouse said the changes in behavior are an opportunity to “focus on value within our messaging without necessarily having to chase pricing all the way down.”
“No question that it's important that we protect affordability and that we make that relevant in the categories that we're in," Clouse said. "But I also think there's a lot of ways to frame value in different ways, right?”
A meal cooked with condensed soup may be cheaper than picking up a frozen item or ordering out. Consumers just need a reminder. Even within Campbell’s own portfolio, the company can elevate brands that have more value now, even if they may not always get the limelight.
The open question is whether the shift in behavior will begin to show up in the results of the companies that have raised prices. Campbell’s overall net sales grew 5% for the quarter ended April 30, while gross profit margins held steady around 30%. But the category-level results were more uneven. U.S. soup sales declined 11%, though the company said that was owed to comparisons with the quarter when supply chains reopened a year ago and expressed confidence that the category is seeing a longer-term resurgence as more people cook at home following the pandemic. Snacks, which includes Goldfish and Pepperidge Farm, were up 12% And while net sales increased overall, the amount of products people are buying is declining. Volumes were down 7%.
These are trends happening across the grocery store. Campbell is continuing to compete. It is leading with iconic brands, and a host of different ways to consume them. It is following that up with innovation that makes the products stand out. Then, it is driving home messaging that shows consumers how to fit the products into their lives, and even their tightening spending plans.
Campbell Soup is more than 150 years old, and has seen plenty of difficult economic environments. It is also a different business today, and will continue to evolve. At the end of the day, continued execution is what’s required.
“If it's good food, people are going to buy it, especially if it's a great value,” Clouse said.