Online Retail Monthly Report | May

09 May 2022

 

Online Retail ETF Monthly Report: Key Takeaways

After two tumultuous years, U.S. online retail growth expected to return to normal levels 2022 – Data consultancy eMarketer expects U.S. ecommerce sales to surpass $1 trillion for the first time in 2022, making up 15.2% of total retail sales. M-commerce sales are also expected to exceed 40% for the first time in 2022. Furthermore, the pandemic will have a lasting impact on online shopping behavior in different product categories, including online car buying and digital grocery. An analyst note from Cowen, estimates that U.S. online sales are on track to grow 11% annually over the next 5 years to $1.6 trillion as this “give back” period is behind us. [1]

Amazon Misses Earnings – Ecommerce bellwether Amazon (not owned in IBUY) was down 14% after giving lighter-than-expected revenue guidance for the quarter, experience its worst day since July 2006. Amazon said it projects revenue between $116 billion to $121 billion in the second quarter, trailing the $125.5 billion average analyst estimate, according to Refinitiv. Amazon’s online retail is off from pandemic peaks, and its operating expenses have not ramped down. Amazon invested heavily to staff up its warehouses and combat supply chain challenges, and it now faces rising inflation, as well as increasing transportation and labor costs. [2]

BNPL to Account for One-Quarter of Online Sales in Five years – According to a new report from ResearchandMarkets, the global Buy Now Pay Later (BNPL) market is experiencing rapid growth. BNPL sales expected to more than double between 2021 and 2026, according to this report's findings. The secret behind BNPL's rapid expansion is the smooth integration of these services into E-Commerce checkouts, attractive financing options like interest-free pay-in-four loans, and a relatively easy application process. Among the top motivations for consumers to use BNPL services is the ability to afford items that would otherwise be beyond their budgets and the desire to avoid paying credit card interest. [3]

Online Retail Has Cemented Its Place in the Hierarchy, Expecting Continued Growth – According to the Bureau of Economic Analysis, global retail sales are expected to top $30 trillion by 2023, with online sales representing 20%, topping $6 trillion. The BEA finds that 87 percent of consumers polled said they started their shopping journey digitally. This is supported by Google, who reports that 82 percent of consumers consult information on their phones while shopping in-store. [4] 

China Lockdowns Favor Online Grocery – Shares of holding DingDong, a Chinese online grocer, surged more than 49% in April, on booming business related to Covid lockdowns. Currently there are 200 million people – roughly 14% of China’s population – who must use online channels to get their daily necessities, led by food. [5]

Consumer Spending Patterns Refocus on Services not Goods – Consumers are spending money on travel and experiences, after spending the pandemic purchasing goods. Global travel demand is the highest since the onset of the pandemic. [6]

Boohoo's profits have taken a hit after online shoppers returned clothes at a faster rate than before the pandemic - Since restrictions were lifted customers have flocked back to physical stores and Boohoo says its online shoppers are sending more items back. Overall, Boohoo's sales rose 14% on the year to £2bn. But it warned that challenges caused by the pandemic, including rising shipping costs and overseas delivery delays, would continue this year. Boohoo said that lockdowns in some of the key countries it sells in, like China, meant people were not buying as many clothes. International delivery delays due to Covid also caused issues in getting stock from factories and out to customers.[7] The company said it expects these pandemic-related issues "will continue for the year ahead". To combat these problems, Boohoo said it was making its supply chain more flexible, its delivery network larger and investing in a new distribution hub in the US. [8]

Please note that past performance is not indicative of future performance.

 

Macro Outlook

Online Retail Experiences Post-Pandemic Growth Pains

As Amazon’s quarter demonstrates, many online retails ramped up for the pandemic, and as life and sales growth returns to normal, higher operating, labor, and input costs are a headwind.[9]  As a result, many online retail stocks sit in correction territory, trading at a discount to traditional retail peers.[10] 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.[11] While many online retailers benefited from the pandemic surge, they are now facing tough comparisons and operation issues as a result. But soon, in-store shopping with its long lines, limited staff, and scant inventory, may lose its appeal, and customers could return online shopping growth to above pre-pandemic levels as new buyers and buying habits have been solidified. IBUY’s growth weighting methodology could be well poised to capture that trend.

 

Online Retail ETF Performance (As of 30.04.2022)

 

1M

3M

6M

YTD

12M

SI

Global Online Retail UCITS ETF

-19.69%

-37.66%

-62.02%

-49.98%

-64.81%

-64.63%

EQM Global Online Retail Growth Index

-19.66%

-37.30%

-61.72%

-49.67%

-64.40%

-64.21%

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 30/04/2022

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. Source: Bloomberg / HANetf. Data as of 30/04/22. Please note that all performance figures are showing net data.

 

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