Daily Brief: If You’re Looking For Opportunities In Online Retail, Take A Look At China

Daily Brief: If You’re Looking For Opportunities In Online Retail, Take A Look At China

almost 3 years ago3 mins

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Online retail giant JD.com reported better-than-expected results late last week, after China proved it’s ready, willing, and able to lean into a digital future.

What does this mean?

The pandemic’s driven a drop-off in window shopping, sure, but JD.com’s been happy to make the most of the spike in Windows shopping: the online retailer reported an expectation-beating 31% sales jump last quarter. Still, investors weren’t exactly delighted to hear it’ll be spending big to maintain and expand its delivery network, which they’re worried will eat into the company’s profit. JD.com might take issue with that, mind you: the second-biggest Chinese ecommerce retailer’s in-house delivery network is exactly what sets it apart from the biggest, Alibaba, which relies on third-party couriers.

Boom times

Why should I care?

The bigger picture: Chinese ecommerce is where it’s at.

The shift to online shopping is one of the trends that’s expected to outlast the pandemic, and China looks like it’ll be leading the way. This year, in fact, it’s forecast to make 52% of its retail sales online – a big jump from 2019’s 34%, and an even bigger one from the 15% and 13% expected this year in the US and West Europe. Better still, that would make China the first country where more sales are made online than in person. And when you consider that favorable backdrop, it might make sense why 92% of authors on data platform Nobias Financial are feeling positive about JD.com’s stock.

Retail ecommerce sales in China

For you personally: You can now buy into South Korea’s biggest ecommerce player.

The country with the next-best ecommerce rate is South Korea, with 29% of retail sales expected to be made online this year. That probably worked in Coupang’s favor late last week: the so-called “Amazon of South Korea” – which almost doubled its revenues in the past year – saw its shares climb 41% on its debut on the New York Stock Exchange.

Coupang financial performance

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Burberry Lifted Its Forecast – A Sign That Luxury Retail's Bouncing Back

Burberry image

Don’t be fooled by Burberry’s sultry pout: the British fashion house is feeling so optimistic about the luxury industry that it lifted its sales forecast for the quarter on Friday.

What does this mean?

It’s famously counterintuitive to get all dressed up with nowhere to go, and there really has been nowhere to go. So it stands to reason that the pandemic has taken its toll on luxury retailers like Burberry. Lucky for them, the world’s fatcats – particularly those in China and South Korea – are starting to splash out again, which might be why Burberry’s expecting sales to be up by nearly a third this quarter compared to the same time last year. That’s both a big rebound from last quarter’s 9% drop and more than analysts were predicting, and that suited investors just fine: they sent Burberry’s stock up 8% – back to pre-pandemic levels.

Burberry shares
Source: Sky News

Why should I care?

For markets: Luxury retail really does look like it’s bouncing back.

Burberry can’t take all the credit for that positive investor reaction: other luxury brands – like Prada, Salvatore Ferragamo, and Ray-Ban maker EssilorLuxottica – brought their own promising news for the sector last week. They said their sales were all boosted by strong demand from Asian customers last quarter too, doubling down on Burberry’s evidence that luxury retail might finally have turned a corner.

In 2020, Asia was the top region for luxury sales
In 2020, Asia was the top region for luxury sales

The bigger picture: Luxury’s all about ecommerce and big-name brands.

Analysts at GAM Investments have pointed out that the pandemic’s accelerated two previously underlying trends in the luxury industry. First, the rise of ecommerce: the sector saw a decade’s worth of growth in the sector in just three months, with online sales doubling from before the outbreak. And second, the power of brand: big names like Louis Vuitton, Dior and Chanel have been winning market share off lesser-known rivals, and they might not give it up any time soon.

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