Once upon a time, ecommerce was the new kid on the business technology block. Fast forward to now, it seems the only way to do business. In order for companies to remain competitive, many have adapted to the digital space and adopted the technologies powering this revolution.
Traditional ways of doing business are losing ground to young startups. In fact, this has happened so often that the term “disruption” has been used to describe this phenomenon. When the old way of doing things has become stagnant, newly arrived visionaries are willing to drive it away, in some cases for good.
“It is a big, big force, and it has already disrupted plenty of industries, and it will disrupt more,” said Warren Buffett at Berkshire Hathaway’s annual shareholders’ meeting in 2016. While he was referring to ecommerce, he was also addressing the reason his company had cut its share in Wal-Mart Stores Inc.
Charlie Munger, Warren Buffett’s right-hand man today, is an accomplished investor in his own right. Just like Buffett, Munger had his own investment partnership (he was convinced to go into investing by Buffett, leaving behind a career in law) before coming to Berkshire Hathaway. However, unlike Buffett who followed a deep value investing strategy as Read More
At $298 billion, Wal-Mart’s market value continues to trail behind online retail powerhouse Amazon’s $356 billion. In 2016, the ecommerce giant reported a net revenue of $135.99 billion, up from $107.01 billion in 2015.
A mobile society
To understand the impact of the online revolution, it is not enough to pit Amazon and Wal-Mart against one another. Consumers also need to be considered as well. A recent pfs Research Center survey showed that 17% of Canadians make online retail purchases with their mobile device more than once a week. Approximately 22% of millenials report making a purchase from a mobile device and about 20% of 18-54 year olds made a purchase from a tablet. Millennials remain the reigning age group to beat in any given year. These consumers aged 18 to 34 are digital natives. They are comfortable integrating tech into their daily lives. They like shopping in anonymity, paying for purchases with a click, and getting packages fast.
Not just retail
Digital disruption has been reaching far and beyond retail. Even insurance, considered a complacent industry, will have to change its ways as a result. Millennials compared to other generations are more than twice as likely (27% vs 11%) to purchase their policies online, according to a Gallup poll in 2014. They also go online to conduct research as well. A survey says that a little under half of millennials in the Canada check “comparison websites” before they buy insurance products. These comparison sites provide them with relevant information such as reviews, beginner’s guides, and other resources.
Other industries already shaken up by new technology and platforms include the following:
- Banking, PayPal
- TV and movie rental, Netflix
Then there are the platforms that provide individuals with the chance to sell online courses, artisan wares, and even their hobbies and personalities (for the so-called “influencers”). Again, most participants in such activities are millennials. But the internet does not discriminate especially when it comes to age, so expect representatives from the middle-aged and senior groups as well.
So, should you invest in ecommerce?
In paring back its stake in Wal-Mart, Berkshire and Warren also realized it was a mistake not to take on Amazon many years back. Still, the industry that the online retailer represents has room to grow, considering that last year’s online sales accounted for only 8.3% of the total sales.
Stocks that are growing faster than their bigger counterparts or worth keeping an eye on right now include: Yelp Inc, Shopify, Paypal Holdings Inc, and Expedia.
For those looking to benefit from the growth of ecommerce there is always Apple. It is not an ecommerce player per se. But if you think about its distribution model, it includes online purchasing as an option. Plus, its high-end mobile devices and iOS play key roles in connecting brands to consumers.
For those not too keen on investing in the e-retail business, then there is always Apple. The smartphone maker has remained strong post-Steve Jobs. Its previous fourth quarter saw soaring stock prices because its iPhones, smartwatches, and MacBook Pros beat sales expectations. If Buffett encouraged his deputy stock pickers to bet on the Cupertino-based company, it somehow meant he was betting on the kind of future that has already started unfolding.
With our increased use of mobile devices and dependence on tech, ecommerce is likely to keep growing. Both investors and consumers are likely to benefit from this boom in terms of convenience and capital appreciation. As new companies emerge in this space to disrupt conventional practices, we are likely to see incredible innovation and exciting advancement.