Online Retail Monthly Report - June

Online Retail ETF Monthly Report: Key Takeaways

E-Commerce Will Continue to Be the Largest Driver of Retail Growth – Online sales in the U.S. grew 15.2% to $907.7 billion from 2020 to 2021, which represented two times the growth of overall retail sales in the country. The report further says e-commerce will account for 30.5% of total retail sales by 2026, up from 24.6% in 2021. Inflationary pressures continue to cut into retailer margins, both in the U.S. and abroad, while rising labor rates, increased material costs and higher fuel prices across all supply chains impact suppliers, retailers and consumers,” said Deren Baker, CEO at U.K.-based Edge by Ascential. “Despite these challenges, data from Edge by Ascential shows that e-commerce will continue to be the largest driver of retail growth over the next few years in the U.S. and worldwide.” [1]

Amazon to Overtake Walmart as Top Global Retailer by 2024 –Amazon has always taken advantage of its head start as a digital-first platform and has been a pioneer of almost all the growth levers associated with platform-based retail from ‘subscribe and save’ through Amazon Prime membership to the evolving media and marketing services Amazon offers to brands. It is not surprising then that by gross merchandise value (GMV) sales, Ascential’s AI-powered forecasting software on Edge Retail Insight anticipates Amazon to overtake Walmart as the largest retailer in the U.S. by 2024. [2]

Online Grocery a Bright Spot – Ascential’s research also predicts online grocery sales will be a bright spot in the e-commerce landscape in coming years, with the report forecasting that those sales will add $34.7 billion in the U.S. between through 2026. Online edible grocery share is expected to hit 8.8% of all online sales by 2026. [3]

Temporary Spending Shift Favoring Travel and Dining – Amazon’s disappointing earnings last month were just the canary in the coal mine for online retail stocks given reports from eBay, Etsy, Shopify, and Wayfair. Some of these stocks are dealing with company-specific issues, like an acquisition at Shopify and a CFO departure at Wayfair. But earnings were also hit by factors such as the pandemic pull-forward of demand for goods like furniture, creating tough comparisons. There has also been a demand reallocation, spending shift from goods to services like travel and dining out. While shoppers have returned to shopping in-store, traditional retailers have also been plagued by supply-chain woes and higher labor and operating costs, the more flexible cost structure of online retailers favors them over the long-term. [4]  

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

Macro Outlook

Online Retail Experiences Post-Pandemic Shift

As Amazon’s quarter demonstrates, many online retailers ramped up for the pandemic as demand for goods was pulled-forward.[5] As life and sales growth returns to normal, higher operating, labor, and input costs are a headwind for all retailers, not just those online. While many online retail stocks sit in correction territory, trading at a discount to traditional retail peers, the long-term outlook for online retailers remains robust and e-commerce is expected to remain the largest driver of growth in retail.[6] Many retail buying habits have been permanently transformed by the pandemic such as online grocery and while in the near-term, inflation constrained spending has shifted to services like travel and dining out, many segments of online retail remain poised for growth in the future. [7]

It would not be surprising to see further consolidation in the space as smaller online retailers seek the benefit from scale. Already, M&A activity in retail has risen in 2022, with 144 deals valued at US$25.19 billion announced in the first three months of the year—up 43% in value compared to Q1 2021.[8] We believe dealmaking in the retail sector will be centered around the winners and losers of the pandemic.[9] IBUY’s growth weighting methodology, could be well positioned to capitalize on that trend.

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Online Retail ETF Performance (As of 31.05.2022)

Please note that all performance figures are showing net data. Source: Bloomberg / HANetf. Data as of 31/05/2022

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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