Reuters Breakingviews delivers agenda-setting financial insight. Its global correspondents react to stories as they develop, delivering sharp and provocative commentary on big financial news as it breaks. Click here to read more international insights.
The Internet is the economy’s version of the Hindu deity Shiva – destroying multitudes of companies and enabling the creation of new ones. According to a new report, the 10 fastest-growing U.S. industries all rely on the Web. With many of them thriving at the expense of established players, this god of annihilation and conception is just getting started.
The researchers at IBISWorld calculated revenue growth over the past 10 years and made forecasts of expected future expansion. Such predictions must be taken with a grain of salt: the same survey from 2012 included self-tanning product manufacturing and for-profit universities. Since then, MTV’s Jersey Shore has been cancelled and the government has cracked down on student lending.
Still, several years of super-charged growth are often indicative of trends with staying power – social networks and social-network game producers are ranked first and second in the list because revenue has, on average, grown 74 per cent and 134 per cent a year respectively for the past decade. Similarly, the past performance of online payments signals a bright future. Revenue in all three areas is projected to increase by more than 15 per cent annually over the next five years.
But the Web’s creative-destructive powers are best seen in the overlay of the Internet on traditional industries. Online sales of shoes, furniture and fashion all made the list of rapidly-growing sectors. E-commerce giants like Amazon and Walmart.com usually offer lower prices than traditional retailers – and convenient home delivery. That’s bad news for struggling retailers like Sears, Best Buy and J.C. Penney.
Specialty websites, like Zappos for shoes, also offer a wider selection than can be found in rival DSW’s bricks-and-mortar shops. The shoe retailer warned that same-store sales are now falling. And the Web’s ability to remove middlemen with high fixed costs means nimble startups can dislodge entrenched players. Warby Parker sells eyeglasses for a fraction of the price of the local optician. That also threatens the $25-billion business Luxottica has built in making and selling high-margin spectacles in its LensCrafters, Pearle Vision and Oliver Peoples shops.
The impact of electronic delivery of digital goods, from books to music to games, has long been evident. And it hasn’t been pretty for the incumbents. If this latest survey is on the mark, traditional retailers will soon feel the same pain.
Follow us on Twitter: