By Matt McCallApr 23, 2017
Today I want to talk about two industries that may not come to mind when thinking about revolutionary technology: finance and retail. Banks and stores have been around forever, right? Yes, but both are making big moves to change the way consumers have done things for years, and investors can’t afford to ignore the results.
We’ll start with the finance and banking industry. Think about how much things have already changed. Going to the bank used to be a weekly chore. But when was the last time you actually set foot inside your regional branch? I would guess it’s been awhile. That’s because banks have been building up their online presence, and there are even a lot of banks out there now that work solely online – with no physical brick-and-mortar stores.
Online banking is more convenient for consumers, and while it has definitely created increased competition for the banks themselves, it’s also helped lower operating costs. I suspect there is still a lot of growth potential here, especially as banks concentrate more heavily on the needs of entrepreneurs and younger generations, who demand everything at their fingertips.
Robo-advisors are another big technological advancement in the financial industry. Like magazines and brick-and-mortar retail, human financial planners are becoming a thing of the past and investors are looking toward robots to manage their wealth. Yes, I see some potential problems here, but it is a trend we can’t ignore. These robo-advisors use the same software as their human counterparts, but they don’t get involved in the more personal aspects of financial planning. What they do offer is portfolio management at a lower cost.
Speaking of brick-and-mortar, let’s turn to retail, where virtual shopping is quickly replacing a trip to the mall. In 2016, online purchases took over buying at physical stores, with shoppers making 51% of their transactions online compared to 48% in 2015 and 47% in 2014. In addition, 44% of smartphone users made purchases through their devices versus 41% a year ago.
It’s no secret that big-name brick-and-mortar retailers have struggled recently. Stores like J. C. Penney (JCP), Macy’s (M), Nordstrom (JWN) and Kohl’s (KSS) have reported a dip in sales while Amazon (AMZN), on the other hand, is still seeing double-digit gains.
Online sales in the United States are expected to reach $523 billion in the next five years, up 56% from jut $335 billion in 2015, mainly driven by purchases on mobile devices.
I like AMZN, too, but that’s where everybody else is right now. Instead, I would look to a company like Shopify (SHOP), which will be one of the biggest winners in the space as it provides an ecommerce platform to retailers and individuals who are selling their products online. The company currently powers more than 377,500 businesses in about 175 countries, and some of its customers include Tesla (TSLA), General Electric (GE) and Nestle.
SHOP has come close to doubling its annual revenue each year since 2013 – a truly remarkable feat – and I think that growth only continues from here.
I have one more trend I want to talk to you about, and if you thought finance and retail was an odd topic when it comes to technology I suspect you’ll be even more surprised with the next one. Keep an eye out for my next article to learn more!
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