The economist Joseph Schumpeter coined the term ‘creative destruction’ almost 80 years ago. It describes the process by which disruptive innovations overhaul existing businesses. I think this concept is quite relevant today. Coronavirus, lockdowns, the recession, and of course the stock market crash, have affected business in a big way. Some enterprises have had to close their shutters forever.
The UK’s brick and mortar retail stores are a good example. They were feeling the heat even before the crisis struck. Debenhams went into administration last year. Marks & Spencer has also been struggling. Lockdowns only accelerated this process. Fashion brand-cum-retailers like Laura Ashley and Monsoon Accessorize recently went under, for instance.
Online shopping in the spotlight
Where some segments have lost, however, others have boomed. I’m talking about the digital marketplace. Online sales were always the future of shopping, but now they are even more so. I reckon this disruptive innovation isn’t about to look back. As consumers, we look for convenience. Once we’ve experienced how convenient online shopping can be, we are likely to engage more with it. It might even become our preferred way to shop now.
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US-based Amazon, of course, is the biggest example of a company that has ramped up operations in the lockdown. But British brands are thriving too. Last week, I wrote about the FTSE 100 food delivery app, Just Eat Takeaway. Earlier this week, I talked of the FTSE 100 online grocery retailer, Ocado, which was almost undamaged from the stock market crash.
My stock market crash pick
Another such is the FTSE 100 online property portal and app RightMove (LSE: RMV). Unlike many other shares that have bounced back to pre-market crash levels, RMV is still trading at a discount. This was to be expected. Real estate is a cyclical industry, which is highly sensitive to recessions.
But RMV is in (relative) luck. It’s not a traditional real estate company. It’s an online marketplace bringing together buyers and sellers of property. As I was saying earlier, online shopping is a growing market. And RMV is a leader in the online real estate segment. So, it’s poised to grow further unless something goes terribly wrong. It has also been less affected than traditional real estate companies, which have had to stop all construction activity.
I reckon as investors get past the stock market crash trauma, and the FTSE 100 gets back on firm footing, RMV will start rising again. In fact, it already has. In June on average, its stock price has been 22% higher than in April, when it was at its lowest. But, there’s much more potential here. Its share price is still lower by 11% from the time I last wrote about it in January.
Until the recession’s over, the property sector is likely to remain muted. So investors in RMV may have to wait for a while before their gains really start kicking in. But I think it will be worth it. RMV is a financially healthy company in a growing sector. I’d buy today.
