High profile disruptive companies have become some of the most favoured among investors. This is partly because they introduce new business models that are attractive, are often capital-light, and appeal to younger generations who are open to adopting innovative products en masse.
As traditional retailing continues to decline the industry is attracting some impressive disruptors. Here are three companies disrupting the traditional retail model that I would consider buying today.
Kogan.com Ltd (ASX: KGN)
Kogan.com is an online retailer of a wide range of products. It sells electronics, homewares, and sports/leisure products. These include products under its own Kogan brand as well as major brands. The company also sells insurance, travel packages, and phone plans on its website kogan.com. Millennials have started purchasing online in large numbers and they are not necessarily loyal to traditional insurance companies and telcos in the same way that older generations are. Kogan will continue to amass a lot of data about its clientele and will use it to its advantage in meeting their needs in the decades to come.
Afterpay Touch Group Ltd (ASX: APT)
Afterpay Touch Group is a technology driven payments company that provides a service and software infrastructure which facilitate the purchase of goods and services. Afterpay allows retailers to offer a 'buy now, receive now, pay later' service that does not require customers to enter into a traditional loan or pay any upfront fees or interest to Afterpay. Customers can elect to pay using Afterpay, receive the goods instantly, and then pay in four fortnightly repayments. Afterpay receives a fee from the retailer, and charges late fees if customers don't pay on time. Its customer base is mostly made up of millennials, and customers have been growing rapidly. Afterpay recently reported a quarter on quarter increase in merchants using their product of 32%, and an increase in sales of 50%.
Zip Co Ltd (ASX: ZIP)
Zip Co is disrupting the same space as Afterpay Touch, offering retail customers the opportunity to buy now and pay later. Through Zip, customers are offered a line of credit which can be paid back interest free. Zip collects fees from retailers and also charges customers a small monthly account fee. Zip has focused on the retail, education, health and travel industries. As with Afterpay, the company is marketed towards millennials. Zip has also been rapidly growing its customer base. Zip recently reported a quarter on quarter increase in transactions of 57%, a 47% increase in transaction volume, and a 35% increase in revenue.
Foolish takeaway
All of these retail disruptors are relative newcomers to the markets. They have demonstrated exceptional growth over a short amount of time and are priced as such. You'll definitely pay a premium to own the companies at today's prices, but in 10 years time it may look like a bargain if growth continues.
