06 September 2020
Source: Bloomberg & Momentum Global Investment Management
What this chart shows
The chart shows internet sales as a percentage of total retail sales in the UK from January 2007 to July 2020. In 2007 just 3% of total sales came from online. By the start of this year, it had grown to 20%. Whilst it is clear this shift online has been in motion for some time, the events of this year have provided a massive boost. With consumers in lockdown, online sales spiked up to 33% in May. Some readers might wonder the reasoning for the regular intra-year spikes. There could be a seasonal element at play here, as often the spikes occur in November and then decline in December, perhaps because of more online shopping during November’s Black Friday sales, followed by more in-store shopping as Christmas approaches.
Why this chart is relevant
The growth in online shopping and consumption clearly plays to the strengths of the big technology stocks and online retailers and the chart sends a clear message to the more traditional ‘offline’ retailers. Whilst the trend is obvious, this does not necessarily mean investors should all flock to buy only these technology stocks. This is already an extremely crowded trade. Of course, all the prior growth is in the price of these companies, as are expectations for continued future growth. Valuations are still important and, as we have commented before, technology stocks are certainly not cheap at current levels. With the market so narrowly focused on these ‘Covid winners’ other businesses that are successfully transitioning their business models are not necessarily appreciated which leaves opportunities for active investors able to dig a little deeper.
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