Ecommerce is one of the fastest growing sectors in the world. Although it may seem to have won the wars, it still has a lot of room for growth. Ecommerce’s growth reminds me of the old story about the frog in boiling water. Each year, ecommerce turns the heat on, taking a large share of the retail market, and each year, physical retailers feel more uneasy with their situation, but in no single year is the growth in ecommerce dramatic. That is, until 2020. The pandemic brought five years of change in just its first three months. It became necessary to shop online. At the beginning of 2020, ecommerce had a 17% share of retail, by the end of the second quarter, that had jumped to 22.5% In the United Kingdom, ecommerce penetration was at 20% prior to the pandemic, and rose to 30% in the three months after the pandemic began. These levels have broadly held since then. Ecommerce has become a dramatically growing sector with a massive market opportunity ahead of it. It has spawned giant firms and attracted huge investments. It’s a place where you should be investing. In this article, I’ll tell you how.
Start an Ecommerce Firm
The most direct way to invest in ecommerce is to found your own ecommerce firm. The market is hyper-competitive, so you have to have a powerful value-proposition founded on incredible product-market fit. Companies such as Shopify have emerged to challenge Amazon in an oblique, non-direct way, offering brands tools to build their own online stores. Shopify has not cornered the market for tools for developing online stores. It is still a sector ripe with opportunity.
There is also space for ecommerce platforms. If you can find a niche where you can offer retailers a platform to sell their products, you have yourself the kernel of a business idea. eBay, for instance, is an online auctioneer, Etsy is a platform for handmade goods and other custom products, and as we said, Shopify provides tools for building online stores. There are different kinds of platforms and yours is to find a platform for a niche, underserved market. Platforms can have very niche product specializations, such as the market for baby products like shop Silver Cross strollers. The important thing is to have a big enough market to support the business model.
Get Equity in an Ecommerce Store
There are a plethora of ecommerce firms either at the startup stage or at a mature stage like Amazon. It’s important to realise that some traditional retailers have successfully built their ecommerce capabilities and are challenging incumbents like Amazon. So if you are looking to invest in ecommerce, the non-obvious choice of putting money into a traditional retailer may be a market winner. Target is a great example of a traditional retailer with incredible ecommerce capabilities.
If you are an accredited investor, you can look at ecommerce startups. You should understand that startups have a high risk of failure. So you need to spread your bets. In the typical angel investor or venture capitalist portfolio, there is an expectation that most of the firms there will fail. These investors bet on having one successful firm whose gains will far outstrip the losses from the other businesses, and out them in a huge winning position.
For smaller investors, crowdfunding sites such as Kickstarter, allow you to invest small amounts of money in businesses within the ecosystem, in exchange for equity or even convertible debt instruments.