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The Disruptive Strategist – what’s next for ecommerce?


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With increasing vaccination levels and economies reopening, GAM Investments’ Disruptive Strategist Mark Hawtin considers what a post-Covid-19 future might look like for the ecommerce sector following a period of significant change.

27 July 2021

Click here to download The Disruptive Strategist Q2 2021

Fifteen months have passed since lockdowns were first introduced in the US and UK, as well as much of the rest of the world. During this period, we saw a monumental shift towards online commerce away from physical commerce, primarily driven by physical retail being closed. In the Q1 2021 Disruptive Strategist Newsletter we noted that in the US, ecommerce’s share of US retail sales effectively saw four years of growth in a three-month period. However, with over 60% of the UK fully vaccinated and 52% of the US, what happens now? How much of this shift will remain?

A recent survey from Shopify suggests that the categories with the highest online penetration before Covid-19 will remain in a post-pandemic world (entertainment, books, toys and technology). However, two interesting insights came out of the survey. First, the businesses that saw a big increase in online penetration have turned these new clients into loyal, sticky customers. The second bucket involves businesses that saw very large shifts online during the pandemic but are now seeing those new customers return to the physical environment. Groceries, alcohol and pet care are the three largest categories where consumers have indicated they would be reluctant to shift back away from online. The common factor here is that the items tend to be bulkier and are often commodity items and therefore there is a lower requirement to touch / feel / see / try before you buy. 

The convenience offered by companies such as Chewy in the US and Zooplus in Europe (ecommerce companies offering pet food and pet-related products) is hard to replicate in the physical environment. Similarly, grocery companies such as Ocado, Walmart or Costco each saw a shift towards online sales and faster growth compared to prior periods. The shift to online in this category was accelerated due to Covid-19 and has therefore also seen an increase of companies trying to pivot into the space. Newly listed Deliveroo is looking to grow its nascent express grocery delivery product. However, it will compete against Uber as well as the more established Ocado. This increase in competition will be challenging for newer, smaller players in the space who will need to invest in marketing to gain share. 

Categories such as luxury, outdoor and garden, fashion, and home furnishings and decor, all saw the biggest shift to online during the pandemic. However, the survey suggests that these categories will also see the biggest shift back away from online as the pandemic ends. Within the fashion space, it is expected that omnichannel will become more prevalent, where the lines between online and offline become blurred. An order may start online and finish in store or vice versa. Physical retail will become more about the experience, customer service and the ability to touch and feel the product rather than the actual browsing experience. 

Those retailers able to utilise technology to create an omnichannel experience focused on the consumer will win, in our view. Farfetch has been trialling its ‘Store of the Future’ with Chanel to develop a range of digital initiatives to deliver high quality consumer experiences both online and offline. After more than a year since the onset of the pandemic, retailers that saw a significant boost to sales last year may struggle with difficult comparisons and the increased competition from the reopening of traditional physical retail.

Important legal information
The information in this document is given for information purposes only and does not qualify as investment advice. Opinions and assessments contained in this document may change and reflect the point of view of GAM in the current economic environment. No liability shall be accepted for the accuracy and completeness of the information. Past performance is not a reliable indicator of future results or current or future trends. The mentioned financial instruments are provided for illustrative purposes only and shall not be considered as a direct offering, investment recommendation or investment advice. The securities listed were selected from the universe of securities covered by the portfolio managers to assist the reader in better understanding the themes presented and are not necessarily held by any portfolio or represent any recommendations by the portfolio managers. There is no guarantee that forecasts will be realised.

Mark Hawtin

Investment Director

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