2017 and earlier

Technology disruption: Its effects and some opportunities

13 Nov 2017

Alina Gregory

Alina Gregory

Portfolio Manager

Amazon is making waves in the retail landscape as we know it; over 300 million active users, a market cap bigger than the next four largest US peers combined (Home Depot, Priceline, Netflix and Lowe’s) and one of the most valuable brand names in the world. No longer just an online bookstore – or even ‘the everything store’. Today Amazon is a marketplace for third party and private label products, a manufacturer of electronic devices and producer of media content. While also offering streaming and free shipping through Amazon Prime and a leading cloud computing service through Amazon Web Services (AWS). Amazon has literally stretched the landscape of retail up to the clouds.

At the core of its ‘virtual heart’ are its customers, with customer satisfaction scores placing Amazon consistently at number one on price, choice and convenience.  One in four people check Amazon’s user reviews while in a physical store. Its share of retail spending is increasing; in the past two years, one in every two dollars spent in retail was through Amazon. Traditional bricks-and-mortar players in the US like Sears and Macy’s are unsurprisingly struggling, and it is not for lack of demand. Since 1995, the US population has grown by less than 14%, yet the number of shopping centres has grown by more than 23% and total leasable area has grown by almost 30%.  As a result, retail sales per square foot have fallen 24% over the past ten years, forcing more and more store closures.There is simply too much supply in US retail.  Add to that depressed wage growth and constantly changing customer preferences and Amazon’s shift from ‘bricks to clicks’ becomes only part of the story, though it is quite a story:

Effects on advertising

Disruption on a macro and micro level

Lifeboats for disruption

Author

Alina Gregory

Alina Gregory

Portfolio Manager

Alina is a Portfolio Manager and joined through the Graduate Programme in 2014 after reading Economics with French at Durham University. She holds the Investment Management Certificate and is a CFA charterholder.

 

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