Which sectors have been disrupted by new technology?

There is no doubt that the Internet has changed the way we live and the way businesses operate. The ability to communicate with people all across the globe in a split second has change the world we live in. However, from an investment point of view, which sectors have been disrupted by new technology?

When we say which sectors have been disrupted by new technology perhaps we should say which ones have been most disrupted? Is there really any area of business which has not been heavily impacted by the Internet?

Banking sector

As the banking sector is something the majority of us use on a daily basis, it stands to reason that it was one of the first to be impacted by the new technology era. The ability to bank on the move, apply for loans on the move, make payments on the move and use contactless cards has been a game changer. It has significantly reduced the cost base for the new breed of challenger banks and niche lenders. They have been able to build businesses from the ground upwards at a fraction of the cost of traditional banking/finance giants.

Intense competition within the banking sector continues to this day and customers are now faced with a much broader range of services and products than ever before. However, have service standards/support slipped?

Retail sector

Few investment sectors have been hit as hard as the retail sector with traditional shops now struggling to survive amidst their more nimble online counterparts. The emergence of Amazon has also had a massive impact, offering the ability to buy discounted products backed by consumer feedback. In many ways it is the trust factor associated with Amazon, and the fact it deals with literally thousands upon thousands of suppliers, which has allowed it to become one of the largest companies in the world.

Will we get to a situation where visiting a high street shop will be the exception as opposed to the norm?

Social media

Social media is a tricky subject because in reality there was no such thing as a social media sector prior to the Internet. Social meetings were physical meetings in homes, social clubs and town halls up and down the country. However, the emergence of the likes of Facebook has seen a significant fall in face-to-face communication which has its pros and cons depending upon who you speak to.

In the early days many so-called experts predicted that social media companies would fall by the wayside. True, some have fallen by the wayside but the likes of Facebook and Twitter continue to prosper.

Changing business models

As we have touched on above, the emergence of new technology and the Internet has had a massive impact upon the business models of years gone by. Due to the relatively low cost of setting up an online business we have seen huge pressure on traditional margins. This has forced many companies to rethink their future plans and look towards the Internet as opposed to physical outlets. There are some sectors where face-to-face communication is still the best method of business but in the real world these are few and far between. Only a couple of weeks ago we saw the demise of UK online letting agent Upad which had itself disrupted the letting industry and was then disrupted by other disruptors!

Word of caution

There are a number of issues to take into consideration when looking at new technology and the impact on various business models and business sectors. The first thing to consider is the slashing of base costs which can lead to a race to the bottom. In this circumstance very few companies will benefit in the longer term and some will fall by the wayside. The second thing to consider is the premium that many investors place upon companies which create new technology but are not yet profitable. There are reasons why these types of companies attract a premium to their share price but the reality is that not all of them will succeed.

If you pick the successful ones, you will do well, if not, then what you have left?

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