House of Fraser picks Capgemini for IT services

30 June 2017

British department store House of Fraser has announced a new agreement with technology and outsourcing consultancy Capgemini. The three-year deal, worth £15 million, will see the professional services firm work at the heart of the retailer’s IT business network.

With over 60 stores across the United Kingdom and Ireland House of Fraser is one of the country’s leading department stores. The group, established in Glasgow, Scotland in 1849, has seen mixed market result in recent times, posting a first annual profit in a decade at the start of 2016, before seeing those figures plunge dramatically by 46% in the first quarter of that financial year. Now in a bid to revitalise the company by capitalising on the oncoming era of digital disruption in the retail sector, House of Fraser has extended its partnership with consulting industry players Capgemini.

The relationship between the two has lasted seven years prior to the new three-year deal, with the £15 million agreement seeing the technology and outsourcing advisory firm now poised to be placed at the heart of the retailer’s IT ecosystem, supporting House of Fraser’s ongoing IT simplification strategy. Capgemini will also continue to provide IT infrastructure and application support, alongside additional new services designed to unlock further innovation across House of Fraser’s IT network.

CIO of House of Fraser, Julian Burnett, commented, “We have a strong and long-standing relationship with Capgemini, but were really impressed with the way in which they were able to approach this opportunity with fresh eyes and demonstrate the flexibility to support our business now and in the future.”

House of Fraser picks Capgemini for IT Services

Capgemini, which celebrates its 50th anniversary in 2017, will also be responsible for the delivery of the Digital Service Desk, a service which provides employees with multi-channel mobile access to resolve IT issues quickly, along with an innovative Application Development and Maintenance platform. House of Fraser hope that this business process oriented, industrialised approach to service will drive efficiencies across the retailer’s applications estate. Capgemini are also tasked with enabling the cost-efficiency of these additional services through its Automation Drive tools and IP, and a programme of continuous service improvements. 

Despite profit levels across the retail sector gradually returning to pre-crisis levels, uncertainty surrounding Brexit and stagnating wages have seen businesses increasingly turning to Artificial Intelligence to provide cost-cutting alternatives. With the new deal, House of Fraser aim to utilise that particular trend, with the potential savings enabling them stabilise continuously varying profit levels.

Tom Thicknesse, Head of Consumer Products and Retail at Capgemini in the UK meanwhile remarked of the continuing relationship between the companies, “As one of our key retail clients, I am delighted House of Fraser continues to count Capgemini as a major partner. Capgemini’s retail pedigree, combined with our client centricity, will help House of Fraser expedite its business’ transformational journey over the next few years.  We are looking forward to continue working together.”


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Consumer goods start-ups grow interest from venture capital

23 April 2019

Funding the latest consumer goods start-up has been a real money-spinner for venture capitalist firms, with a number of $1 billion companies – or unicorns – having emerged in the space in recent years. New analysis has explored the resulting corporate consumer products activity in the acquisitions space.

Consumer products have enjoyed years of strong growth as new markets opened in developing Asia. China in particular has enjoyed strong growth across a range of consumer good types as the country’s middle class expanded. Private equity firms have been keen to pick up targets in the space as they expand their portfolios to include additional local capacity as well as customers in new markets.

As a result, a study from Bain & Company has found that interest from PE firms in the consumer product space grew sharply in 2018, hitting 6.1% of all invested capital for the year, and making it the third most sought-after category. It is now only behind financial services (23.9%) and advanced manufacturing and services (13.9%).

Corporate venture capital investment

The ‘M&A in Disruption: 2018 in Review’ research found that growth in the segment reflects key changes in the segment as a whole. This is particularly true of insurgent brands, which often leverage local expertise in order to take on international giants in domestic markets.

Short change

The market changes have led to shifts in motivations for consumer goods company investments from PE firms. The number of strategic investments stood at 50% in 2015 compared to deals that increased scope. This has shifted significantly, with 34% of deals focused on strategic outcomes in 2018 compared to 66% for scope. The move towards scope reflects companies seeking out fast-growing products that enable stronger revenue growth streams.

Acceleration in scope-oriented M&A in consumer products

However, there were other motivations for deal activity in the space. Activist investors have put pressure on companies to expand their portfolios in recent years, with the trend expanding from just US targets to Europe.

Further trends

The other key shift in the space regards outbound deal activity. The study found that outbound deal activity has increased significantly in the Americas (up 363%) with total deal volume up only slightly (15%). Key deals included Coca-Cola and Costa, Procter & Gamble and Merck’s consumer health unit, and PepsiCo and SodaStream. In the Asia-Pacific region, outbound deal activity rose 195% while total deal activity fell sharply, by -36%. The EMEA region saw both a sharp decline in outbound deal activity, at -68%, as well as lower overall deal activity, which fell by 32%.

Cross-regional deal making

Deal-making in the current environment is increasingly fraught with uncertainties, as business models change on the back of new technologies, new consumer sentiments and wider market changes from new entrants. As such, acquisitions are increasingly useful as possible hedges on changes in market direction. As such, companies are increasingly pressed to take a future-back position, making sure to incorporate a vision of how the company needs to look in five years into acquisition strategy.

The firm notes that certain acquisitions which enhance a remembrance of a nobler mission, revive a sense of entrepreneurialism and engage directly with consumers may be necessary qualities in acquisitions that transform a company to fit market expectations in the coming decade. While going forward, focus on innovation, partnering with retail winners, reducing cost base and constantly reallocating scare resources will be necessary to protect market share in areas where insurgent local and strategic competitors are active.

Related: Private equity asset growth top priority for 2018.