Online Retail Is the New Normal
Amazon just held its annual Prime Day, in which it offered heavily marked-down prices on all sorts of goods.
But as Eric Fry asks below, “In a world where we’re all staying home and ordering everything online, isn’t every day a celebration of e-commerce?”
The reality is that the pandemic has accelerated the online shopping trend. In the essay below, Eric takes a look at where all this e-commerce growth is happening.
The bottom line is that the pandemic didn’t create the e-commerce trend. But it has proved to be a massive tailwind behind its development.
Today, let’s see how to use this to your portfolio’s advantage.
Have a good weekend,
The One Company Capitalizing on All the Major E-Commerce Trends
By Eric Fry
I was surprised when I saw online ads for Prime Day last week. Hadn’t the annual two-day celebration of e-commerce put on by Amazon.com Inc. (AMZN) already come and gone?
Normally, Amazon celebrates its “holiday” in the summer, offering up sales and deals in order to create a Christmas-in-July feel.
However, as with so much this year, COVID-19 forced Amazon to push the date back.
Of course, overall, COVID-19 has been a “win” for Jeff Bezos, with all the stay-at-home orders, social distancing, and brick-and-mortar closures causing demand for Amazon’s services to skyrocket.
Amazon’s revenue jumped 40% year over year in the second quarter as so many of us abandoned the strip mall and fired up our laptops in order to shop from home. Sales for the period reached $88.9 billion, crushing analysts’ expectations of $81.5 billion.
The company’s stock has soared nearly 90% year-to-date, while the S&P 500 Index is up just 9%.
That brings us back to Prime Day 2020 … and the necessity of it.
In a world where we’re all staying home and ordering everything online, isn’t every day a celebration of e-commerce?
This isn’t just a rhetorical question or thought experiment. There are real numbers to back up what I’m saying.
According to Statista, retail e-commerce sales worldwide totaled $3.46 trillion in 2019 — nearly double the 2016 tally. And e-commerce volumes are on track to soar another 8.5% over the next three years, according to eMarketer.com.
And the pandemic is likely accelerating this trend.
So today, let’s take a look at where all this e-commerce growth is happening — and at one company that is capitalizing on e-commerce trends that not even Amazon is on top of …
Supercharged Growth … That Won’t End When the Pandemic Does
This shift from brick-and-mortar stores to warehouses and websites is just another expression of the Technochasm we talk about here.
On the winning side of the Technochasm, we find thriving technology-powered retailers mimicking Amazon’s practices and prioritizing online business and direct-to-consumer (DTC) sales channels. These companies are innovators, looking to modernize how they do business.
Some of Amazon’s brick-and-mortar counterparts, Target Corp. (TGT) and Walmart Inc. (WMT) most notably, have cruised through the pandemic because they invested heavily in improving their online experience.
From The Wall Street Journal:
Like rival Walmart Inc., Target has benefited as coronavirus concerns fueled demand for services that let shoppers pick up goods in parking lots or skip trips to the store. Both companies also sell groceries and other household staples that have been in demand as Americans cook and clean more in their homes.
And these biggest of big-box stores aren’t the only ones rising up to meet Amazon’s challenge.
Lululemon Athletica Inc. (LULU), for example, has created a vibrant DTC sales channel. It was one of the first retailers to emphasize online sales, and the company is reaping the rewards of that forward-looking strategy.
DTC sales account for more than one-quarter of the athletic apparel retailer’s revenue and more than one-third of its operating income.
Lululemon set all this up a few years back — and the pandemic allowed it to “collect” on all that internal infrastructure. By putting itself on the right side of the Technochasm and investing in DTC channels, Lululemon has weathered store closures with ease.
Furthermore, “athleisure” sales are booming, now that we’re all stuck at home, as CNN Business reported in September:
Despite closing stores temporarily because of the pandemic, Lululemon said Tuesday that sales increased 2% to $903 million during the quarter ending August 2, compared with the same period last year. Lululemon (LULU) was able to make up for temporary closures with sales online, which grew 157% last quarter.
Food delivery companies are also seeing massive demand growth.
For smaller restaurants to survive closure and continue providing food to their communities, they’ve turned to services like DoorDash, Grubhub, Postmates, and Uber Eats.
In order to capitalize on this food delivery opportunity, Uber Technologies Inc. (UBER) bought out Postmates and merged it with its fast-growing Uber Eats business — though the two will still operate under their separate names. At the same time, however, Uber Eats has been pulling out of countries where it doesn’t have a dominant market share.
Which raises an interesting question: Who is dominating the food delivery space in other countries?
A Company Built for the Technochasm
One company owns more than 50% of the leading online food delivery platform in Latin America.
That same company owns a 22% stake in a Berlin, Germany-based food delivery company that operates in over 39 countries.
It also owns a 39% stake in the food delivery platform of choice in India, the second most populated country in the world.
Those holdings alone could make this company an excellent investment for the pandemic, but we won’t be dealing with COVID-19 forever.
The Technochasm, on the other hand, is here to stay.
This company — in addition to its food delivery services — also owns e-commerce, social media, fintech, and digital classifieds firms.
That makes this company a compelling one-stop trade for investing in early-stage consumer technology companies around the globe. It is like a private equity fund that is open to everyone — not just well-heeled institutions and individuals.
If you want exposure to all the cutting-edge trends in e-commerce, this company is the place to start.
The pandemic didn’t create the e-commerce trend. It sped up its development. The Technochasm is gaining strength, and as it sweeps through the global economy, it will continue to reward companies that innovate and invest in new technologies.
You can head here to find out more about this company … and the stock that I believe is best positioned to give investors 1,000%+ returns over the next few years.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.