Here’s bad news…
Major U.S. retailers, such as Barnes & Noble, Radio Shack, and Abercrombie & Fitch, have announced to shut down more than 6,000 physical stores permanently across the country.
People started to concern about the U.S. economy because who knew how many this kind of tragedy would happen again in the coming years, and some even assumed that this news was just the beginning of U.S. retail collapse. However, if you think carefully, you will realize that the U.S. economic condition is just fine. So what has actually been forcing these retailers to close thousands of stores?
The answer is “the e-commerce war”.
“Retail guys are going to go out of business and ecommerce will become the place everyone buys.”
– Marc Andreessen
Is e-commerce that powerful? Let me show you some charts.
As you can see, North America, Europe, and especially Asia e-commerce investment activities are all growing at a staggering rate. Also, when you look at the e-commerce global investment chart, it is really hard to imagine that in Q1’10, investors only funded 0.3 billion in e-commerce global investment, but in Q2’15, the total amount of the investment reached to 4.9 billion.
Most of these startups didn’t have much revenue in the early stage, but they still received huge investments from VCs. Well, in my opinion, investors care more about business value than just revenue because a new company’s valuation is almost equal to its ROI. Hence, when VCs see a high potential startup, they will probably invest or acquire it as soon as possible. It is the same strategy of playing stocks.
However, big investors, like Amazon, eBay, and Alibaba, don’t just invest or buy these startups in order to make more revenue; they want something more than that. I think one main reason is that these investors don’t want their competitors to snap these valuable startups up and become stronger than them so they need to buy these small companies first. Another crucial reason is because of data. Big investors know that it is a lot easier to gain user databases by purchasing startups than to acquire new users by themselves. Also, some small companies’ app functions are just cooler than these major players’ and big companies are afraid of these startups to become larger than them and start to cannibalize or even eat them up one day.
Next, I want to show you some charts. Clearly, Asia (especially China and India) is becoming the new e-commerce battlefield, but is Asia really a market that is worth occupying in the future? I think no one is a 100 percent sure about it, and yet, at least we know that investors are pouring money into Asian startups.
Big investors are “gathering troops’” for the global e-commerce war, particularly for “the Battle of Asia”.