Private equity is looking elsewhere, and many investors show no interest in small and mid-sized retailers, but True co-founder Matt Truman sees opportunity in the industry.
It's official: our industry is despised by investors and government in equal measure.
Last year, the world of private equity allocated just 3% of all its capital to our global sector as it preferred to chase the single most crowded trade in history, technology.
Meanwhile, anything with a listed market cap of less than £1bn is increasingly not worthy of even coverage, let alone deep research and considered analysis.
UK retail is the largest private sector employer, responsible for nearly one in 10 workers. When combined with the consumer sector, it comprises 410,000 active firms and delivers just under 20% of UK GDP. Put simply, it is the single largest ecosystem by both employment and business volume that spends its days feeding and clothing people.
Yet this and previous governments have chosen to bombard it with taxes and legislation that hinder investment and offer little to benefit the underlying consumer or the retail flywheel.
Few realise or think about the fact that it is an industry that will probably be a net beneficiary of Al. Few think about its wider social impact, especially offering youth employment opportunities and the power of human interaction. Few think about the extraordinary array of talented, proven, and successful entrepreneurs we have at our disposal. Almost no one thinks about how to cherish and actually invest in it. At least not in the UK.
I had the privilege of listening to Dr Karsten Wildberger at the World Retail Congress. He's Germany's first federal minister for digital transformation and government modernisation, and a former chief executive of Ceconomy, one of Germany's leading retail groups. Dr Wildberger outlined a vision and a plan that is completely lacking in the UK.
He believes that ‘retail is infrastructure for everyday life’ that keeps cities alive and communities connected. Retail represents 26 million jobs in Europe, roughly one in seven, which means retail policy is also employment policy, skills policy, social policy, and opportunity policy.
He is firm on fair competition and community security being more important than the rights of criminals, and his plans were succinct and well-structured. The UK is crying out for a similar vision and a plan. Meanwhile, we have been waiting for three years just to close the de minimis tax loophole. It is breathtakingly pedestrian.
I believe that Al will be one of the great enablers for our industry over time.
Why is retail so unpopular?
Retail is complicated and ever-changing. It involves lots of people. It moves goods across continents. Those goods often have shelf lives. Wars, pandemics, and geopolitics have a nasty habit of disrupting supply chains. And consumers are extremely demanding about price, quality, convenience, and service. This inherent complexity makes profit levels harder to come by than for a SaaS technology business, but in the complexity lies its defensiveness and the opportunity.
If someone had told me that since founding my firm 14 years ago, this sector would incur Brexit and the loss of European Union partnership and trade, the collapse of sterling, the ongoing erosion of liquidity in the UK stock market for small to mid-cap companies, a supply chain crisis or five, a cost-of-living and inflationary crisis, Covid tariffs, two wars, and two rounds of President Trump, even the optimist in me might have turned around and headed the other way. Over my 26 years in our industry, I haven't witnessed such a plethora of challenges, and to invest has been challenging and volatile, but the complexity makes it ever thus. And now we have Al...
So is the world overlooking an opportunity? With valuations at a 30% discount to long-run averages, free cash flow yields in the double digits, but capital and liquidity are scarce, opportunity is everywhere for the brave investor.
But what about Al? I believe that Al will be one of the great enablers for our industry over time. The agentic possibilities are staggering, but the beauty of the complexity of physical goods and services is that it is difficult to fully displace them. We have it firmly down as a sector that will greatly benefit from Al if you are alive and open to its possibilities.
Opportunity-wise, we are not focusing on the customer-facing agentic shopping trend via third-party LLMs as many others are. We see the agentic operating model as a great opportunity. We see far more efficient operating models coming on stream that deliver significant economic advantage, which in turn will allow the beneficiaries to put humans back into the front line to deliver great service.
It is service and the human touch that will deliver a competitive advantage. 'Human-led, enabled by technology' is how we frame it. The combination of depressed valuations, scarce capital and a sector firmly positioned as an Al beneficiary will surely awaken some investors' interest. We will always have the complexity. As a result, we will always have our fair share of failure, but in a world searching for opportunity, look no further than the entrepreneurs and managers of today's retail companies.
As Nathan Rothschild said in the 18th century, and as a brave investor might say in 2026: ‘The time to buy is when there's blood in the streets, even if the blood is your own.’