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The Future of Payments
Retail 2.0 … an Omni-Channel Future
Converged, eCommerce and Retail Systems
Payments Monitor, Part 2
May 2014
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
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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
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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
*
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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
Expen
sive and
clun
ky
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
Difficu
lt to ad
apt to
cu
stom
er-specific n
eeds
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Online Retail: Moving towards Scalable, SaaS Platforms
eCommerce Platform
6
Build a custom website
+ Integrate a
Shopping Cart
No
t able to
adap
t / stay curren
t
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
2012 2008
Other, In-House
Major eCommerce
Platform
New Requirements Retail 2.0 Retail 1.0
Growth in % of global top 500 internet retailers using SaaS eCommerce Platforms
74%
26%
63%
37%
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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
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Order Management System
Startups will play a significant role in the Omni-Channel solution
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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
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Mooreland Summary: Omni-Channel Retail Systems are the Future
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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
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Retail 2.0 Solutions: Company Landscape is Crowded
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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 POS Payment Services
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$54
$214
$42
$11 N/A
$19
$56 $54
$131
$51
$113
$144
$298
$333
$265
$103
$200
$100
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
Investments >$100M ($ in millions)
Investments <$100M ($ in millions)
Number of Investments
Retail 2.0 Solutions: Investment Activity is Picking Up . . .
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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
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… while M&A activity has focused on filling product / technology gaps
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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 System Retail Store Solution
eCommerce Platform
Order Management System
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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
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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.
www.moorelandpartners.com
SILICON VALLEY 950 Tower Lane, Suite 1950
Foster City, CA 94404 Tel: +1 (650) 330-3790
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Greenwich, CT 06830 Tel: +1 (203) 629-4400
LONDON 2-4 King Street,
London SW1Y 6QL, Tel: +44 (0)20 7016 3380