Given Alceon Group has a wide investment mandate and Facioni has a particular passion for retail, the two will continue working together where it “makes sense”. Alceon and ACTA will co-manage Mosaic Brands (Noni B, Katies, Crossroads, Millers, Rockmans among others) with Facioni continuing as executive chairman. The two firms will also continue working on Alquemie Group, a retail investment platform that oversees owned and licensed brands including Lego Certified Stores, Surfstitch and Ginger & Smart.
Top of the agenda
To kick things off, Facioni’s first focus at ACTA is on accelerating Mosaic’s growth, after it struggled through the bushfires and coronavirus, then underwent a major reset to get it back on track last year. With the help of Facioni’s team, Mosaic invested heavily in online, re-worked its cost structures, re-adjusted its store portfolio and now, according to Facioni, it’s well-positioned to grow in the next few years.
“Over the next 12 months, the focus is to make sure the share market starts to recognise the potential of that business. At the moment, it doesn’t, but now we need to show the market that this is a great business that has reset through Covid and is set for phenomenal growth,” he said.
Next, Facioni is looking at more growth opportunities within Alquemie Group and plans to close at least one or two licensing deals in the next 12 months, as well as a couple of new strategic acquisitions.
A secondary focus for ACTA Group is capital growth opportunities outside of the retail sector – businesses that have an interesting vision but aren’t yet on the radar of the bigger private equity firms, said Facioni. The first acquisition in this space for ACTA is rail engineering business Trovon Group.
“The commonality between growth capital investments and retail is that at the end of the day, it’s about people,” he said. “The one thing it comes down to is backing the right management team – a team that you can work constructively with. You can do great things in whatever sector, but it always comes down to the people.”
Gun shy investors
Even before Covid, the retail industry didn’t always inspire a lot of confidence from investors. In fact, there are very few firms that focus on retail and in some regards, it’s not hard to see why. Insolvencies, store closures and a reliance on changing consumer sentiment have turned off some investors from the sector.
“There was a period years ago where private equity was doing a lot of retail, but then a lot of firms lost a bit of money in retail. It’s not a sector most equity firms focus on now, but there are a handful that are investing [in it] as part of a broader mandate,” observed Facioni. “I think they got a bit gun shy. Retail can make people nervous. It’s hard – and it can be very hard – there’s a lot that’s out of your control in retail, it’s true.
However, Facioni is adamant that this just creates more opportunities for his new business.
“Our job is to reduce the riskiness of retail investments and the way we do it is to focus on growth margin. We focus on the cost of doing business, we get the businesses as profitable as we can, focus on the cash and that removes a lot of the risk so you can withstand volatility of sales,” he explained.
“If your sales come off and you can’t withstand it, you can get into lots of trouble. Our job is to make sure the business can withstand sales volatility so sales are good. And if sales do come off, you can still weather the storm and get through it until sales recover.”
Here, Facioni shared his thoughts with Inside Retail on the current retail landscape:
Where the industry is heading
“Everyone was worried about insolvencies off the back of JobKeeper and Covid, but it hasn’t yet quite happened. To their credit, I think the government managed the economy through Covid pretty well with the initiatives they put in place. A lot of retailers made some really tough decisions and made some cost structures. But now that retail is still resetting, with structural shifts to online and fewer bricks-and-mortar stores, there’s a lot still happening. The focus is now on becoming a true omnichannel or multichannel retailer. I don’t think anyone’s quite got that right yet and I think that’s where the opportunity is.”
Trust the data, not anecdotes
“When people say they understand their customer, often it’s anecdotal. They think they know who the customer is. And if you think about traditional bricks-and-mortar retail, it’s hard to know who they are unless you’re physically watching them coming and going. Now we’re in the era of data and e-commerce and we’ve got so much data on our customers, we actually now can understand who they are at quite a granular level: we know who they are, where they live, what they’ve bought from us before, their shopping habits, when they’ve stopped shopping from us.
I think it’s about getting more sophisticated, not relying on just anecdotes and what you think, but actually what the data tells you. Most people are not doing the data piece very well.”
Chasing new customers: The grass is not always greener
“It a common thing that happens in retail – your sales come off because your customers are getting old or they’ve migrated to someone else, so you look for a new customer to prop up sales. You go after a younger customer or a more casual customer and as soon as you start doing that, you start to lose focus on the core customer. I’ve seen a lot of retail businesses do that, where they think, ‘Our customer doesn’t want occasionwear anymore, so we’re going to start doing activewear.’ It’s easy to say, but is that really how your customer is going to see you?
“Don’t fall into the trap of thinking the grass is always greener and chasing after a customer segment you don’t have.
“Everyone talks about putting the customer at the centre of what they do, but I don’t think too many people do it. They don’t necessarily live it, that’s the difference. You can talk the talk, but how many people actually walk the walk?”
The retailers that are kicking goals
“Those categories that are talking to the younger consumer and are about lifestyle products – Accent Group and Universal Store are playing in a really nice part of the market. I know they’ve gotten a little bit of a free kick through Covid, but I think they’re going to continue to do well. Businesses selling homewares will continue to do well. Beauty is a great category that will continue to do well.
“You can buy [a lot of] the same stuff at Universal or Accent elsewhere, but people like to shop there, they connect with the brand. They can connect with Hype and Platypus. Customers connect with Adore Beauty – that’s a business that understands its customers, connected really well with them and has built customer loyalty.
“You now have the opportunity to talk to your customer one-on-one on a very personal level. The technology’s there so that you can tailor the way you present yourself to customers at a very personalised level. That’s where retail is heading and that’s where the winners are going to be.
“Most retailers will only talk to you when they’re selling you something – another discount, another offer, whatever. But if you say, ‘I’m talking to you because this is something of interest, not just because of a transaction’, it’s a true relationship and guess what? You’re going to transact as a result of it. It’s where retail is heading that’s why I get so bloody excited, there’s so much opportunity.”