Online trading platform eToro has not missed the opportunity to deliver investment products for its client base to take advantage of the rapid growth seen in the retail eCommerce space.
Back in the ‘wonder days’, e-commerce was something for Silicon Valley and those with the foresight of just how integral the web and online shopping would become to our everyday lives.
10-years ago, we would be hopping off to the travel agent to book our flights to our dream destinations or home for the holiday season.
Hotels had to take credit card bookings by fax, at best and, in the worst case, risk holding a room for a ghost booking.
Department stores prospered as the one-stop-shop concept peaked back at the turn of the Millennium.
2 decades on, millennials and non-millennials alike have materially shifted the retail landscape.
While e-commerce has been long associated with global trade, growth in retail eCommerce sales has also been impressive.
In 2017, global retail e-commerce sales hit $2.3 trillion, with sales projected to hit a whopping $6.54 trillion by 2022, according to Statista.
The top 3 online stores reportedly had revenues totaling close to $100bn in 2017. While less than 10% that was still quite a chunk of the market.
By region, there were also some significant variations in retail eCommerce sales. Perhaps unsurprisingly, Asia has been one of the front runners in recent years.
China reportedly accounted for 19% of total retail e-commerce sales back in 2016, compared with just 6.7% in Japan.
Unsurprisingly, China’s retail e-commerce sales have continued to rise since back in 2016.
The increase in the middle class and greater product awareness driving demand.
China will not have been alone, however, with Europe, the U.S and the rest of the laggards also seeing an increase in numbers. In spite of that, however, it would be hard to actually catch up with China.
According to reports, retail eCommerce sales account for more than 35% of total retail sales in China. That is the highest in the world.
In 2018, China retail eCommerce sales hit $1,526.70bn. This accounted for more than 50% of the total of $2,016.33bn in global retail eCommerce sales in 2018.
Retail eCommerce sales in the U.S hit $525.69bn, which is still a big number as the pre-millennials continued to support the malls and the shopping avenues.
Elsewhere, the numbers are smaller. Retail eCommerce sales hit $123.60bn in the UK and just $109.26bn.
China to Lead the Way
When considering the fact that retail eCommerce sales jumped by 34.3% in China in 2018, compared with 16.0% in the U.S and 24.2% globally, that’s quite a move.
Couple that with China’s projected growth, population size and the projected rise in the number of online buyers, the future looks bright for the retail eCommerce space.
In 2018, digital buyers accounted for just 48.2% of the Chinese population. This is projected to rise to 58.8% by 2022.
Focusing on the world’s largest retail eCommerce market, Alibaba has the largest market share at 58.2%.
JD.com’s market share sits at just 16.3%, while Amazon China has just 0.7% of the market share.
When also factoring in the continued rise of the middle class in China and projections that see China’s GDP surpassing that of the U.S within the next 10-years, retail eCommerce investments should form part of any investment portfolio, when looking at the numbers alone.
eToro shares this view and offers a blended retail eCommerce portfolio for its clients to benefit.
If we look at 2019 retail sales figures, China saw retail sales growth of 8%, year-on-year, in 2019. That towered over 5.82% growth in the U.S over the same period.
In actual numbers, China is projected to see total retail sales exceed that of the U.S for the 1st time in 2021.
www.eMarketeer.com had projected for China’s total retail sales to hit $6.031tn in 2020 versus U.S retail sales of $5.695tn.
Economic woes and the coronavirus outbreak will have set China back and may lead to China falling behind total U.S retail sales until 2021 – 2022.
This is a delay, however, China will likely overtake and sooner rather than later.
A number of marquee companies have driven the surge in online retail sales. These included Alibaba, Amazon.com, JD.com, Apple, Walmart, Dell Technologies, the Otto Group, Vipshop Holdings, Gome Electrical Appliances, and even Macy’s…
It’s ultimately America’s Amazon.com and China’s Alibaba and JD.com that perch at the top of the e-commerce retail sales tree.
While JD.com is currently focussed domestically, Alibaba and Amazon.com have a more global footprint. The jury is still out on who has the brighter future and whether they can hold onto their existing market shares.
Alibaba and JD.com may have geographical concentration risk, but when considering the shift in China’s demographics, both look well placed and that’s assuming the focus doesn’t extend significantly beyond China’s borders…
When we consider the likes of Amazon.com, Walmart.com and the other U.S household names that have gone web-based, protectionism could become their undoing.
Only recently, Walmart.com pulled out of the battle for market share in China, deciding to become an investor in JD.com.
Amazon.com has ultimately also failed in China and Alibaba in the U.S.
The Ever-Changing Landscape
Time will tell whether the two big U.S names can regroup. Exploring low penetration geographies will be key from an investment perspective. That then brings regulation and geopolitics into focus.
When we consider Apple.inc, a top 5 retail eCommerce player, China is a sizeable market, as is the EU. Trump’s foreign policy could materially damage Apple.inc and even Amazon.com and Walmart’s fight for global market share.
That delivers the opportunity to smaller players and that’s never a bad thing for investors in search of the next big opportunity.
Is the growth in eCommerce over? The numbers suggest not… Finding the right geography by researching demographics and consumer behavior is key, however.
One thing is certain. The world is unlikely to stop shopping any time soon. The easier it is the better and let’s not forget the logistics involved in a physical shopping spree…
Investors don’t need to go direct to the source to get exposure to the retail eCommerce space.
Investing in e-commerce
While there are a large number of listed e-commerce stocks available to gain exposure to the industry, more niche investment opportunities are also available.
eToro has developed an e-commerce ShoppingCart within its copy portfolio platform.
CopyPortfolio is a portfolio management product developed by eToro. The investment strategy provides access to an equally weighted portfolio that gives investors exposure to the retail eCommerce sector.
eToro developed the ShoppingCart in recognition of the sector’s historical growth and anticipated expansion in the coming years.
While the broader eCommerce sector includes non-retail players involved in payments, logistics and cybersecurity, eToro’s ShoppingCart focuses on pure retailers.
This gives prospective investors a blended portfolio exposure to the retail eCommerce sales industry.
In conclusion, there’s unlikely to be much backtracking for the eCommerce sector. How the sector performs in the coming years, however, will have a correlation with economic growth and labor market conditions.
Trade wars and regulatory risks are also factors to consider. This is particularly the case as countries such as the U.S enter a phase of protectionism.
Either way, however, eToro is well-placed to deliver investors with exposure to a sector that will continue to expand globally. While some markets may see growth level out, others will undoubtedly enter into what is becoming an ever-increasing global online retail market.
The good news for those investing in eToro’s e-commerce ShoppingCart, the minimum investment is just $2,000 and eToro provides all the analysis and portfolio details that an investor could want to monitor the portfolio’s performance.
Building a personalized portfolio would certainly be more cumbersome and less cost-efficient.