Online marketplace spending to surge this Christmas. Is it worth looking at those stocks now?
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Despite tighter purse strings, Australians are set to spend $4.8 billion on online marketplaces as they shop around for the best value items in the lead-up to Christmas.
Around 80% of Aussies will choose online marketplaces to be their channel of choice this peak season, according to research from ecommerce delivery platform ShipStation and retail consultancy, Retail Economics..
Driving the popularity of online marketplaces is that consumers feel they offer better value, and enable them to easily compare products and prices. Over 72% surveyed believe online marketplaces offer better value than individual retailers.
And according to the research, a third of Aussie consumers are planning to start their online Christmas shopping sometime around this month.
The impetus to shop early is particularly pronounced among younger shoppers, while older consumers are likely to adopt more traditional approaches to better manage budgets for their festive purchases.
David Boyer, VP, Head of ANZ at Auctane, ShipStation’s operating brand, says this year’s holiday season shopping could exceed expectations.
“From a volume perspective, in terms of sales orders and shipping volumes compared to last year, I think we’ll see a pretty substantive increase,” Boyer told Stockhead.
“Nothing near what we saw during Covid, but I think retailers in the e-commerce space will see a pretty sizeable increase this year – more in line with what we saw in the years of 2016 through 2018, than 2019 through 2021.”
Boyer acknowledged that current macro data do paint to a bleak picture in retail, but from an e-commerce retail perspective, he believes there’s still a lot of runway.
“I think 2023 is the test or measure of what the new reality is for us post the Covid era.
“And if you zoom into the online retail space, there’s still a lot of opportunity and positivity around performance this peak; such as merchants expecting a larger increase in volume over last year,” said Boyer.
Boyer also reckons that consumers are looking to re-adjust their shopping habits back to predominantly online channels, compared to physical channels.
“During Covid, we saw that obvious shift to digital. And in 2022, there was a shift back to physical channels as everything opened up.
“But now in 2023, we’re seeing a recalibration back to digital.
“In particular, the non-digital native or the over-45s cohort, who’ve learned online shopping behaviours over Covid, are now coming back for the convenience of shopping online,” said Boyer.
Boyer argues this will be the new normal for consumers moving forward in terms of retail experience online versus in-store.
He noted however that online consumers in Australia are more sensitive toward the cost of delivery, with 78% citing shipping cost as the most important factor when making an online purchase.
“The major concerning bit for Australians going into this peak season is that the shipping costs are just too high in general,” Boyer said, adding that ShipStation’s software could lower those costs by helping retailers connect to all the different potential shipping providers.
But when it comes to choices, Aussies aren’t just limited to a handful of marketplaces like Ebay, Amazon or Kogan.
“There’s actually a large variety of marketplaces here based on niche, so depending on the type of product, there’s a marketplace for it in Australia,” said Boyer.
Data suggest that online shopping in Australia is worth $56 billion in 2023, out of a total retail market size of $360 billion.
Boyer believes this slice will only keep getting bigger going forward.
“Throughout most of the last 20 years, online retail e-commerce as a percentage of total retail has grown every year by like, 10 plus digits, almost in every country that we’re in,” explained Boyer.
“We don’t see that trend shifting at all, and likely, it won’t until way into the future because as retailers innovate with technology, the way people buy online will only get easier.
“So buying things online will only be more straightforward until we hit some diminishing returns threshold when this rapid growth eventually starts to slow down,” said Boyer.
On the ASX, there are pureplay online marketplaces (as opposed to own-brand online retail stores).
Kogan’s businesses include its pureplay online marketplaces, Kogan.com, and MightyApe.com.au.
Kogan also recently acquired Brosa, one of Australia’s largest online luxury furniture retailers, out of administration.
Kogan’s share price has surged in the second half of FY23 after announcing a return to positive Adjusted EBITDA in H2.
The company’s focus during the year has been on frugality and ‘relentless pursuit of continuous improvement, data-driven decisions, and tough negotiations’.
For the full year, Kogan delivered an NPAT loss of -$7.7 million, and Statutory NPAT of -$25.9 million.
“Having returned Kogan.com to sustained and increasing underlying profitability in the second half of FY23, we look to FY24 with confidence,” said CEO, Ruslan Kogan.
Redbubble’s online marketplaces include the RedBubble.com flagship website which connects independent artists with customers; and TeePublic.com which is a platform for custom apparel and designs.
Around 71% of the company’s total sales in FY23 were made in North America, with Europe accounting for 22% and ANZ just 6%.
During the year, Redbubble completed an operational review to return the company to growth and achieve sustainability.
FY23 marketplace revenue was $467.5 million, down 3% on the pcp, and EBITDA was a loss of -$40.7m, compared to -$11.2m in FY22.
“We have learnt from these mistakes and taken decisive actions to rightsize our cost base, and accelerate our return to positive underlying cash flow,” said CEO, Martin Hosking.
Adore Beauty is a pureplay online beauty retailer with its flagship platform, adorebeauty.com.au.
The company is focusing on the 41-50 year old female demographics, and has plans to expand its product/SKU offering into its own in-house brand – which are much larger margins for the company.
Currently it has three house-owned brands: ‘Adore Beauty’, ‘AB LAB’ and ‘Viviology’.
Focus in FY24 will be on continued margin and cost improvement, and leveraging its healthy balance sheet to look into investments in key short, mid and long-term strategic initiatives.
Booktopia is an online book retailer which also sells eBooks, DVDs, audiobooks, magazines, stationery and gift certificates & services through its website, booktiopia.com.au.
The company had a tough FY23, with revenue falling by 18% to $197.6m, and underlying EBITDA came in at a loss of -$4.6m from a $6.2m profit the year before.
Management said it will now prioritise actions to improve future profitability, while balancing ongoing investment in people, technology and infrastructure to support future growth.
To achieve this objective, the company has made changes to its board, which includes a new chairman and three new non-executive directors.
Booktopia also appointed David Nenke as its new CEO in May this year. Nenke has 25 years of executive experience at Barnes and Noble Education in the US.