Investment funds and institutional investors looking for diversified opportunities are currently gravitating towards solutions that deviate from traditional assets. Among these, e-commerce stands out every year as one of the top catchment areas, for a variety of reasons; so what is driving the move towards this type of investment?
Every year, several thematic investment funds are launched, and investors are increasingly interested in staying in the right trend or identifying what could be explosive trends.
In recent years, classic assets, with their decades-long security, have been shaken by the entry of trends increasingly linked to technological and business development: green economy, technological development, digitization.
This is where online shopping comes in, with its ability to tap into multiple domains and thus attract more and more investors.
Current investment trends
When entering the game, investors need to weigh up several factors on which to focus their assets, one of the most important being the risk/benefit aspect.
While risk increases as so does the benefit (i.e. the return on investment), this rule applies almost inversely to certain types of asset; the choice to invest in “safer” realities (where a level of risk exists, although not linked to the nature of the asset) has led to the growth of objectives such as e-commerce or innovation technologies.
The action of the funds in these cases is dual: to ensure a return and to ensure growth; in this context, shrewd management and targeted direction make the asset capable of reaping great benefits even in situations where any other activity would collapse precipitously. We need only consider the strength that these funds (and to some extent institutional funds) have brought to a number of businesses during the first wave of the pandemic emergency; businesses that would have seen a collapse have instead had the opportunity not only to survive, but to thrive and increase their turnover.
Looking at the macro-areas where most of today’s investments are concentrated, we have identified sectors linked to new technologies that have seen a considerable increase in recent years; the main reason for this is the slow shift of the focus from the physical to the virtual market, and the growth of the Tech Innovation macro-sector.
These are the most interesting ones:
- Phygital: this is the connecting bridge between physical and digital experience (physical+digital); a new and very functional approach to selling and marketing, which implements technologies and communication methods from different fields, in order to achieve a result that is immediate and interactive. Investments in this case are aimed at both technology and research on marketing best practices;
- Digital Payment: investing in classic (Visa and Mastercard) or contemporary (PayPal, Revolut etc.) payment circuits is one of the most consolidated and, in a certain sense, secure trends. The need to manage monetary traffic, especially nowadays when it is increasingly digital, is paramount. The entry of cryptocurrencies on the market and the ever-increasing interest in their capitalization and commercial usability, then, has sanctioned new interesting game mechanisms;
- Virtual Reality: among the most engaging technological innovations, this is a way of implementing UX and CX in a much more customizable and effective way;
- A.I.: one of the most controversial fields, but also one of the most capitalized in terms of Tech investments. The study of Artificial Intelligence requires skills and professionals from many fields; also, a massive and constant dose of incentives and funds to be able to move forward. The implications and applications are still being studied, but they are multiplying by the day – which is why it is always a very desirable area;
- e-commerce: see the growth of Amazon and eBay, but also more sectoral realities such as ProduceShop, Shopify, Etsy.
E-commerce as a form of investment
We have kept the last item on the list in “mute” precisely so that we can explain its potential in detail.
The data on the growth of online commerce are increasingly promising; if we exclude momentary bubbles attributed to peculiar situations (such as the boost detected during the first closures), the level of growth, however, remains constant and positive. What is this due to?
The change in social and generational habits is leading more and more people to prefer the convenience of managing purchases remotely rather than going to a shop in person. The convenience of having a complete and up-to-date product catalogue always at hand, even during working hours or outside business hours, is leading users to see shopping as an increasingly habitual activity; on the shop side, having a database that goes well beyond the geographical limits of one’s own business, and much more freedom (but also responsibility) in the area of marketing, is certainly a significant incentive in the choice of opening an online shop.
A choice of values
Investors, whether traditional or established, seek to identify those businesses that are able to include all the winning features in their strategy; not just the product itself, but a whole series of characteristics that identify the brand and its mission:
- language and communication
- brand identity
- brand activism
- digital and technological innovation
- evolutionary business model
By focusing on this type of reality, the return on investment can be calculated in a more confident way by the various funds, going to solidify a way of “shopping online” increasingly directed towards the most functional and modern practices; the level of risk in the investment decreases, especially by turning to non-category-killer realities, which are able to pursue a safe and profitable data-driven approach.
The opportunity is that, by investing in virtual spaces, a bit like 30/40 years ago we invested in physical spaces for commercial purposes, we will find ourselves one day owning assets of “digital real estate” that, after years of cohabitation between the two modes of sale, could presumably acquire a higher market value to be considered in the sector.
When one targets their own investments on an asset such as virtual commerce, it is essential to make sure of the human capital that the business offers.
While innovation and automation are guarantees of performance, the total absence of the right roster of talents risks leading any company into stagnation over time. In the case of investment, this inevitably means loss.
- Corporate PR
- Finance Dept. ProduceShop (https://mbkfincom.com)
- Private Banking Italia
- Borsa Italiana