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Monthly Global Online Retail Market Report | May

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  • Global ecommerce sales are expected to hit $4.2 trillion this year according to Adobe, as the shift to online shopping accelerated by the pandemic shows no sign of slowing down.        
  • Ecommerce has experienced 5-years of growth over the last year.  According to a report from MullenLowe Profero, ecommerce rose from 19.2% of total retail spend in 2019 to 27.9% in 2020, and that shift is here for the long term with 71% of respondents revealing they will continue to shop for items online post the pandemic.        
  • MullenLowe Profero’s report cites convenience as a key factor promoting continued growth, along with rapid delivery options, as it predicts an “era of convenience” in retail commerce in the post-pandemic environment.        
  • Providing further evidence, Amazon reported blow-out earnings on April 29th, with sales surging 44% which also smashed earnings expectations, and its guidance for the second quarter implies it expects this momentum to continue.        
  • Amazon also announced that this year’s two-day Prime Day event will take place in June, instead of July.

 

EQM Global Online Retail Growth Index Performance

April

12 Month*

4.26%

131.14%

Past performance is no guarantee of future performance. Source: Bloomberg NTR Index, in USD.  *12 Month figures from 30.04.20 - 30.04.21.

 

Performance Review

The underlying index of our Online Retail ETF, the EQM Global Online Retail Growth Index, has delivered a positive return of 131.14% over the last 12 months as online retail sales growth has been sustained in an environment of higher consumer confidence, rising employment, and government stimulus.  For the month of April, the index gained 4.26%.

Top performance contributors in April included German-based restaurant delivery service Delivery Hero which was up over 22% for the month after posting strong quarterly results for revenue and orders in the first quarter amid the “exceptional growth of quick commerce.”

US-based home goods online retailer Overstock.com was another top performer for the month.  The stock was up 23% in April as the company reported a revenue increase of 94% year over year as the home goods category remains strong. Overstock’s spin-out of its blockchain business is also ahead of schedule.  

US-based home exercise equipment maker Peloton Interactive was the month’s worst performing name, down 12.5% due to heightened competition in the category and a shaving of its “pandemic premium” valuation as physical gyms reopen.

Past performance is no guarantee of future performance. Source of all data: EQM Indexes. Data as of 30.04.2021

 

Global Online Retail Performance Table As of 30.04.21

 

1M

3M

6M

YTD

12M

SI

Global Online Retail UCITS ETF

4.22%

-

-

0.50%

-

0.50%

EQM Global Online Retail Growth Index

4.26%

-4.82%

34.58%

5.32%

131.14%

0.56%

Performance before inception is based on back tested data. Back testing is the process of evaluating an investment strategy by applying it to historical data to simulate what the performance of such strategy would have been. 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 30/04/2021

 

Industry News

Earnings reporting season has provided evidence of the sustained growth in the online retail and marketplace retail segments even in the face of physical store re-openings.

Amazon beat significantly on both the top and bottom line and guided up in the second quarter as it expects it will see sustained momentum from its annual Prime Day, even though it is now scheduled for June.  Amazon’s strong Prime streaming results and Netflix’s subscriber miss also suggests that heightened competition and a lack of new content is driving demand for Prime, as opposed to the pandemic driving the appetite for streaming. 

Ecommerce marketplace software infrastructure firms Shopify reported strong first quarter results as more and more retailers shuttered physical stores and shifted their business online.  Shopify’s revenue was up 110% over last year.

Latin America has experienced a quantum leap in ecommerce growth thanks to the pandemic. Retail ecommerce jumped 37% in the region in 2020 driven by pandemic lockdowns, but the shift online is not likely to reverse now that the “genie is out of the bottle”.  Argentina’s Mercado Libra, the leader in Latin America, doubled its operations in 2020.  In Brazil, ecommerce sales grew 68% last year according to the National Confederation of Commerce, Goods, Services, and Tourism (CNC) and eMarketer reports ecommerce sales in Argentina grew 79%.  These numbers reflect a deep and accelerating transformation in the region thanks to improvements in technology, logistics, and payment infrastructure.

Data from behavioural marketing technology provider Wunderkind that UK ecommerce sales rose 2.5% week-on-week in April even with a 178% increase on shopper footfall on the High Street, illustrating sustained digital demand despite the unlocking of traditional retail in the UK.  The study suggests there has been a seismic and permanent shift online. Wunderkind, comments: “There’s been much debate as to whether the boom in online could successfully be sustained once retail reopened. And, from what we’ve seen so far, even pent-up demand for real-life shopping experiences in the first week of opening hasn’t deterred consumers from the ease and convenience of shopping online, suggesting the shift to digital is here to stay.”

To quote Oppenheimer’s retail analyst Jason Helfstein, in ecommerce, “the genie never goes back in the bottle.”

 

Constituent News

US online home goods retailer Overstock.com posted first quarter net revenue growth of 94% year over year, but it is also seeing interest on the heels of “cryptomania”.  Overstock’s aggressive moves into blockchain and trading platform tZero has captured investor attention beyond online retail.

Amazon’s blow out quarter and announcement that Prime Day will be moved up to June has gathered attention, but it is also raising eyebrows in Europe as it reportedly opening a full-fledged fulfilment centre in Dublin to service Ireland.  Ireland has been served for years from the U.K, but this move could allow Amazon to avoid Brexit-related headaches shipping goods across the Irish Sea.

Germany-based Delivery Hero reported strong quarterly results in the “quick commerce” restaurant delivery category.  This is particularly interesting in light of concerns raised related to Deliveroo’s failed IPO, suggesting that Deliveroo’s problems are stock specific and not an indictment of the gig economy model.

Chewy, a US-based online retailer of pet food and supplies has been a big beneficiary of the pandemic in part to the rising use of its “autoship” feature which now makes up 70% of Chewy’s total net sales.  Many people also adopted new pets during the pandemic, as households with pets increased 5.7% in 2020 versus the previous compound annual growth rate of only 0.6% over the previous 5 years. In 2020, Chewy welcomed 5.7 million new active users, representing a 43% year over year increase.  While 2021 may see a drop-off in pet adoptions, autoship and other value-added services like “Connect with a Vet” telehealth will be continued source of growth.

The next scheduled quarterly index rebalance is the end of May.  

Outlook

  • Pandemic Has Accelerated Online Retail Trend: While online retail grew at a record pace in 2020, there are many studies revealing its long-term growth outlook has been accelerated by 5 years. As a result of the pandemic, permanent new shopping habits have been established, new categories such as online grocery have solidified, and new delivery options such as “click and carry” and “curbside delivery” have emerged.        
  • Retail Apocalypse Continues: UBS expects 80,000 physical stores to close over the next 5 years in the U.S. and one-quarter of American malls to shutter in the next 3-5 years as the grim decade for traditional retailers dubbed the “retail apocalypse” continues.        
  • Apparel Retail Faces Positive Outlook: After a tough 2020, fashion retail has some good news as much of the globe moves toward reopening. Moody’s Investors Service upgraded its outlook for retail apparel to positive as it expects business conditions to improve over the next 12-18 months as pandemic pressures ease and those gaining the “Covid19” in terms of weight need to refresh their personal and business wardrobes.

 

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