Is the threat of e-commerce overplayed?
With the number of retailers streamlining or shutting down their bricks-and-mortar presence, some directly citing online competition, the e-commerce sector could appear set to boom.
However, research from UBS suggests this may not be the case in the short term and the threat posed by the online sector may be overplayed, with online penetration having slowed across all categories barring electronics.
While online retail sales have grown at a rate of 14 per cent CAGR for the past three years, the sector’s share of the overall retail industry sits at only 9 per cent, and is forecasted to increase to 12 per cent by 2024.
Domestic retailers are performing well in the space, with online penetration growing across most listed retailers.
A key opportunity observed is the growth of click-and-collect. While industry penetration is low at around 20 per cent, approximately 62 per cent of customers that utilise the service go on to purchase more once they enter a store to pick up their order.
Additionally, the research found that customers perceive prices to be higher in-store rather than online, and noted an opportunity for brands to do more targeted promotion to change price perception.
Is Amazon Australia set to grow?
The big question mark in the Australian e-commerce industry, Amazon, has been gaining traction in terms of consumer acceptance in the last year.
Around 28 per cent of those surveyed have used Amazon, and 38 per cent said they would use the platform in the future. The most popular categories across the site have been electronics, toys, apparel and cosmetics.
UBS also asked consumers if they thought Amazon would be a major shopping destination moving forward, with 28 per cent believing it will be.
While seemingly high, the figure is down year-on-year, with the business’ limited local range seemingly becoming an issue.
“Our analysis of SKU count across 12 key electronics brands suggests Amazon Australia’s range is ~33 per cent that of JB Hi-Fi,” the report reads.
Who to watch
According to UBS, Treasury Wines, Flight Centre, Myer, A2 Milk, Premier Investments and Adairs are all business primed for investment.
On the other side, the firm recommends shareholders consider selling out of Coles, Coca-Cola Amatil, GUD Holdings, and JB Hi-Fi.
While accepting that JB Hi-Fi has seen success with its online strategy, UBS notes it is very expensive as a stock.