Folly of spinning-off e-commerce arms

It is proving to be a buoyant time for retail IPOs with massive excitement around the Ao.com and Boohoo flotations.

What has most excited investors are the stratospheric valuations placed on these online-only businesses. The multiples attached to them will have also caught the attention of established retailers who must be looking on with serious envy.

Even though many of these businesses have online divisions, which are growing at impressive rates, this is not exactly being fully reflected in their overall valuations. They are languishing at unexciting levels.

As if there wasn’t already enough hype in the market at the moment around these IPOs Dan Coen, director at Zolfo Cooper, has thrown a bit of accelerator fuel on the bonfire with the suggestion that retailers look at spinning off their e-commerce divisions.

Surely this is madness. The idea that retailers should use this financial wheeze to bring in a one-off chunk of money to invest in their bricks and mortar businesses is confusing at best. Surely the area where they should be investing any funds in is their e-commerce areas!

After all, this is where the growth is and every retailer knows that they need to create a more multi-channel proposition if they are to enjoy future success.

By spinning-off their e-commerce arms they are pushing their channels further apart – which would be a serious mistake. The last thing retailers need to do is further propagate the silo mentality in their different channels.

They acknowledge that bringing together these various elements to create a seamless operation is proving to be one of the biggest challenges to them creating a more multi-channel proposition.

While it will no doubt be interesting for observers to see if any retailer follows this path of separating their channels, for the businesses themselves it would potentially be suicidal as it goes against everything that merchants should be looking to achieve in this increasingly digitally-driven world.