24 October 2018
Workers process shipments at an Amazon fulfillment center. Online shopping is set to be the trend. Photo: Reuters
Workers process shipments at an Amazon fulfillment center. Online shopping is set to be the trend. Photo: Reuters

Online shopping still a key investment theme in next 5 years

All business activities have to create value for customers. Shopping malls, department stores or super markets came into existence and later thrived as they used to be the only venue to display products and goods. Therefore, they were the only option for both consumers and product manufacturers.

However, almost all products nowadays can be found online, and consumers can easily purchase them and get them delivered to their home. Why would they bother to go to brick-and-mortar stores anymore?

For example, if you wanted to book a trip in the past, you had to go to a travel agency to get the necessary information, and book tickets or hotels through them. Also, a guided tour is a better choice when there is limited public information available about the destination.

Nowadays, online travel agencies can do all that for you. You can download all the tours online and compare air tickets from different airlines. Also, you can easily find travel information about destinations all across the globe.

The same will happen to standardized products like beverage, tissue and grocery goods.

In fact, American commercial property trusts like Regency Centers and Kimco Realty have suffered a 20 to 40 percent decline in share prices over last year.

Nevertheless, not all shopping malls will be replaced by online shopping. Offering product differentiation and unique customer experience are vital. Consumers would rather try in-store shopping if they want to buy a Louis Vuitton handbag or an engagement ring. In that sense, high-end shopping malls will be able to buck the trend, while those who target the mass market might continue to struggle.

Millennials’ buying power will soon surpass that of the generations before them. Online shopping is set to be the trend.

Investors should constantly adapt to the changing world. Billionaire investor Warren Buffett has started to invest in airline stocks in light of falling oil prices, after avoiding them for years. Internet technology stocks will dominate the market in the next five years at least.

Internet firms may tie up with offline retailers to force others out. In the end, most offline players will fade out.

This article appeared in the Hong Kong Economic Journal on July 5

Translation by Julie Zhu

[Chinese version 中文版]

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Columnist at the Hong Kong Economic Journal

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