According to Mark Daoust, founder of brokerage and consulting firm Quiet Light, the e-commerce market is likely to stabilize this year.
“On the buy side, I feel like things have stabilized somewhat — maybe not in a great place, but they have stabilized,” Daoust said in a video interview this month. “We’re not seeing as many fits and starts as we used to.
Last year there was a market mismatch in either a lack of sellers or a lack of buyers. Now, buyers are active but more cautious, with the average time to complete a deal increasing to 150 days from 110 days in 2021.
Mark Daoust
“Buyers are more sensitive to issues within a business than in the past,” Daoust said. “The dominant issue now is that many more businesses are trending down. As one of my brokers said, we have a list of many firms that need things fixed.’
A buyer’s market
Daous predicts steady acquisitions through the fall and a chance for real improvement in 2025. That assumes businesses stop bleeding and sellers adjust their expectations to what is now a buyer’s market. This means that a higher percentage of deals fall apart during due diligence.
“A buyer is not going to acquire a business that is terminally ill,” Daoust said. “When evaluating something with evolving trends, buyers ask, ‘Is it going to be stable over the long term? Can I fix it? Can I get it back to profitability?” If so, it’s a great buy and a bargain for the buyer. This is a great opportunity for buyers to buy some of these businesses at lower valuations.”
It would help if interest rates were lower, making capital less expensive, but Daoust has seen a number of buyers with loans from the US Small Business Administration to finance their transactions, albeit at high rates of up to 13%.
Plus, for the right deal, buyers are willing to risk private loans or rates higher than 20%.
Regardless, post-election activity should pick up as well, regardless of who wins.
“Republican, Democrat. It doesn’t really matter. The market loses very quickly after that,” he said. “I would expect the same here.
Buyers are increasingly looking for more revenue channels outside of Amazon. Shopify, Walmart, Target, and TikTok are all solid platforms for selling.
“You can build a good business outside of Amazon. We are seeing more merchants expand into physical retail stores,” said Daoust. Social media is also becoming very relevant. “The TikTok deals we’re seeing look very promising.”
Artificial intelligence can change the game. Businesses will need to rethink search engine optimization and determine how to optimize for AI, Daoust said.
“From a business owner’s point of view, I’m like, ‘How can I take advantage of this?'” Daoust said. “A client came to us saying that ChatGPT recommended us. I was like, hey, this is something we have to look at now.”