July 8, 2014

The Trillion Dollar Opportunity

by Ash Sethi


Blockbuster Video, Comp USA, Tower Records, Borders Bookstore—you may have had some fun childhood memories in one of these stores, but they’re a mere sample of how physical retailers have fallen at the hands of online competitors.

It wasn’t surprising—significant disruptions in the retail space occur every ten years or so.  First mall-based chains were crowded out by big box retailers that could leverage size and scale, which translated into better price-points.  Yet their considerable fixed costs, high leverage, and low operating margins were a handicap against e-commerce operators that didn’t have to build ornate stores, hire huge sales and logistics staff, and could surface efficiencies from centralizing their operations.

Now the next big wave of creative change in the retail space has arrived in the form of purely mobile based commerce.  The average person looks at their phone over 100 times a day, and is already using it for paying bills, ordering food, booking taxis, and managing finances.  The convenience of making purchases via phone at any time and location is too much of a win for consumers not to take advantage of it.  The proliferation of tablets as highly portable mini-laptops has accelerated the trend.  By the end of the decade, smartphones and tables will account for three out of every four online commercial transactions and make up over 50% of transaction value.

Technology firms offering mobile retail, mobile payments, and geo-location services can take advantage of the current shift in the +$1 trillion retail market.  This makes now the right time to explore acquisition opportunities in order to utilize sales channels and experience of larger players to innovate across the product sourcing, curation, and distribution dimensions.