The acceleration of e-com hasn't resulted in a pre-Christmas high on the ASX. Will investors look back on this time as a missed opportunity?
Last week Kogan announced that it had sold the domain name bitbuy.com to Canadian cryptocurrency trading platform Bitbuy for $US1.5 million ($2.1 million). Kogan also entered into an advertising arrangement to provide marketing support when Bitbuy launches in Australia.
‘The domain sale not only delivers returns for Kogan shareholders but also provides an opportunity to benefit from Bitbuy’s future success in the crypto business abroad and potentially in the Australian market,’ Kogan’s Executive Director, David Shafer said.
In response to the announcement, Kogan shares lifted slightly, up 2% over seven days and 15% over 14 days, closing at $8.28 on Monday. While the domain name sale changes little in the short term, in the longer term, it positions Kogan well from both a crypto and advertising standpoint.
Kogan was the only company on the ASX Listed E-Commerce Index to actually experience share price growth over the last week, with all others on the Index either remaining stagnant (both BikeExchange and Cettire at 0%) or shedding. Booktopia and MyDeal were the worst performers in this time period, dropping by 10.8% and 10.6% respectively.
Source: E-Com Index based on ASX reporting for the period
Last week, Booktopia announced the completion of its new publishing and distribution agreement with UK-based Welbeck Publishing Group. Earlier in the year, Booktopia told investors it would secure a 25% stake in the UK-based company’s new standalone subsidiary, Welbeck Australia (WPGANZ) for around $3 million. All agreements have been executed and from 1 January 2022, Booktopia will distribute WPGANZ’s catalogue of around 300 new titles per year (and Welbeck’s existing distribution agreement with Allen & Unwin and United Book Distributors will be transferred to Booktopia Publisher Services towards the end of 1Q2022).
While Booktopia’s share price originally responded well to the announcement, it hasn’t experienced any further lift, closing at $1.57 on Monday, which is another 52-week low (a far cry from its high of $2.99 back in late August). When it listed in early December it was thought of as reasonably valued compared to others hitting the market at a similar time that were potentially overhyped. Given this (as well as the company’s major growth and retention strategy), that its share price hasn’t grown (or at least held steady as it has through most of 2021) is perhaps surprising.
Temple & Webster, Redbubble and Adore have also experienced a dip in the last week. Closing at $3.92 on Monday, Adore Beauty has shed 8% over seven days. While this is far from the $6.24 it hit in late January 2021, it’s above the $3.31 it hit back in May 2021. Like Booktopia, it has a focus on diversification and growth and its latest results have been strong. Temple & Webster shed 4.6% in the last seven days and Redbubble shed 3% in the same period.
Overall, the ASX E-Com Index is underperforming compared to the ASX200, the latter shedding 1.2% with the former dropping 3.2% over seven days. Taking a longer-term view, the differences are more apparent, with the E-Com Index losing 18.4% over 90 days compared to the ASX200 which shed 1.3% in the same period.
A post-lockdown landscape which has found online retailers battling with supply chain issues and fulfilment delays has resulted in a dip in sales. Yet if we’re comparing two-year compound growth, the pre-pandemic to post(ish)-pandemic picture paints a different story. As we level out from the extremes of 2021, the spikes and troughs of the ASX E-Com Index should begin to level out as well.
What we’ve seen is that some of the big players sold shares at their peak with an expectation that this would be post-pandemic normal. As we reach the end of the second pandemic year, reality is kicking in and we’ve swung to another extreme. Heading into 2022, it’s clear that consumer behaviour has been forever altered. With retention strategies in overdrive, will investors once again find favour with e-com?
Figures are current as at close of ASX on 20 December 2021. This is analysis only and not intended as investment advice.
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