The massive global scramble to digitalize both private and professional matters is creating big winners and losers. Today, we are at a shockingly early point in the digital transformation.
The economy of the internet is still only a single percentage of global GDP. We are gradually heading to a place where the GDP of the internet will provide the majority of economic activity. This big social change is like a huge tailwind driving the most successful businesses in the next decade.
E-commerce penetration in the U.S. grew from 5.6% in 2009 to 16.0% in 2019. Then it grew about 30% in April. There are 5.7 billion adults on the earth of which about 4 billion have a smartphone. The penetration of e-commerce is still low in most countries because people lack good internet and digital tools. If one would like to buy a handmade fabric from a person in Senegal online, then there are quite a few complications with regard to the exchange of goods and money. However, the teams at companies such as Starlink, Stone, Stripe, Shopee, Square, and Shopify, are determined to provide the most efficient platforms that allow and urge everyone to participate.
As digital commerce is growing more businesses are building a direct relationship with the consumer. For instance, L’Oréal’s chief digital officer said “We are setting ourselves up for a world where half of the business is e-commerce and 80% of customer interactions will happen online.” L’Oréal quickly shifted its advertising and marketing spending online, which led to an increase from 50% to 70% of its total since the start of the pandemic. As a result, digital advertising on platforms such as Instagram, Amazon, Cardlytics, Spotify, and Roku, is set on a trajectory this year to overtake spending on traditional media.
Changes are clear beyond commerce; the pandemic has caused a massive acceleration of remote education and telehealth which grew from an 11% penetration in 2019 to about 46% currently. The pandemic has increased the need for technology that enables on-demand virtual urgent care, virtual visits, remote personalized monitoring, and collection of data to improve care driven by machine learning.
The investor does not need to have an opinion on the general economy. It does not matter what the general economy or the stock market will do. What matters to the investor is whether one belongs to the group to whom wealth is shifting.