Online Retail Monthly Report | April

07 April 2022

 

Learn more about our online retail ETF.

The Pandemic Has Rapidly Expanded the U.S. Digital Economy

A new report from Adobe reveals how the last two years have shaped the future of online retail. [1] U.S. consumers spent $1.7 trillion online during the pandemic, $609 billion more than the two preceding years. Demand remained strong in 2021 with $885 billion spent online, up 8.9% YOY.  Some of the key takeaways of the Adobe Digital Insights report are as follows:

  • Groceries are now a major online category, expected to top $85 billion in U.S. online sales in 2022
  • U.S. consumers paid $32 billion more for online goods thanks to inflation
  • “Buy Now Pay Later” (BNPL) and curbside pickup and buy-online-pickup in store (BOPIS) have reshaped the online shopping experience
  • U.S. online consumers have seen 60 billion out-of-stock messages in the last 24 months in the face of supply-chain shortages.
  • U.S. consumers are expected to spend over $1 trillion online in 2022 – setting a new record

 

Online Spending Above Pre-Pandemic Level in Half the World – A new IMF report reveals that the online share of spending is still above pre-pandemic trends in about half of global economies, from large emerging economies such as Brazil and India to other middle-income countries like Bahrain and Jamaica. [2] Accelerated levels have declined, but remain robust and persist in many economies more recently enabled for online shopping as new buying habits have been formed and supported.

Technology Enhancing the Online Experience – As ecommerce continues to explode in 2002 and beyond, here are four trends revolutionizing the experience (Forbes): [3]

  • Multi-channel Personalization - Multidevice customer journeys make up the majority of online sales, and marketers stand to gain tremendously by integrating personalized campaigns across the channels customers are interacting with daily, like social media, email and text. Whether scrolling on Instagram or browsing online, shoppers are consistently served content tailored to their specific algorithm and expect automatically personalized results in their interactions online, regardless of the medium.
  • Artificial Intelligence - Heading into the start of 2022, e-commerce sellers are expected to sign the check for over $7 billion in AI investment this year, giving them the power to deliver data-driven customer experiences that are consistent across devices. [4]
  • Mobile Commerce - Shoppers use mobile devices at all stages of their digital journeys, from product investigation to making a purchase. Almost 73% of e-commerce purchases are estimated to happen on a mobile device. [5]
  • Transcending Data Privacy Concerns - Right now, personalization and audience-building activities have been hit by the latest data collection privacy regulations. 2022 will likely see retailers get creative with how they work around these issues to consistently deliver an optimized shopping experience informed by personalized customer data.

Online Retail Trading at a Discount to Traditional Retail – Despite the superior growth estimates for online retailers relative to traditional, brick and mortar retail, online retail stocks are now trading at a discount to their traditional peers. (EQM) The prospect of rising interest rates and inflation has caused a revaluation of technology stocks that underestimates their growth potential. This has created many buying opportunities, especially in retail segments expected to benefit from the economic reopening trade or continue to grow based on new buying habits formed during the pandemic. These market segments include: apparel, travel and entertainment-related names as people return to work and play and online grocery, BNPL, subscriptions, and food delivery, as habits that have been permanently engrained post-pandemic.

Macro Outlook

Indiscriminate Sell-Off Creates Buying Opportunity:

Facing tough year-over-year pandemic comparisons and plagued by a host of issues such as higher operational expenses related to a sudden surge in demand, compounded by supply chain shortages and inflationary pressures, many online retail stocks sit in correction territory, trading at a discount to traditional retail peers.  And yet its positioning, relative to physical retail remains stronger than ever as retail buying habits have been permanently transformed by the pandemic and growth rates remain higher for online retail. 

Just like many companies temporarily adopting remote-working practices during the pandemic are expected to continue them, many shoppers with limited online shopping experience pre-pandemic, are now firmly hooked on the practice, creating new buying habits, emerging categories, and continued sales growth.  As online retailers cut costs and re-pivot to manage sales in the new normal, post-pandemic environment, online retail sales growth remains above pre-pandemic 2019 levels.  Furthermore, rising fuel costs may keep consumers off the roads, making for more shopping purchases online.

Amid the indiscriminate sell-off, we expected strong categories with superior fundamentals to once again be rewarded and new categories, such as apparel, travel, and entertainment, to lead in the reopening economy. Online retail is alive and well, and still taking over the world, with much of the new growth coming from developing markets transitioning from cash-based to digital economies. As a result, online share of spending is still above pre-pandemic trends in about half of all global markets.

Global Online Retail ETF Performance Table (As of 31.03.2022)

 

1M

3M

6M

YTD

12M

SI

Global Online Retail UCITS ETF

-11.29%

-37.71%

-52.42%

-37.71%

-54.33%

-55.96%

EQM Global Online Retail Growth Index

-11.06%

-37.35%

-52.05%

-37.35%

-53.81%

-55.45%

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 31/03/2022.

Performance before inception is based on back tested data. Back tested data does not represent actual performance and should not be interpreted as an indication of actual or future performance. Past performance for the index is in USD. Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product. Please note that all performance figures are showing net data.

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