The case for investing in innovative online retail businesses

I’ve long been a fan of contrarian investment strategies. Having the same strategy as everyone else makes it hard to differentiate and generate outsize returns. I’m also a fan of focused investment strategies – they allow you to build expertise resulting in better investment decisions and better deal flows as entrepreneurs seek out your expertise.

As I’ve written before, our investment strategy here at Forward Investment Partners is to focus on innovative online retail businesses. According to pandodaily, as well as being focused we are also contrarian:

Silicon Valley has run away from the ecommerce category. The most common arguments among ecommerce bears are that the sector is over-invested and that late-stage valuations do not map to public company comps and realistic acquisition values.

This creates opportunity for us. There is still plenty of scope for innovation in online retail (I use this term rather than ecommerce to denote that we are moving beyond using simple websites to sell third party products) and online spending amongst consumers is still growing like a weed. Moreover, as an early stage investor the late stage valuation issues don’t directly effect us.

The pando article is actually a call for further investment in the sector, and they outline three characteristics that will be required to make the next generation of online retail businesses successful:

  • Authentic brand
  • Proprietary product or uniquely curated experiences
  • Operational excellence

I couldn’t agree more. We are all about well designed products and services that connect deeply with consumers as the foundation for building great brands. Operational excellence is a given.