In the last three years, Shopify (TSX: SHOP) has seen its share price rocket up by over 1000%. And while a lot of this growth can be attributed to the hard shift to online shopping that occurred throughout the COVID-19 pandemic, the eCommerce giant has been, more or less, on a sustained upward trajectory since its IPO in 2015. In fact, the growth multiple in Spotify’s share price for the three years following its May 2015 IPO comes startlingly close; rounding it up to a nice neat number, this period saw Shopify’s price multiple by nine.
That seems like a remarkable performance; multiple thousands of percentage points in price gains in the space of five years. However, Shopify’s performance is just the continuation of a trend that’s been happening for a long time. Take, for example, Amazon. A $500 investment in it back in 1997—when it was trading at just over $1.50 per share—would be worth somewhere in the ballpark of $7 million today. That’s the power of the shift to online retail.
Just like physical retail, eCommerce presents opportunities to a broad spectrum of service providers
But there’s more to this shift than just online platforms like Amazon and Shopify, just as there’s more to the physical retail landscape than malls and Sunday markets. There are countless service providers without which the whole shebang would grind to a halt. Sticking with physical retail for a moment, the industry is serviced by everyone from marketing specialists to catalog printers, cleaning service companies, real estate developers and everyone in between. And when retail does well, they all do well.
Fortunately, for many tech companies, much the same can be said about the trickle-down effect of online retail success. The more customers are spending online, the more that payment processors, hosting providers, ad networks, and other associated industries make. This positions the companies servicing online retailers in the enviable position of benefiting from a rapidly growing market.
What opportunities are there in eCommerce
However, while the trickle-down effect of eCommerce is only going to increase as the world continues its transition to online, taking on established players in established verticals isn’t where the biggest opportunities to profit from this trend lie. Going up against the likes of Amazon’s AWS cloud platform or Stripe’s payment processing is just fighting over an already over-served market where there’s not a huge amount of room for product differentiation outside of competing on price.
Instead, new startups and investors looking for opportunities that will deliver similar growth to what Amazon and Shopify have delivered should be looking at emerging technologies that are only just beginning their encroachment into the retail landscape. And here, the most direct way to uncover these technologies is looking for opportunities where the integration of tech with retail is yet to fully disrupt incumbents.
Try before you buy still a saving grace for physical retail: soon to be disrupted
One of the saving graces that has softened the fall for physical retail is the simple fact that customers cannot try products prior to ordering them online. Until now, trying things out online simply meant looking at a handful of photos and, maybe, looking at measurement details and guestimating at what something would be like once delivered. But, accelerated by the forced closure of many retail outlets throughout the COVID-19 pandemic, a new crop of startups are looking to bring try before you buy online.
The solutions being presented are varied, but most of them revolve around either making the returns process easier for customers, or by utilizing maturing AR and VR technologies to provide instant access to almost-real interactions with a product. At the moment, the buzziest of these two options for enabling tryouts seems to be in companies like Olive and Black Cart. Each takes a different approach to this, but they both revolve around the use of traditional postal and courier services for delivery and returns, meaning that, despite the rapidity of online shopping, product try-outs like this are hardly instantaneous. In many cases, it will still be quicker for many customers to just head into a local store.
Virtual and Augmented Reality will be the biggest retail disrupters of this decade
Whilst physical interactions with a product will likely remain the truest way to experience it prior to committing to its purchase, relying on traditional post and couriers for delivery and returns remains somewhat cumbersome. It also still requires the customer to commit to a limited selection of products they wish to try out; a far cry from, say, the full day out shopping experience where hundreds of items of clothing, shoes, and accessories can all be tested in rapid succession.
This is where Augmented and Virtual Reality companies like XRApplied are now stepping up to the plate and offering an ideal middle ground. By creating instantly available virtual product touchpoints that are almost-real, this emerging technology is quickly finding its way into the tech arsenal of many online retailers. Further to this, there are now also opportunities to bring products like furniture and floor tiles where the previous in-store model was far from ideal.
Companies like XRApplied will be the next big winners in the eCommerce boom
While it’s still in its infancy, AR and VR tryouts and tryouts are already gaining traction in the marketplace. Popular applications here include things like Google’s AR makeup tryouts (solving a big sanitation problem at a time like now) and XRApplied’s floor tiling app, which touches on the big opportunity that exists in bringing previously instore-only products into the home.
And, just like Amazon and Shopify, companies like XRApplied will, ultimately, go on to become some of the most companies to emerge from the accelerating shift to everything online. Amazon emerged out of the initial growth in online shopping. Shopify emerged as an early enabler of the recent race for all and sundry to also set up shop online. And XRApplied will be at the ready for each and every business looking to set up VR and AR product experiences online.
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