Dec 11, 2023

E-Commerce Sector Update – December 2023

e-commerce M&A multiples
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Consumer Resilience Continues in E-Commerce Sector, M&A Market Prepares for a Rebound

Consumer spending across the E-Commerce sector has been strained but certainly not paused. An inflationary environment and continued drawdown of consumer savings have challenged retail and online sales, which have failed to reach the lofty growth rates experienced in the post-pandemic months. The resilience of the U.S. consumer has been a hallmark of the economy through the first three quarters, which has helped to stave off a widely anticipated recession. Notably, retail sales in September grew more than expected, rising 3.8% year-over-year (YOY), according to the U.S. Census Bureau.1 However, personal savings in August fell to their lowest level since December 2022 (U.S. Bureau of Economic Analysis)2—creating uncertainty for the sustainability of healthy spending levels.

Despite consumer headwinds, e-commerce spending remained robust in the first half of the year with sales reaching $277.6 billion in Q2 which marked a 7.7% YOY increase, according to Digital Commerce 360 and the U.S. Department of Commerce.3 Online sales growth in Q2 nearly mirrored the prior two quarters, demonstrating the resilience of e-commerce spend amid a challenging retail environment. Web penetration has also remained at healthy levels through Q2 with e-commerce accounting for 21.1% of total retail sales which remained in line with recent quarter levels. While online spending has moderated, the sector has yet to experience a drastic pause in online purchases that many expected following a rapid monetary tightening campaign and elevated inflation.

Holiday spending has typically been a significant tailwind and highly anticipated period for E-Commerce sector players. Despite persistent consumer headwinds, online holiday sales are expected to remain robust and are forecasted to grow between 10.3% and 12.8% YOY, reaching up to $284 billion, according to Deloitte.4 Year-end sales will be carefully monitored by sector participants as a gauge on the health of the consumer and broader space. Through the first half of the year, leading big box retailers and online players have had mixed sales results. Moving through year end and into 2024, private businesses with growing sales, low customer acquisition costs, and recurring revenue are expected to garner steady buyer attention—contributing to expectations for a robust merger and acquisition (M&A) market in the new year.

Despite the current economic climate, e-commerce spending is still on the rise. The Black Friday weekend and Cyber Monday (BFCM) event set a new record, with both Shopify and Amazon experiencing a significant increase in sales over last year. We feel that 2024 will be a strong year for Consumer E-commerce sector M&A as brands post sales growth and benefit from more normalized product and supply chain costs.

Lisa TolliverManaging Director, Capstone Partners

Public Companies Show Varying E-Commerce Results

E-commerce sales performances have been mixed among big box retailers through the first half of 2023. Retail spending has demonstrated a pullback in bigger ticket items, including furniture and home furnishing, while consumer staples have remained in steady demand. Walmart (NYSE:WMT) grew its e-commerce sales by 24% YOY and BJ's Wholesale Club (NYSE:BJ) improved its digitally-enabled sales by 15% YOY, according to their most recent earnings releases.5,6 Walmart noted strong e-commerce growth has been driven by store-fulfilled pickup and delivery as it works to optimize its inventory management—with inventory in stores often closest to the customer.

On the contrary, Costco (Nasdaq:COST) recorded a 0.8% decline in e-commerce sales while Target (NYSE:TGT) experienced more drastic declines with digital comparable sales falling 10.5% YOY, according to their earnings releases.7,8 Pure-play e-commerce operators have also had varied revenue performance. Chewy (NYSE:CHWY) and Amazon (Nasdaq:AMZN) have been among the leaders in sales gains, with revenues rising 14.3% and 11% YOY, respectively, according to their earnings releases.9,10 However, online furniture and home goods retailer Wayfair (NYSE:W) reported a 3.4% YOY sales decline, according to its earnings release.11 The strength of the consumer through year-end and into 2024 will likely dictate revenue growth for sector players in the near-term.

Outlook for M&A Volume and E-Commerce M&A Multiples Favorable for First Half of 2024

M&A activity has held steady through year-to-date (YTD), despite caution among both buyers and sellers in transaction markets. Total sector YTD deal volume has amounted to 87 announced or closed transactions, a 4.8% increase YOY. Buyers have increasingly scrutinized customer acquisition costs of potential target companies, performing significant diligence on the efficiency of marketing spend and engagement. Supply chains have also remained highly analyzed, with many strategic and financial buyers preferring diversification in sourcing locations, absent of a high concentration to China. In addition, inventory management has been in heightened focus post-pandemic with many sector players working through excess product through Q3. Many prospective sellers have remained on the sidelines waiting for a more favorable transaction environment, which is expected to create a wave of pent-up demand and bolster E-commerce M&A multiples towards Q1 and Q2 of 2024.

Strategic buyers have continued to drive the M&A market through YTD 2023, accounting for 74.7% of total transactions. Private strategic acquirers have been particularly active, comprising 43.7% of deal volume. Recurring revenue, low customer acquisition costs, and a loyal customer base have been key attributes of attractive target companies in the current market. Financial buyers have demonstrated increased caution in the current market amid higher transaction financing costs and uncertainty around the near-term strength of the consumer. Through YTD, financial acquirers have comprised 25.3% of total transactions, largely through add-on acquisitions which often require lower debt usage than traditional buyouts.

Strategics Bolster Capabilities, Sponsors Enhance Portfolio Holdings in E-Commerce Sector

While M&A markets have been challenged through Q3, select buyers have remained acquisitive in the current market. The Business-to-Business (B2B) segment of the market has demonstrated signs of strength with market participants seeking to bolster existing capabilities. In addition, while private equity has remained cautious amid higher transaction financing costs and a difficult exit environment, add-ons to portfolio holdings have remained attractive. Select recent transactions are outlined below.

  • MSG Distributors Acquires Boxed (August 2023, Undisclosed) - MSG Distributors acquired Boxed, a seller of bulk-sized pantry items at wholesale prices, in August. Terms of the transaction were not disclosed. MSG provides regional distribution of consumables and household essentials. It also services B2B accounts through its distribution and fulfillment centers across the U.S.
"This acquisition strengthens our inorganic growth strategy and diversifies our distribution models nationwide. The loyalty and trust that customers and brands have in Boxed is priceless, and we are committed to continue this model of offering bulk-sized products to customers at wholesale prices," commented Mark Gadayev, MSG's President in a press release.12


  • Cedar Brands Acquires Nuzzie (July 2023, Undisclosed) - Downing Capital Group-backed Cedar Brands acquired Nuzzie, a leading weighted blanket brand for an undisclosed sum in July. Nuzzie is a direct-to-consumer (DTC) provider of knit weighted blankets ranging from eight pounds to 25 pounds. Cedar Brands is a consumer brands platform focused on Home, Family, and Lifestyle categories and is actively pursuing additional acquisitions, according to a press release.13
The acquisition of Nuzzie showcases the robust private equity appetite for category-leading brands with strong customer following. As debt capital has remained expensive, sponsors have increasingly opted to pursue add-ons to portfolio holding companies.


To provide an update on your business or learn about Capstone's wide range of advisory services and E-Commerce sector knowledge—including trends in E-commerce M&A multiples—please contact us.

Connor McLeod, Vice President, was the lead Market Intelligence contributor to this article.


  1. U.S. Census Bureau, "Advance Monthly Sales for Retail and Food Services,", accessed October 21, 2023.
  2. U.S. Bureau of Economic Analysis, "Personal Saving Rate,", accessed October 21, 2023.
  3. Digital Commerce 360, " US ecommerce Q2 sales indicate permanent COVID-19 boost,", accessed October 23, 2023.
  4. Deloitte, " Deloitte: Holiday Retail Sales Expected to Increase Between 3.5% to 4.6%,", accessed October 23, 2023.
  5. Walmart, "Walmart Reports Second Quarter Results,", accessed October 23, 2023.
  6. BJ's Wholesale Club, " BJ’s Wholesale Club Holdings, Inc. Announces Second Quarter Fiscal 2023 Results,", accessed October 23, 2023.
  7. Costco, " Costco Wholesale Corporation Reports Fourth Quarter and Fiscal Year 2023 Operating Results,", accessed October 23, 2023.
  8. Target, " Target Corporation Reports Second Quarter Earnings,", accessed October 23, 2023.
  9. Chewy, " Chewy Announces Second Quarter 2023 Financial Results,", accessed October 23, 2023.
  10. Amazon, "Amazon.Com Announces Second Quarter Results,", accessed October 23, 2023.
  11. Wayfair, " Wayfair Announces Second Quarter 2023 Results,", accessed October 23, 2023.
  12. Cision, " Acquired by MSG Distributors, Inc.; A New Chapter Begins for Membership-Free Wholesale Retailer,", accessed October 23, 2023.
  13. Cision, "Cedar Brands, a Modern Consumer Company, Acquires Nuzzie, the Leading Name in Weighted Blankets,", accessed October 23, 2023.

Related Transactions

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