How Kevin O’Leary Of ‘Shark Tank’ Is Investing In The ‘Great Digital Pivot’ Triggered By COVID-19

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The coronavirus pandemic compressed five years of digital transformation in the U.S. into five months, “Shark Tank” star Kevin O’Leary said Saturday.

What O’Leary calls “the great digital pivot” away from retail presents an opportunity for investors, he said. Retail sales have 50% gross margins, but direct-to-consumer sales have gross margins nearing 100%, O’Leary said at Benzinga’s Stocks & Options 101 Boot Camp, held virtually June 26-27.

“I’ve been working hard on indexing this change and investing in it myself,” said O’Leary, the chairman of O’Shares ETF Investments.

O’Leary On The Digital Pivot: Before the pandemic, a typical American business made 50% of sales at retail, 40% on, Inc. (NASDAQ: AMZN) and 10% direct-to-consumer, he told Benzinga’s Neal Hamilton during a Boot Camp session.

Then came the coronavirus and an economic shift to “America 2.0,” O’Leary said.

“Most of these companies said, ‘I don’t want to give all retail sales to Amazon for one reason,” he said. “Amazon does not give you back your customer. They keep [them].”

That led businesses to start their own websites with platforms like Shopify Inc (NYSE: SHOP) and sell on Facebook, Inc. (NASDAQ: FB) and its Instagram platform, he said.

With direct-to-consumer sales bringing what O’Leary said are almost 100% gross margins, sales can fall by half without impacting free cash flow, he said.

“What I care about [as an investor] is free cash flow.”

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