Investors are discovering what ‘Covid normal’ means for the discretionary online retailers, now that consumers are abandoning their mouses and rediscovering those quant things known as bricks-and-mortar shops.

E-commerce advocates contend that the surging demand reflected a deeper change in the mindset of consumers – especially younger ones. In other words, online commerce will continue to encroach on physical sales from their low levels of penetration relative to, say, the US market.

But updates from some of the key providers suggest the post-pandemic pull-back might be deeper than expected.

Kogan (ASX:KGN) reported a 3.8 per cent decline in gross sales for the March quarter, year-on-year. In a rare blip, the company also traded in the red with an adjusted underlying loss of $800,000.

Rather than being troubled by supply chain related shortages, Kogan had built up its inventory to cater for the same level of demand.

Management accepts the need to “recalibrate” the company’s cost base, but refers to an overall slowdown in Australian e-commerce and indeed that’s borne out elsewhere.

In its update, Redbubble (ASX:RBL) reported year-to-date revenue of $384 million, down 16 per cent. Excluding the transient category of Covid masks, revenue abated 4 per cent.

A marketplace for arty types to sell goods such as apparel, stationery and housewares, Redbubble also revealed a $6 million operating loss for the March quarter.

With a slant to furniture and homewares, Temple & Webster (ASX:TPW) appears to be faring better, with year-on-year revenue growth of 23 per cent. Once again, sales momentum is slowing given revenue in the December 2021 half climbed 46 per cent and a year earlier the company was achieving triple-digit growth.

In the specialist sector, online bookshop Booktopia (ASX:BKG) this week reported a one per cent dip in March quarter sales, to $64 million, amid “volatile and unpredictable’’ conditions. Underlying earnings fell 65 per cent to $1.5 million, partly because there were few overseas students to buy its high margin academic texts.

BikeExchange (ASX:BEX) looks to be – er – cycling through the conditions okay, with a 17 per cent increase in March quarter customer receipts to $10m. But its performance is muddied by seasonal factors and a recent acquisition and its revenue also includes subscription income.

The stiffening headwinds have seen shares in Temple & Webster swoon 60 per cent over the last six months. Still, the company is still the biggest ASX online retailer valued at a meaty $600 million.

Kogan shares have fallen to a similar degree, valuing the life’s work of Belarus émigré Ruslan Kogan at $400 million.

Investors can click-and-collect Redbubble shares at a 70 per cent discount.

Even during the pandemic, the online commerce boom didn’t benefit all the players equally. For instance, MyDeal (ASX:MYD) is a well-known name but it’s traded on lower earnings multiple than its peers.

MyDeal now defies broader market, notching up record March quarter gross sales of $60.4 million. The company’s actual revenue (as opposed to gross sales) soared a “staggering” 35 per cent (the company’s words) to $16 million.

MyDeal has sought to expand its repertoire by launching Amazed.com, a portal for activities and experiences such as balloon flights and skydiving.

Temple & Webster, meanwhile, has declared cyber war on the monolithic Bunnings with an initial $10 million investment in The Build, its online foray into the $16 billion home improvement market.

Investors appear nonplussed by the expansion and we can understand why. Surely the joy in home improvement is in physically comparing the carpets, curtains and cisterns … if that’s your idea of a fun time of course.

Meanwhile, the physical retailers are performing patchily in light of the Reserve Bank’s not-so-shock decision to remove billions of dollars of spare household cash from the retail ecosystem.

JB Hi-Fi’s upbeat update this week pointed to strong demand for computers and office goods, which confirms the remote working trend is here to stay.

Plus-sized clothing specialist City Chic is racking up decent sales, but is battling with supersized sourcing and shipping costs.

As Booktopia notes, retail conditions are especially hard to read at the moment, with this week’s rates rise making ‘Covid normal’ look anything but ordinary.

This story does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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