In the Spotlight Trends of the Month
E-commerce is not a new investment theme. For decades now, investors have been profiting from well-known online shopping stocks such as those of Amazon, eBay, and Walmart. This theme could still be in its early stages though since the global e-commerce industry is likely to experience substantial growth in the years and decades ahead.
Over the last decade, e-commerce has become an indispensable part of the global retail landscape.
During the coronavirus pandemic — when society was forced into lockdown — people came to realise the benefits of shopping for groceries and other goods online, and today, many consumers still prefer to shop from the comfort of their own homes or via their smartphones due to the convenience it offers.
As more people around the world gain access to the Internet, online retail sales continue to rise. This year, worldwide sales are projected to hit $4.1 trillion, helped by major shopping events such as Amazon Prime Day, Black Friday, Cyber Monday, and Singles’ Day, all of which generate excitement among consumers due to the big discounts on offer.
Looking ahead, the trajectory of sales figures is expected to remain upward.
Today, online shopping only represents about 20% of retail sales worldwide, so there is plenty of room for industry growth. And the number of online shoppers is expected to continue rising in the years ahead. Next year, it is expected that there will be around 2.77 billion online shoppers worldwide — a 17% increase from the figure in 2020.
It’s worth pointing out that in the coming years, some of the biggest growth is likely to come from the world’s emerging markets.
According to Americas Market Intelligence, Latin America will potentially see growth of more than 20% between 2023 and 2026, with the region accumulating more than $700 billion in total combined online retail sales over this period. In this part of the world, the middle class is growing rapidly, and disposable income is rising quickly.
One company that is benefitting from this growth is MercadoLibre, which operates the largest e-commerce platform in Latin America (and is Latin America’s largest company by market cap). Other hotspots for e-commerce across the emerging markets include Southeast Asia and India. Here, there are multiple factors driving growth, including rising incomes, increasing Internet penetration, and young growing populations.
Yet, there is far more to the e-commerce industry than just retail shopping.
Today, the market incorporates such things as flight bookings, taxi rides, food delivery, live event ticket bookings, music and video streaming, home sales, business-to-business (B2B) sales, and more. So, it’s an enormous industry overall with huge potential in the long run.
One sub-sector of the e-commerce market that appears to have a lot of potential is online travel bookings.
This includes flight, train, and bus bookings, hotel bookings, cruise ship bookings, taxi rides, and car rentals. According to SkyQuest, between 2023 and 2030, this industry is likely to grow by around 12% per year to be worth $2.4 trillion. SkyQuest believes that growth will be driven by a range of factors, including a growing desire among consumers for immersive and unique experiences, the influence of social media, increased disposable income, further Internet penetration, and advances in booking technology.
One company that is making big moves in this space is rideshare company Uber. For a while now, consumers have been able to book plane and train tickets through its app. However, recently, it came to light that the company is exploring a deal for travel booking company Expedia. If a deal were to go through, Uber could end up operating a travel “super app.”
Another area of the e-commerce market with significant growth potential is video streaming.
Today, this market is booming — thanks to the brilliant services on offer from companies such as Netflix, Disney, YouTube, Apple, and Amazon. Currently, these companies are generating hundreds of billions of dollars in revenues every year. But this could be just the beginning — according to Precedence Research, the video streaming market is set to grow by 18.5% per year in the years ahead to be worth $1.7 trillion by 2030.
As for B2B sales, the potential market size here is gigantic.
Today, the global B2B e-commerce market is worth around $28 trillion (versus $15 trillion in 2020). However, according to the International Trade Administration, this market is likely to be worth around $36 trillion by 2026. Industries such as advanced manufacturing, energy, healthcare, and professional business services segments will drive the majority of this sales growth.
Overall, the e-commerce market appears to have significant potential from an investment perspective. Over the next decade, this industry is likely to create many opportunities for investors.
Those looking to capitalise on the growth of the industry may wish to check out eToro’s ShoppingCart Smart Portfolio. This portfolio provides access to a range of companies across the e-commerce ecosystem including online shopping platforms, online travel businesses, payments companies, and food delivery companies.
With the global financial markets continually experiencing bouts of gut-wrenching volatility, demand for risk management products is increasing. Today, many investors are looking for investment products that can protect their capital from market downturns while still offering the potential for long-term growth.
Amid this backdrop, Capital Guarantee products have emerged as a compelling solution as they offer investors the potential for attractive returns as well as downside protection. Here’s a look at how these products work and how they are responding to current market conditions.
How Capital Guarantee products work
A Capital Guarantee product is an investment that aims to protect investors’ capital, regardless of market performance. With these products, investors are assured of getting most, if not all, of their original capital back, even if the underlying investments experience losses.
A common way to structure a Capital Guarantee product is to combine a long position in an index such as the S&P 500 with a put option in the same index. By investing in an index, you gain exposure to the stock market, and you’ll benefit from any gains in the index over time. Meanwhile, by buying a put option, you get the right, but not the obligation, to sell that index at a predetermined price on or before a certain date.
Essentially, the put option acts like an insurance policy, ensuring that if the index falls, you won’t lose more than you’re prepared to.
The end result is that you can participate in market rallies while protecting yourself from any potential market weakness.
It’s worth noting that eToro’s Capital Guarantee products provide access to a range of different stock market indexes, including the S&P 500, the Euro Stoxx 50, and the MSCI Japan (with stop losses applied to each index), which reduces risk for investors. They also provide exposure to bonds, and in some cases, Bitcoin, which reduces risk further as these asset classes have a low correlation to stocks.
Given this bullet-proof structure, these portfolios are well-suited to many different types of investors, including those who are more risk-averse, those with short-term investment horizons, and those who have concerns about potential market corrections in the near term. By adding these products to their portfolios, investors can potentially reduce their risk levels significantly.
Volatility in the markets
In recent months, many major equity indexes have risen to new all-time highs. However, investors have experienced high levels of volatility at times due to shifts in central bank monetary policy, key economic data, and ongoing geopolitical events. In early August, for example, stocks experienced a “flash crash” on the back of the unwinding of the Japanese yen carry trade. Stocks then experienced another sharp pullback in early September amid fears that the US was heading towards a recession.
Throughout this market turbulence, eToro’s Capital Guarantee portfolios demonstrated their resilience.
The blend of stocks and bonds in the portfolios helped. Stocks provided opportunities for growth, especially in sectors such as Technology and Consumer Goods. In contrast, the bonds provided stability, acting as a ballast during stock market downturns.
eToro’s new Capital Guarantee products
Looking ahead, investors are likely to see further volatility across equity and fixed- income markets as a result of global economic data, central bank policies, and geopolitical issues. So, risk management will be important.
Capital Guarantee products are expected to remain a key defensive strategy, offering investors protection from downside risks while still allowing for potential growth through equity exposure.
Those interested in adding Capital Guarantee products to their portfolios may wish to check out eToro’s Global-Edge and Global-EdgePro Smart Portfolios, which have been designed to help investors minimise the risk of capital loss. The Global-Edge Smart Portfolio provides exposure to multiple equity indexes as well as bonds, meaning that it is well diversified. As for the Global-EdgePro Portfolio, it provides exposure to stocks and bonds, but also has a 5% weighting to Bitcoin. This adds a further level of diversification as Bitcoin prices tend to have a low correlation to traditional asset classes.
