Online Retail Monthly Report | July

Our Online Retail Monthly Report explores what's happening in the ecommerce and online retail industry and what factors are influencing constituents of our Online Retail ETF.

• Total ecommerce sales during Amazon’s 48-hour Prime Day event surpassed $11 billion USD, according to Adobe Analytics. Online retail sales were up 6.1% over 2020’s event, with Monday recording the biggest day for digital sales this year, slightly above last year’s record Cyber Monday event. [1]
• eMarketer’s latest estimates predict that even after last year’s spike, U.S. back-to-school ecommerce sales will grow 13.3% this year to $41.3 billion, as the shift toward online shopping last year continues to push back-to-school sales online. The apparel category is expected to see particularly strong growth as many students prepare for a return to in-person learning.
• Six months after the conclusion of the Brexit transition period, UK brands are reporting a loss of EU customers according to a report by ChannelAdvisor and CensusWide.  Of the 304 CMOs at UK brands that sell online interviewed for the report, 94% said they had lost EU customers since December 31, 2020, with 66% having lost "a significant number." Slow delivery appears to be the underlying source of this trend. [2]
• The National Retail Federation now expects retail sales in 2021 to grow between 10.5% and 13.5% over 2020 levels. The new forecast represents a sizable increase over NRF’s last February projections calling for a 6.5% to 8.2% increase.  Previous estimates failed to take into account robust consumer spending, vaccine distribution, virus infection rates, and additional fiscal stimulus.  NRF now expects U.S. GDP for the full year to grow close to 7%, the fastest rate of growth since 1984. (Seeking Alpha) [3]
• Chinese consumers are spending less on foreign brands, according to a report authored by consultancy Bain & Company and Kantar Worldpanel.  The “China Shopper Report” saw the volume of foreign brands fall 4.1% through the end of June.  Besides pandemic-related global supply chain disruptions, simmering geopolitical tensions have also hurt foreign brands in China.  For example, Swedish clothing brand H&M faced backlash in China in March over comments that resurfaced about its concerns over alleged forced labor in Xinjiang region. (CNBC) [4] 

Performance Review

The underlying index of our Online Retail ETF, the EQM Global Online Retail Growth Index, has delivered a positive return of 12.31% since inception as online retail sales growth continues to be robust despite the reopening of many brick and mortar traditional retailers.

EQM Global Online Retail Growth Index Performance

Past performance is no guarantee of future performance. Source: Bloomberg *NTR Index, in USD.  YTD figures from 30.06.2020 inception to 30.06.2021

The strong sales for Amazon’s 48-hour Prime Day event provided a testimonial that consumers continue to look for online bargains even as in-person shopping levels increase.

The top performance contributor in June was US-based online marketplace Contextlogic, which does business under the name Wish.com. Over the past month the stock was up 66%, as it was identified by traders in the r/WallStreetBets community as a meme stock. Wish.com is a discount digital marketplace which features merchants selling unbranded merchandise directly from warehouses in China.

U.S.-based restaurant delivery service DoorDash was another top-performer, as it announced a partnership with a large grocery chain to provide one-hour grocery delivery services.

The largest negative contributor for the month was KE Holdings, a Beijing-based online platform for housing transactions. The housing broker was warned last month by the Chinese State Administration for Market Regulation (SAMR) about suspected anti-competitive practices. The recent death of its billionaire founder Zuo Hui, who built the company into China’s largest platform for housing services, has also made investors nervous regarding the company’s future prospects.

Source of all data: EQM Indexes. Data as of 30.06.2021

Global Online Retail Performance Table (As of 30.06.2021)

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 30/06/2021

Industry News

Amazon Prime Days - More than 50% of Prime members made a purchase on Prime Day. Digital Commerce 360 estimates consumers spent a total of $11.9 billion globally during Amazon’s 48-hour Prime Day event, up 6.4% over last year.  U.S. digital revenue on June 21—the first day of the Prime Day period this year—topped $5.6 billion, increasing 8.7% over Oct. 13, 2020, when the event kicked off last year after being postponed due to the pandemic. But growth slowed on day two—June 22—when online sales rose just 3.6% from the 2020 counterpart to over $5.4 billion, dragging down the performance of retailers for the overall Prime Day event.  Nonetheless, June 21 and June 22 both mark the biggest days in ecommerce so far this year and each day raked in more digital revenue than the $5.1 billion spent online on Thanksgiving Day 2020 as well as the Saturday and Sunday of the Cyber 5 weekend last year. (Adobe Analytics) [5] 

Didi IPO - The recent IPO of Chinese ride-hailing app company Didi Global, which was the largest NYSE debut since Alibaba’s IPO in 2014, has hit a snafu.  It is now the subject of a China probe citing concerns about national data security and registration of new users of the app were suspended. [6]  

More Ecommerce IPOS/Deals - Many international ecommerce firms have made their trading debuts, or have plans to go public, on markets from Indonesia to Germany, while other players in the online shopping industry are set to be acquired. In Indonesia, Bukalapak is interested in landing up to $800 million in funding through an initial public offering (IPO) in August, Reuters reported.  In the U.K., Made.com landed an infusion of £100 million (approximately $141 million) by selling 50 million new shares, the Financial Times reported. In Germany, shares of About You surged on the firm’s inaugural trading day in Frankfurt, with the sale of a 21 percent stake bringing in €842 million (or approximately $1 billion) and providing the firm with a €3.92 billion (approximately $4.7 billion) valuation, Bloomberg reported. About You’s rivals on the retail side include companies such as Zalando SE and Asos Plc. About You seeks to serve young women between the ages of 20 and 40. [7] 

eBay Selling 80% of Korean Presence - In South Korea, eBay is selling 80% of its Korean business to E-Mart for $3 billion USD. [8] 

Amazon Looking to Expand into Vietnam - Amazon is looking to expand its eCommerce relationship with Vietnam and is recruiting merchants to join its marketplace as exports in the country soar, Nikkei Asia reported.

Constituent News

The IBUY UCITS ETF was just rebalanced in May. New addition to the Index ContextLogic, the US-based operator of the website Wish.com was up 66% in June due to meme-stock mania. 

Etsy acquired Elo7, known as the “Etsy of Brazil” for $217 million USD.  This comes just a few weeks after it bought UK-based second-hand marketplace Depop for $1.63 billion USD.  The two deals speak to Etsy’s ambitions to expand the scope of its marketplace into resale and to expand its international reach. [9] 

U.S.-based online aftermarket auto parts retailer Carparts.com is now the fastest growing retailer in the space.  In light of rising used car, rental car, and gas prices, the auto parts market is experiencing a rebound as more households are purchasing vehicles and returning to work. In addition, as the global chip shortage still holds a vice grip on the car industry, the aftermarket auto parts space is left in a unique position in which there is overwhelming demand.

Just Eat Takeaway completed its acquisition of Grubhub, creating one of the world’s largest food delivery platforms. GrubHub had 33 million active users as of the end of the first quarter. Just Eat Takeaway saw total orders surge 79 percent year over year in the first quarter of 2021. [10]

Outlook

Online Retail Remains Strong Even as Brick and Mortar Reopens: The retail landscape has been permanently transformed by the pandemic as new shopping habits, categories, and preferences have been established in a new era of “consumer convenience”.

Ecommerce Now a Larger Slice of the Pie: Prior to the pandemic, eMarketer expected ecommerce sales to make up 13.2% of total retail sales ($5.779 trillion) in 2021. That percentage has now been increased to 15.5% of the total $5.856 trillion in 2021.  Global ecommerce sales are expected to make up 22% of total retail sales across the globe by 2023. (eMarketer) [11]

Ecommerce sales will surpass $1 trillion next year: US consumers will spend $1.045 trillion through digital retail channels in 2022. Prior to the pandemic, eMarketer did not forecast ecommerce to reach this milestone until 2024. [12] 

Apparel Retail and Back to School See Positive Outlook: While other areas of online retail are facing tough comparisons, apparel/accessories and back to school is poised for future growth as consumers retool their wardrobes for a return to work and in-person schooling. 

Learn more about our Online Retail ETF here.