A Lens on Digital Era, Global E-commerce and ASX listed retailers – KGN, ADH

Summary

• With the advent of technology, the future of e-commerce industry seems to be booming as consumers are hooked on to their gadgets, and are focussing towards convenience, price comparison, shopping availability 24/7, as well as greater variety and shipping options.
• Owing to the underlying concerns in society about the pandemic blowback, individuals are emphasising on personal hygiene and social distancing, encouraging online shopping.
• KGN noted an incremental onboarding of 109k active customer base in June. Further, for Q4 2020, KGN experienced robust growth of more than 95% and 115% in gross sales and gross profit, respectively.
• Adairs’ online sales skyrocketed 92.6% during 2H FY20 up to 14 June. Moreover, management believes that the Company is well-positioned to respond to emerging opportunities and risks.

In the old days, the idea of finding a product via an online medium on a computer or mobile phone, and giving in credit card details for making payments, in hope that the said product would arrive on one’s doorstep after few days would have sounded crazy.

However, with the advent of technology, an online boom has been witnessed over the past decade, explicitly in e-commerce space.

In the digital era, numerous organisations are reshaping the landscape of their organisational models and structures. The restructuring has unveiled, entirely new digital products and enhanced customers experience.

Do you know what factors are fuelling in growth of the online marketplace?

Convenience for the shopper and overhead cost reduction for the retailer are acting as drivers of the incremental growth in the e-commerce space.

Owing to pandemic induced stringent lockdown, numerous brick and motor retail stores have had witnessed closure of doors, creating prodigious uncertainty.

As people were unable to shop for items other than essentials in some stores, they began to opt for the next finest thing: purchasing via virtual means.

Furthermore, the pandemic has led to a radical shift in both shopping and payment patterns; during the lockdown, individuals were cooped up in their respective houses, and bought different products using cashless payments to fulfil requirements of households or to fray boredom.

Although people have been mindful of spending, they are still shopping and crashing servers and online fulfilment processes across the nation.

Must Read: How is the buying pattern changing during the COVID-19 pandemic?

E-commerce space has emerged as one of the safest industries functioning during the pandemic, and various retailers have been capitalising on the sustainable growth of their online platforms.

As per US Investment banking giant, Goldman Sachs estimation total e-commerce revenue for Australia would upsurge from US$30.5 billion this year to US$43.8 billion by 2024.

Did you read; E-commerce Emerges as Winner from COVID-19 Turmoil

Jeff Bezos-led juggernaut, Amazon.com, Inc. (NASDAQ:AMZN) is one of the finest examples showcasing growth. The e-commerce giant is not only enabling brands and retailers to advance on the consumer experience, it also helps them gain competitive benefits through product recommendations, dynamic pricing, and advertising.

Do you know, Amazon’s share rose by 7.93% and closed the day’s trade at US$3196.84 on 20 July 2020?

Despite the fact that the e-commerce is booming, with the absence of physical human interaction at the time of placing the order, delivery of the product is still done.

As the shift from brick and mortar to online retail continues, the difficulties of managing the contactless delivery persists.

Amazon might change the game with the contactless delivery.

Are you wondering, how the e-commerce behemoth would keep its ball rolling?

Well, the e-commerce giant is also ramping up plans to implement same-day-delivery via drones.

Amid COVID-19, the shift in consumer preferences towards online businesses has been advantageous for many online retailers, further boosting their revenue streams.

Did you read; 6 Stocks that Weathered the COVID-19 Storm - ANN, KGN, XRO, RMD, MIN, FMG

Notwithstanding the headwinds arising from worries of the pandemic, many ASX listed e-retailers are witnessing growth in their businesses:

Kogan.com Limited (ASX:KGN)

Australian online marketplace, KGN has successfully sailed through the disturbances ensued by the pandemic and witnessed heightened KGN’s sales growth.

Although, physical brick and motor stores have been re-opening at present, with the normal functioning, sales on KGN’s online platform remained extremely strong.

On 21 July 2020, KGN unveiled its robust performance with soared gross sales and gross profit of more than 95% and 115%, respectively for the fourth quarter, ended June 2020 as compared to Q4 FY19.

Other highlights of the accelerated trading performance of KGN were as follows:

• During June 2020, active customer base noted an incremental addition of 109,000 and KGN recorded an overall 2,183,000 for the same, by 30 June 2020.
• For June 2020, KGN’s gross sales were more than AU$94 million; gross profit was over AU$17 million, and adjusted EBITDA was beyond AU$7.9 million.
• The Company’s total inventories and cash were recorded at AU$113.1 million and AU$147 million, respectively, as on 30 June 2020.

Furthermore, KGN completed the Share Purchase Plan (SPP) and raised AU$20 million, earlier in July. Earlier in June, KGN had concluded its underwritten AU$100 million Placement at an off price of AU$11.45/new share. The funds from the same are anticipated to be utilised to give financial flexibility and enable the Company to act immediately on upcoming opportunities.

For more updates read;

• Federal Court Finds Kogan’s Tax Time Promotion False
• Com Raises A$20 Million Through a Share Purchase Plan
• Capital Raising and Share Purchase Plan: Is Bigger, the better?
• Shedding light on tech and consumer discretionary stocks – MMM, OCL, ELO, KGN

On 22 July 2020, KGN last traded at AU$17.41, down by 1.915% from the previous close.

Adairs Limited (ASX:ADH)

Retailer of home furnishings in Australia, ADH unveiled its trading update and sales guidance for FY20 on 19 June 2020.

In 2H FY20 period to 14 June, the Company witnessed an upsurge of 27.4% in total sales, 5.3% growth in stores and 92.6% growth in online sales.

Furthermore, in the 2H FY20 period to 14 June, the Company’s total sales noted an increase of 15.7%, constituting 3.5% growth in stores and 64% growth in online sales.

Additionally, ADH’s online business, Mocka, delivered sales growth of 52.1% in 2H FY20 period to 14 June.

In FY20, the Company anticipates recording Group sales between AU$385 million and AU$390 million. Moreover, Company’s management has recognised the raised level of uncertainty over the medium term and emphasised that the business is well-positioned to respond to the emerging opportunities and risks.

On 22 June 2020, the Company notified that Adairs’ Non-Executive Chairman, Mr Michael Butler, had declared that he would not seek re-election at the upcoming Annual General Meeting (AGM) in October this year, and would remain with the Board until the AGM takes place.

ADH believes that he would exit the firm in a robust position.

On 22 July 2020, ADH closed the day’s trade at AU$2.380, down by 0.833% from the previous close.

(Note: All currency in AUD unless specified otherwise)