Reinventing Consumer-Facing Industries
Across Europe and Asia Pacific, business models are being upended in several consumer-facing industries.
Cloud Pick Machine vision solution for automated checkout in retail stores. Eliminates queueing, scanning, and payment processes China
Trustly Online payments solution that allows European consumers to pay directly from their bank account Sweden
Paytm Online payment and digital wallet solution provider India
Adyen, Bambora Flexible, online, in-store, and mobile payment solutions Netherlands, Sweden
Pinduoduo Social network-based e-commerce platform China
Thread Online AI-driven style and fashion advice service UK
BigBasket B2B/B2C grocery platform with fast delivery India
Flipkart India’s biggest e-commerce platform with large product range India
Ant Financial Comprehensive online financial products and services provider China
Monzo, Starling, N26 Digital-only banks offering variable levels of additional services UK, UK, Germany
Ottonova Integrated online health insurance provider Germany
MedOnline and Babylon Apps connecting doctors and patients for online consultations UK, China
WeDoctor App helping individuals manage all elements of their healthcare services, including virtual consultations China
CureFit App curating fitness, nutrition, and mental well-being services India
Healx AI-driven drug discovery acceleration platform aimed at rare diseases UK
*The deal summary, general partner, and/or companies shown above are intended for illustrative purposes only. While this may or may not be an actual investment or relationship in a HarbourVest portfolio, there is no guarantee it will be in a future portfolio.
In developing Asia, growth is underpinned by rising incomes and a rapidly emerging consumer class, which is increasing spending power and the quality of services being demanded. However, consumer industry disruption is also being felt across Europe and Asia Pacific. While the most obvious changes are being wrought by the rapid shift in shopping behavior towards e-commerce, this is merely the tip of the iceberg. Disruptive companies are creating an array of new services that reflect changes in the way that products and services can be consumed.
Sector-wise, these changes are most visible in our day-to-day lives in the retail sector. Numerous brick-and-mortar retailers have failed in recent years and in a highly competitive market we expect many other slow-to-adapt firms to follow. There are, however, significant, if less visible, innovations disrupting the financial services and healthcare and wellness industries, among others.
Key Growth Sectors
Changing How We Shop
Global e-commerce sales are estimated to have reached $3.5 trillion in 2019, accounting for 16% of total retail sales – up from 11% just three years prior.⁴ There are numerous start-ups, such as Sweden’s Trustly and Bambora, and India’s Paytm, that are tapping into this strong demand from businesses for online payment solutions. This demand can only increase.
Greater consumer and retailer comfort with online shopping is driving growth for a variety of companies across Europe and Asia Pacific. India’s BigBasket, for example, is an expanding e-commerce supermarket and wholesaler focused on rapid delivery of fresh produce.
Companies are also finding more creative ways to drive sales online. A great example is China’s Pinduoduo. Individual shoppers share the product they wish to buy through their social network on the app – the more friends they attract to do the same, the bigger the discount they receive.
Changing How We Pay
The global value of the mobile payment market is estimated to have surpassed $1 trillion in 2019 – and is projected to exceed $4.6 trillion by 2025.⁵ The potential for growth is substantial, given uneven penetration rates in major European and Asian markets.
However, the prospects for in-store mobile payment (as opposed to online retailing) are less clear, as the next wave of payment systems is already emerging. China’s Cloud Pick, for example, seeks to eliminate the physical process of paying entirely from the in-store experience via machine-vision technology – which would automatically identify both the customer and their purchases.
The confluence of rapid advances in AI and the continued emergence of a powerful consumer class in Asia leaves plenty of room for further growth as fierce competition drives the ongoing reinvention of the retail industry.
4 Digital Commerce 360 projections, November 2019. 5 Tariff Consultancy, “Mobile Payment Services 2019 - A Survey of the Development of Global Mobile Payments in both Emerging and Developed Markets”, June 2019.
Reflecting its citizens’ general comfort with new technological solutions and sharing personal data, China is not just leading the reinvention of retail, but also spearheading the digitalization of financial services. Ant Financial – an affiliate of Alibaba – has leveraged significant data resources, the ubiquity of its Alipay payment platform, and its parent company’s financial might to become the world’s largest online financial products and services provider. Ant spans banking, payment, credit, insurance, pensions, and wealth-management products, and is constantly evolving.
Europe also has its fair share of digital-only banks, particularly the UK, where brands such as Monzo and Starling have grown rapidly – though none have come close to Ant Financial in terms of either scale or the breadth of their offering. While Europe may not birth a fintech giant like Ant, we expect financial services across the continent to be disrupted dramatically by ongoing advances in AI and Big Data and increasing consumer comfort with digital-only money management.
Healthcare sectors across Europe and Asia Pacific look set to continue to grow strongly in coming years, driven by aging and growing populations and the greater prevalence of chronic diseases, as well as rising spending among a growing middle-class in developing Asia.
Expected Growth in Global Healthcare Expenditures 2017: $7.7T ------ 2022: $10.1T
Source: Economist Intelligence Unit data in Deloitte, 2019 Global Health Care Outlook
With growth comes greater pressure on existing systems. This creates opportunities for innovation to help meet increased demand in a cost-efficient and effective manner, particularly in parts of Asia where coverage is often patchy.
For example, China’s MedOnline is helping solve the issue of seeing a doctor in the country’s often overstretched healthcare system, providing a platform that connects patients and doctors for online consultations.
European healthcare systems are far better established and with few exceptions heavily centralized, which leaves less room for direct private disruption. However, there is likely more space for innovation in wellness services. In addition, given significant fiscal stress on many of Europe’s individual systems, there are opportunities for innovations that create efficiencies, as well as the possibility of greater private sector participation in service provision.
Snapshot of Global Retail
Estimated global e-commerce sales in 2019
2019 estimated e-commerce share of global retail sales, up from 11% – 2016 – up 5 percentage points
Estimated number of users of in-store mobile payment in 2020.
China - 81%
US - 29%
Canada - 21%
UK - 19.1%
France - 15.6%
Germany - 12.5%
Estimated share of smartphone owners that used in-store mobile payment in 2019.
Source: eMarketer estimates, October 2019. Includes point-of-sale transactions made by using mobile devices as a payment method.