We have been thinking a lot about our sector focus recently and are coming to the conclusion that there is a huge opportunity for us to lead the next revolution in online retail. Currently 5-10% of sales happen online, depending on which country you live in, up from around 0% at the turn of the century. It’s a safe bet that the percentage of sales conducted online will continue to grow fast. Part of that will come from increased growth in existing businesses and models, but a good chunk will come from new disruptive innovations.
The most important of those disruptions will be a marked increase in direct to consumer sales. We have seen the beginning of this over the last few years with the advent of drop-shipping and innovative product companies that sell direct, but there will be much, much more to come.
We will be funding and helping create the companies that are driving this disruption.
They will be:
- Innovative product companies that sell direct (good examples include Graze, Bonobos, Warby Parker)
- Companies that re-imagine the online buying experience (good examples include Hailo, Lyst, Thread)
- Software and services companies that support this disruption (good examples include Stripe, Brightpearl, Hubspot)
There are a number of factors beyond increased broadband penetration which make now a great time for these sorts of companies:
- The decreasing costs of short run manufacturing
- The rise of crowdfunding for product pre-purchases
- The ability to use big data to personalise and innovate generally in products and services
- The ability to use cheap connectivity to create innovative new products and services
- The ability to create amazing buying experiences on mobile and tablets
The UK is a good place to build companies in this space – online accounts for a higher percentage of online sales here than elsewhere (10% of UK sales were online in 2012 compared with 5% in the US – see here) and a greater percentage of our online population buys things over the internet (87% of the UK internet population bought something online in 2013 compared with 73% in the US – see here).
I’d love to know what you all think about this. Our aim is to build and fund around 40 great companies in the UK in this space over the next 3-5 years.