Most onlookers believe COVID-19’s greatest effect on business is as an accelerant – speeding up already existing trends.

Take a look at E-commerce,. In 2000, E-commerce made up six per percent of retail sales in the US. Since then, digital share of retail has grown around 1% each year. At the start of 2020, 16% of retail was transacted via digital channels.

But, eight weeks after the pandemic struck, that number had leapt to 27%. That is a decade of E-Commerce growth in just eight weeks.

The world’s largest grocer Walmart is a case in point. It had year on year growth of 10% this year,  equal to 3.5 years worth of growth.  Online groceries in the US have seen six years of growth in six months.The trend of working from home has accelerated two decades in two weeks.

The area likely to see the greatest acceleration is healthcare. In the US, healthcare spend as a percentage of GDP is at 17%. (In Australia it is 9%). That’s worth $3.6 trillion.

Who are likley to be the big players in the HealthTech sector? Amazon alsready has Halo, an AI powered wellness app while Walmart are launching clinics.

Soon, the new doctor’s office will be your handheld device. The new doctor? AI.

It’s likely healthcare will have similar adoption rates as E commerce. That’s equal to one trillion dollars of healthcare funds moving online by 2025.

HealthTech going to be bigger than AI, E-commercre and social media rolled into one.

Posted in: Infographic of the day | Leave a Comment

Walmart are fighting back against Amazon with their version of Amazon Prime.

For $13 a month Walmart subscribers can now get unlimited free delivery.

If it works, Walmart can enjoy a greater valuation associated with recurring revenue businesses.

That in turn would win them access to cheap capital that Walmart could use to innovate at the same scale as Amazon has over the last few decades. This could double Walmart’s capitalization – all off the back of  just 4-6% annual revenue growth.

Posted in: Infographic of the day | Leave a Comment

Americans are more likely to get divorced then break up with Amazon Prime.

That is a startling fact, and one that points to the extraordinarily enduring appeal of what is being called Recurring Revenue Companies.

These are firms with a relationship with customers that goes on and on. Amazon’s Prime service is one obvious example. Another is Software platform Adobe. Int he last nine years Adobe have made sure an increasing amount of their sales come from customers who have subscribed.

Adobe’s recurring revenue as percentage of sales:

2010 10%

2019 90%

Why? Companies with recurring revenue relationships tend to out-perform transactional companies.The stock market also values recurring revenue companies much more highly, often at a multiple of six or ten times that of transactional companies, who have to reinvent their consumer relationship with every purchase.

Between 2010 and 2019, for example, Adobe went from being valued at 4x sales to 18x sales. That equals $200bn additional cash in shareholder value.

Apple have pulled off a similar trick this year.

Percentage of Apple Recurring Revenue in 2020

Q1 10%

Q2 22%

The reward for this change is a near doubling of Apple’s price-to-earnings ratio from 15x to 30x, which, in turn, is driving a 100% increase in the stock price since the start of 2020.

Apple One is the company’s attempt to accelerate this trend.

For $14.95 a month you get a bundle including Apple Music, Apple TV Plus and Apple Arcade. While this package does little to enhance the core offering from Apple, my guess is Apple will enhance Apple One in to a more robust offering real soon.

Posted in: Infographic of the day | Leave a Comment