Zacks

Zacks Industry Outlook Highlights Qurate Retail Group, Rover and Travelzoo

Zacks Equity Research
12 min read

In This Article:

For Immediate Release

Chicago, IL – November 13, 2023 – Today, Zacks Equity Research discusses Qurate Retail Group QRTEA, Rover Group, Inc. ROVR and Travelzoo TZOO.

Industry: E-commerce

Link: https://www.zacks.com/commentary/2182245/ecommerce-industry-on-a-rebound-3-picks

This year is likely to see a return to normalcy with ecommerce taking away bigger and bigger slices of the total retail pie. Commerce Department numbers for the last quarter is proof of this: ecommerce sales in the second quarter grew 7.5% over 2Q22 (up 2.1% sequentially), with total retail sales increasing 0.6% (flattish sequentially). Ecommerce accounted for around 15.4% of total U.S. retail sales.

As the back-to-stores trend recedes, convenience is returning as a major factor driving volumes in this industry and this is particularly true of Gen-Z, which is becoming a more relevant component of sales. Many of these buyers have grown up on the Internet and are accustomed to a much higher level of digitization. They are also likely to hang out on popular social media platforms, allowing themselves to be influenced by the latest trends there. This is driving an entirely new perspective on the ecommerce space, one that is likely to expand with more advanced technology such as AR/VR and the Metaverse.

Valuation, although down over the past year, remains an issue, reflecting the significantly stronger growth prospects. Several stocks in this extremely diverse industry are worth buying today, but we've picked three: Qurate Retail Group, Rover Group and Travelzoo.

About the Industry

Internet - Commerce continues to evolve as the technologies driving it advance.

On the one side are increasingly powerful and capable user devices. On the other are increasingly sophisticated platforms often combining chatbots and/or social media. While AI continues to deliver increased user satisfaction, the metaverse promises another paradigm shift.

Differentiation comes from better technology for improved showcasing, easier navigation and payment, speedier delivery and returns, brand building, comparison shopping, loyalty, etc. as well as more shipping options, which generally tip the scales in favor of larger players. Particularly because there is fierce price competition necessitating deep discounting, which keeps prices down.

Current Trends Driving the Internet-Commerce Industry

  • ·Holiday sales will drive results in the current quarter, but the jury's out on the extent of the bump-up. Adobe Analytics, which was one of the first to provide estimates, said that ecommerce would increase 4.8% in the traditional season (Nov 1 to Dec 31) although retailers are beginning early pushing their discounts and in Amazon's case, the second Prime Day in October. Mastercard's Spending Pulse is expecting a 6.7% increase while the National Retail Federation (NRF)is projecting a 7-9% increase in the said period. eMarketer's Insider Intelligence, which includes October, sees retail ecommerce hitting 11.3% growth this year. While overall retail is expected to be much softer according to all estimates, attributed to the impact of inflation on consumer purse strings, ecommerce will benefit from the continued to shift in shopping habits. The 2023 Deloitte holiday travel survey however indicates that consumers spending this year is less about thrift and more about choice. The survey report says that nearly half of Americans will be traveling, with intent strong across generations and income levels. Therefore, although some reports suggest fewer discounts this year because of relative normalization in inventory levels, especially at big-ticket retailers, it will probably not be as big a factor this year.

  • Macro conditionsshould continue to improve for the industry, which was pressured last year by a combination of factors, including a consumer trend back to stores, as well as a certain level of thrift as people fretted about rising costs and the possibility of a recession that would see significant job losses. As we move through 2023, it's clear that inflation (including wage inflation) is coming down (however slowly), although job openings remain pretty decent and unemployment remains at historic lows. Therefore, there is very little in support of the recession theory. For producers, supply chain issues have alleviated while the labor situation is still tight. Global uncertainties continue to affect foreign exchange effects for companies with international operations. The higher interest rate is another pressure on producers, and by extension consumers, remaining a negative for the year. Overall, industry players will continue to see the benefits of operating leverage they have built up in the last few years. The importance of having a digital presence has never been greater, particularly considering the fact that the retail ecommerce market continues to expand into new product segments and geographies, and consumers continue to move back to the convenience of online shopping.

  • Ecommerce will gain at the expense of brick-and-mortar this year. The Commerce Department's data for the first quarter shows that ecommerce growth continued at a faster pace than overall retail for the fourth straight quarter and gained a full percentage point of market share over the year-ago quarter. Therefore, this year is shaping up to be a relatively normal year, or in other words, one in which ecommerce will continue to grow at the expense of physical stores.

  • Ecommerce growing at the expense of physical stores doesn't mean that a physical presence will be downgraded. In fact, with Gen Z, the demand for convenience and options will remain paramount. In many cases, this will mean faster deliveries or pickups from some nearby convenient location. Since it is only proximity to a consumer that can facilitate quick delivery, both ecommerce pureplays and traditional retailers will continue to balance ecommerce sales with a physical presence. Therefore, a hybrid/omnichannel model will remain of utmost importance, allowing customized, quick and convenient delivery (BOPIS, curbside pickup, etc.) through apps. Customers generally downgrade stores that don't provide these conveniences. Self-driven delivery vehicles and drones are also on the horizon to deal with logistics problems and make deliveries smoother and cheaper.

  • A trend that Gen-Z is popularizing now is social commerce. Social commerce means the ability to discover, research, buy and checkout on a social media platform. Brands usually have store fronts on these platforms where influencers also discuss their products, thus driving traffic to them. The social element of shopping that ecommerce had taken out is thus returning through this route. Since social commerce is already popular in China, it isn't surprising that the Chinese social media platform TikTok that's also very popular with Gen Z is the number one place for social commerce. But others like Facebook and Instagram are also in the game. According to The Future of Commerce, "Global sales via social media platforms were es

Terms and Privacy Policy
Your Privacy Choices
Utah Privacy Notice
More Info

Recommended Stories