However, within this positive macro trend there are important competitive shifts under way. At Standard Life Investments our ‘focus on change’ investment process is a micro, stock driven approach focused on spotting these shifts. We are seeing a dramatic shift from offline to online retail.
In China, fuelled by growth in low-cost smartphones, e-commerce penetration has risen at an astonishing rate, already surpassing levels in developed markets like the US. Many bricks and mortar Chinese retailers are now struggling, having overinvested in floorspace growth in the past few years and suddenly seeing customers switch to cheaper online channels.
One way of playing this is Vipshop, which dominates the fast growing ‘flash marketing’ discounted brands market. This company is currently growing revenues at triple digit rates.
At the other end of the market cap spectrum, the search engine Baidu should benefit indirectly from fast e-commerce keyword search growth.
Similarly in Latin America, e-commerce is gaining an increasing share of the retail sector. We like Mercado Libre, which has a ‘market place’ model similar to eBay’s.
Alistair Way is investment director of global emerging markets at Standard Life Investments