When you hear e-commerce, Amazon typically dominates the discussion, but what is the future of retail and is there more of the marketplace than just Amazon?
Stores such as TJ Max, Toys R Us, Sears, The Limited are filing bankruptcy or closing stores at a pace unlike any time in recent history. In 2017, over 7,000 stores were closed and the trend appears to be accelerating into 2018. The “retail apocalypse” is upon us and entrepreneurs, business owners and investors better prepare themselves as e-commerce is the future of retail.
Industry analysts expect an average of double digit growth in global e-commerce sales over the next five to ten years. From large corporations to small boutiques, e-commerce has changed theway people do business online, selling their products and services to new audiences worldwide. The largest driver of online growth is the number of e-commerce sales from mobile devices. This trend is expected to continue well into the future.
There are a series of transformational changes that will impact and shape e-commerce sales in the years to come. E-commerce sales will be boosted by personalized shopping experiences delivering the right product, content and deals to each customer. Social selling will become more prevalent as businesses utilize social media to capture business directly on each platform. Artificial intelligence will be more integrated into e-commerce transactions through a variety of personal assistants to enhance the shopping experience. One big stumbling block of e-commerce is same day delivery and returns. With advancements in logistics and flexible delivery options, customers will benefit with faster delivery times and increase their reliance upon online shopping.
Benefits of Investing in E-commerce
- Fast growing market – e-commerce is growing at 20% annually for the past 5 years. As more brick and mortar stores go under, the growth rate will continue to increase.
- Ease of participation. Rather than taking the time to start your own online store, investing in e-commerce companies allows you to participate in this market without having to endure the learning curve of starting a business.
- Gets better as technology improves. With additional technological developments, online shopping will continue to gain broader acceptance with ease of use.
- The US retail market is valued at $5 Trillion and only 16% of these sales were online. This is an enormous opportunity as buying habits shift to e-commerce.
Outside of the obvious investments such as Amazon (AMZN) and eBay (EBAY), there are
numerous opportunities to invest in companies that are literally creating the internet and e-commerce. These companies offer a centralized platform that helps merchants create websites, integrate payments, analytics, logistics and customer management. WordPress/Woocommerce, Shopify and Magento are the three main companies providing e-commerce platforms to tens of thousands of new businesses each year. Industry leader WooCommerce held 18% of the market last year, Magento controlled 16%, Shopify (SHOP) controlled 13%, while ATG Commerce (ORCL) platform, comprised 16% of the market, Demandware, held 10% and WebSphere (IBM) held 7%. Woocommerce is privately held and Magento was recently purchased by Adobe (ADBE).
Alternative E-commerce Investment Opportunities
Big data companies that provide the backbone and infrastructure for e-commerce are always an intriguing opportunity. Every single WooCommerce site requires a SQL database behind it along with data storage. Also payment processors such as PayPal, Square and others will be beneficiaries of the explosive new growth online. You may also want to consider other emerging industries such as cannabis. One investment that stands out is FSD Farma, a new company that recently entered the stock market in Canada and sells cannabis.