The Investment Case for Online Retail

16 March 2021



Online retail has permanently disrupted the traditional brick-and-mortar store retail landscape as “clicks” have replaced “bricks.” According to research firm eMarketer, global ecommerce is expected to exceed $3.9 trillion this year[1], providing online retailers fertile ground to grow their business in this new era of contactless shopping. In the United States, ecommerce sales were projected to reach $794.5 billion in 2020, a 32.4% increase over 2019, versus previous forecasts of 18% growth.[2] The global coronavirus pandemic accelerated the pace of ecommerce growth in 2020, propelling online sales to levels not previously expected until 2022—helping existing online retailers expand their dominance in retail. Value-added features such as competitive pricing, shopping convenience, greater product selection and rapid delivery options have solidified online commerce as a disruptive technology that is here to stay.

Ever-increasing internet and mobile penetration is one of the key drivers contributing to this growth, enabling more consumers to shop online anywhere and anytime. New technological innovations in electronic payment, rapid delivery, artificial intelligence and voice-assisted shopping, as well as virtual and augmented reality continue to enhance the online shopping experience, further driving the expansion and growth of this investment theme. 

Additionally, due to the pandemic in 2020, digital commerce added new shoppers that had not previously shopped online, fuelling new buying habits such as online grocery, which grew 43%.[3]  This trend has accelerated traditional retail’s woes, with 27 U.S. retailers having filed for bankruptcy as of September 2020,  on the heels of 17 major retailer bankruptcies in 2019, pre-pandemic.[4] Amid this marketplace evolution, online retail has become a transformational and dominant force in global retail. 


A Brief History of Online Retail 

Online commerce has permanently transformed the retail sector and the way consumers and businesses shop for everything—from books to office supplies, to shoes and furniture. But how did it all begin?

The origins of online commerce pre-date the internet age. Indeed, the first predecessor of online commerce was the mail-order catalogue. In the 1970s, protocols such as Electronic Data Interchange (EDI) and Electronic Funds Transfer (EFT) were created, providing the infrastructure needed to support electronic transactions. In 1979, the British inventor Michael Aldrich [2] was credited with being the official “inventor of ecommerce.” Aldrich connected a television and a telephone line and invented “teleshopping” or shopping at a distance.

Meanwhile in the United States, infomercials (paid television advertisements) gained popularity, paving the way for the first cable home shopping channels. Finally, the internet came along and changed the way we shop forever.

See below a brief timeline highlighting some of the historical milestones that cleared the path for modern day e-retail commerce:

“The mall isn’t dead, it has just moved online.”

– EQM Indexes

For illustrative purposes only  Source: EQM Indexes  


Value Proposition

A number of key benefits serve as the driving forces behind the growth of ecommerce. These benefits have proven to be valuable for businesses, consumers and society as a whole.




Lower costs associated with not having a physical presence

Enhanced product selection

Less traffic and crowds

Automated inventory management

No geographic sourcing boundaries

Price competition and democratization of selection

Customer analytics

Competitive pricing, virtual auctions

Expanded access to rural areas

Unlimited geographic presence

Convenience of shopping from home/office/ mobile device 24/7/365

Shopping and delivery access for housebound consumers

Open for business


Time savings for consumers, one-stop shopping

Facilitated delivery of public services, such as education and health care

Reduced advertising and marketing costs

Customer reviews and social input

Global in scope


Source: EQM Indexes  


Growing Global Opportunity

Given the superior benefits online and virtual commerce provide, it is no wonder that this channel has grown at a superior pace than traditional retail. U.S. ecommerce sales now represent 14.0% of total retail sales, after declining slightly from its pandemic lockdown peak in the second quarter of 2020.[5]

For illustrative purposes only Source: U.S. Department of Commerce Quarterly Retail Ecommerce Sales, 2nd Quarter 2020, reported 8/18/2020.

Globally, ecommerce is also growing at a rapid pace, with year-over-year percentage growth of 27.6% in 2020, with sales approaching $4.3 trillion in 2020, up from $3.3 trillion in 2019, according to eMarketer. By 2022, it is forecasted that ecommerce’s percentage of total retail sales worldwide will surpass the 20% mark. [6]

For illustrative purposes only Source: eMarketer, December 2020.

While U.S. online retail sales comprise only 14% of total retail sales, other large ecommerce markets such as the United Kingdom and China have a much higher proportion of online-to-total retail sales. In addition to the U.S. market, here are some of the other top global markets for ecommerce:

China – China is the world’s biggest ecommerce market led by companies such as Alibaba Group and and sites such as Taobao, TMall and others, with retail ecommerce sales penetration of 44.8% in 2020.[7] With an annual growth rate last year of 27.5%, China’s ecommerce market is also one of the fastest growing. In 2020, driven by popular sales events like Alibaba’s Singles Day, the world’s largest 24-hour shopping event which generated $115 billion in record sales alone[8], China’s ecommerce sales totaled almost $2.3 trillion.

United Kingdom – Despite its small size, the United Kingdom is a big player in the area of ecommerce, securing third position with $180 billion in annual sales. Amazon UK, eBay UK, Asos, Currys PC World, Gumtree, Argos and John Lewis are some the U.K.’s biggest ecommerce sites[9]. Moreover, the country has one of the highest ecommerce sales percentages at 30.9% of total retail sales in 2020.

Japan – The fourth largest ecommerce player in the world, Japan is the leading mobile commerce (m-commerce) player. Rakuten, Mercari, and Yahoo! Japan are some of Japan’s leading ecommerce platforms. Annual online sales are $141 billion, and it ranks among the fastest-growing globally, boosted by a developed economy, highly urbanized population, 93% internet penetration and single-language culture. Japan’s ecommerce businesses also benefit from the small country size and excellent infrastructure, allowing for rapid delivery.[10]

Germany – Germany is Europe’s second largest ecommerce market with $97 billion in sales in 2020, behind the United Kingdom. Amazon has a good foothold in the German market, similar to the U.K. market. eBay also has a large presence in Germany.

For illustrative purposes only Source: eMarketer, Dec 2020


Ecommerce has emerged as a global shopping phenomenon. From Cyber Monday to Singles Day, here are some of the year’s busiest online shopping days around the world.