Why I'm Betting on Stock

When the stock market crashed, negative emotions arised, but great opportunity presents itself. However, this isn’t about THAT kind of stock.

This is about inventory.

The Dropshipping Boom: Covid,TikTok and Lots of Pocket Money

Covid was an interesting time.

With the advent of short-form content paving its way into everyday life, we saw a preview what of a fully digitised world would look like, where education, business and events would all take place online. For the majority, there was huge difficulty in adapting to the new life, struggling with productivity issues and isolation.

For content creators, this was a golden age, where the main activity for the developed world was to scroll on Instgram reels, TikToks and watch long-form YouTube videos while eating lunch.

While everyone was inside playing Among Us, the governments were attempting their best 2008 Kevin Rudd impersonation by providing money to the public, trying to prevent a social and economic collapse. This resulted in future cost of living problems, however most governments had the brilliant tactic of losing power at the end of covid, to perfectly frame the future government for any excessive inflation.

So during covid:

• People had nothing to do except watch TikTok
• Had a lot of spending money

Add the rise of Andrew Tate, ‘hustle culture’ and Mr Beast’s Shopify adverts to the equation, and the perfect storm for E-Commerce Drop-Shipping was born.

The Goliath of E-Commerce

“Then, everything changed when Amazon attacked” - Some AliExpress Dropshipper

There was a key problem with dropshipping.

Shipping times.

Why would a customer wait 6 weeks for a product, when they could buy a similar item on Amazon and get it in 2 days?

Convenience is humanity’s biggest addiction. Fewer people are visiting shops and restaurants since there is less friction to simply purchase food and items online. The fear of online payments has dramatically declined, creating a world where everything is achievable, as long as you have an internet connection.

So how does anyone compete with a company that sells everything, and can ship it quicker than anyone else? The only way is to play their game.

The Push To Hold Stock

Amazon’s large network allows them to hold large amounts of stock, everywhere.

There is always a risk in holding items for stock, especially when smaller companies have finite storage space, however the companies that can provide the quickest, cost-effective and less erroneous service will win long-term.

Over time, drop-shippers will struggle to compete, even with their marketing funnels on TikTok and Instagram reels, with the potential exception of personalised, luxury items, in which demand is inelastic to the time taken to receive goods.

I’m betting that over time, businesses will look to save costs and minimise sales lost by increasing their held inventory. This means that companies who were able to manage stock manually or through spreadsheets, will need a dedicated system to ensure that they are using their space efficiently and effectively.

The Impact of AI

Since the emergence of LLMs, startups are either building products revolving around AI, or have to find a space in which a future AGI wouldn’t make their idea obsolete.

From an outsider perspective, it is unclear how close or far we are to reaching AGI, if humanity ever achieves it at all.

Warehousing/inventory management is a hybrid between physical and software components, making it expensive to develop fully automated solutions, even if AGI existed.

Most small companies don’t need fully automated warehouses, they just need methods of making their inventory management easy, reliable and resistant to errors. AI can help with adding new products into the database for validation, but a human (or robot) needs to scan these items in and out of stock.

There are some cool embedded hardware solutions of stock management. If you have ever shopped at Uniqlo and gone through their self-checkout, you would know what I mean, however I don’t see AI as a significant threat to the inventory management (just yet).

If you can estimate humanity behaviour, you can use that information to estimate business behaviour. With accessibility being the main driver in modern life, I believe businesses will look to take advantage by providing the most convenience possible.

Planes can only travel so quickly, items can only be so cheap.

The only way smaller companies will compete is by providing quality products, and having them in stock.

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