Disclaimer: I am not a financial analyst or an economist. This is not financial advice. This is simply the results of my research using referenced open access information.
With the expected launch of the Safex marketplace in mid-2018 there is a lot of excitement within the Safex community and many predictions of Safex price and trade volume.
While any project has a chance of missing its goals, most of us have high expectations that the Safex marketplace can become a leading marketplace for goods and services, while offering the advantages that come with purchasing with an anonymous cryptocurrency.
Below I present a number of reasons why I am expectant and positive about the medium to long term potential of Safex, based on demographic and economic trends.
Part 1: Demographic and economic trends
1) While the population of the world is expected to grow by roughly 300 million people by 2022, the number of people moving into the middle class is expected to be close to one billion.
When people move into the middle class (from the lower classes) they spend more money of non-necessities. This is good news for the growth of e-commerce markets as more people will have more money to trade with.
Note that ~88% of this transition to the middle class is expected to be from Asia making this region a great source of potential growth for Safex and other marketplaces.
As more people have access to the internet there are more potential marketplace users and therefore, more potential sales.
Big potential growth markets are in Asia and Africa, which currently only have ~47% and ~31% of their population connected to the internet (compared with 80 – 90% in Europe and North America).
Mobile and tablet devices are most likely to be the used to access the internet, so e-commerce sites should carefully consider the usability of their mobile sites and apps.
3) In 2022, global GDP is expected to exceed 103,000 billion USD, an increase of over 20,000 billion or approx. 25%.
GDP (Gross Domestic Product) is a measure of the value of all goods and services produced annually. With more money being spent to buy products and services worldwide, e-commerce providers have the opportunity to grow and flourish.
Although some of this growth will be offset by global inflation, the world is positioned for a decade of economic growth.
Part 2: E-Commerce trends
4) Growth in the “sharing” economy is ready to explode, growing from $14 billion USD in 2014 to a predicted $335 billion by 2025, a ~2400% increase.
Peer-to-peer sharing services such as Uber, Lyft, and Air BnB allow users to provide services directly to potential clients, cutting out many middle-men. In the future more people will be selling, renting, sharing more goods and services directly one to the other, bypassing traditional methods.
In the US alone, 86.5 million adults are expected to access the “sharing economy” in 2021, up from 56.5 million currently.
Safex is strategically well positioned to take advantage of this growth in the sharing economy, as users will be able to sell goods and services directly peer-to-peer on the marketplace safely and anonymously.
5) The total e-commerce market is expected to double by 2021, reaching $4.5 trillion dollars, with approx. 480 million more people worldwide purchasing goods and services online.
The growth of online sales is currently ballooning. With an expected doubling of total e-commerce sales in the next 4 years, online marketplaces stand to cash in on this trend. Although the world population is set to grow 300 million by 2022, the number of people shopping online is set to increase 480 million in the same time-frame.
The percentage of internet users purchasing digital goods is expected to rise 5% to ~65% by 2021, but recall in this time that ~700 million more internet users will be added, signalling a huge increase in people purchasing goods and services.
To further highlight this trend, for the past seven years the percentage of e-commerce sales in the US (i.e. percentage of e-commerce compared to total retail sales) has been growing approximately linearly, and is currently just over 9%, leaving much room for e-commerce growth in the coming years. The “big two”, Amazon and Alibaba, are currently experiencing exponential revenue growth.
Online marketplaces like Safex will greatly benefit from this massive increase in the number of users and money entering into the digital economy.
6) It is expected that cryptocurrencies are the future of paying for goods and services online and the crypto market is expected to have a compound annual growth rate of ~35% over the next five years.
Currently, only ~3% of all online purchases are made with Bitcoin. As awareness of cryptocurrencies increases it is expected that more people will use these to purchase goods and services online. Additionally, demand for stores and marketplaces which accept cryptocurrency as payment will also dramatically increase.
These predictions increase the likelihood of success for well developed and managed online marketplaces, such as the upcoming Safex marketplace.
The rapid growth of e-commerce in Asia cannot be ignored, with Malaysia, India, and Indonesia expected to have an e-commerce compound annual growth rate greater than 20% until 2021. Interestingly, Serbia, the country where Safex is based, is expected to be the 14th fastest e-commerce market in the world, with an expected compound annual growth rate of 12.3% until 2021.
Significantly, B2B (business to business) e-commerce sales are approximately three times larger than B2C (business to consumer). Currently in 2017 the B2C + B2B markets together made a staggering $10 trillion USD in sales. If Safex can tap into the B2B, B2C, and P2P (peer to peer) markets, the potential for rapid and sustained growth is incredible.
A point worth noting is that 75% of users want to purchase goods in their own native language, while 59% never purchase from English only sites. This is extremely important, considering the majority of population growth, transition into the working class, and e-commerce growth is expected from Asia.
A well designed, multi-lingual marketplace is crucial to success, and will give a significant competitive edge over other marketplaces.
Part 3: So what does this mean for the Safex marketplace?
Whilst anything can happen between now and the next five years, the trends and forecasts outlined suggest that the world is set for a large sustained growth in e-commerce trade.
There will be an increased demand for marketplace services, as well as demand for low fees, safe and secure trading, anonymity, and payment using non-traditional currency. The planned launch of the Safex marketplace next year is well timed and well suited to fill all of these needs and demands.
If the team can design, build, and translate the marketplace to take advantage of the global nature of online buying and selling, and if they can tap into the B2B, B2C, and P2P markets, then we could well see an e-commerce giant emerge.
The title of this article, The five year HODL; Crypto-commerce in a changing world, suggests HODLing Safex for five years simply because many of the statistics and forecasts are given until around that time.
But if all is successful, then for myself five years will be the minimum HODL. If the e-commerce market continues to grow after 2022 at a similar pace, then I may HODL Safex indefinitely and continue to collect dividends. Again, I am not offering financial advice, but simply stating my situation and my reasons for my optimism.
Finally, regarding Safex dividends. As a thought experiment, suppose that the global e-commerce market reaches 4.5 trillion dollars, as predicted. In a recent article by Ivana Tudor, the Safex economist, it is stated that the medium term goal of Safex is to take ~1% of market share.
For the purposes of this article, let’s assume that the market cap of Safex is approximately equal to the trade volume. Using the dividend calculator on the Safex website we can estimate the dividends expected, should Safex near or reach its goals. A table of results for various market share percentages is displayed below.
|Dividend per 1 Safex held (US cents)||1c||10.5c||52c||104.8c||209.5c|
Table of (rounded) predicted dividend per share given a 4.5 trillion USD e-commerce market.
The table above suggests that, if the global e-commerce market does indeed reach 4.5 trillion USD by 2021, and if Safex reaches the stated goals, the a single Safex share (currently trading a little over 1 US cent) will return just over a dollar in dividends.
An investment of 10,000 Safex now (roughly $100 – $150 USD) has the potential to be returning almost $10,500 USD in dividends by 2021, should all global and Safex targets be met.
Given the risk vs reward scenario outlined above, and the global e-commerce growth and predicted trends, I am comfortable with my investment position in Safex.