Four Megatrends Underlying Amazon: E-Commerce and More

This 12 months Amazon Prime Day occurred on July 12 and 13 and in line with Amazon was the “largest Prime Day occasion in Amazon’s historical past,” offering some perception into general 3Q e-commerce gross sales power. Amazon’s title has develop into virtually synonymous with e-commerce, and the “Amazon Impact” has modified the way in which customers expertise procuring and likewise the way in which retailers handle their provide chains. With its dimension, scale, and cultural affect, the corporate has been driving shifts even past retail—prompting some buyers to search for different methods to take part in a few of the long-term tendencies that assist and/or end result from Amazon’s extensive scope of companies. Apart from e-commerce and on-line procuring, this observe additionally explores thematic shifts towards electrical automobiles, e-commerce actual property, and cloud computing.

Amazon has helped drive larger on-line gross sales for the general retail business.

Whereas Amazon doesn’t launch precise gross sales figures for Prime Day, the corporate introduced that this 12 months’s occasion was the most important Prime Day occasion in historical past with Prime members buying 300 million objects globally.(1) In line with information from Adobe Analytics, Amazon Prime Day noticed roughly $11 billion in on-line gross sales in 2021 and grew to roughly $12 billion in 2022 (these gross sales are whole on-line gross sales throughout all retailers—not simply Amazon). Amazon Prime Day has develop into equal to a significant spending vacation and its influence now extends past Amazon itself. Prime Day has helped increase gross sales throughout each Amazon’s promoting companions (most of that are small and medium-sized companies) and likewise competing retailers. The proportion of non-Amazon gross sales throughout these Prime Day has grown over time to 40% of whole gross sales as many retailers additionally host gross sales on the identical day (e.g., Wal-Mart’s Offers for Days sale and Goal’s Deal Days sale). Gross sales development for Amazon’s promoting companions this 12 months additionally outpaced Amazon’s retail enterprise with prospects spending over $3 billion on over 100 million small enterprise objects.

The S-Community World E-Commerce Index (ECOMX) tracks corporations which are engaged within the international e-commerce business, together with on-line retail, on-line marketplaces, content material navigation, and e-commerce infrastructure segments. The index consists of corporations like Amazon (AMZN, 1.7% index weight), Shopify (SHOP, 1.5% index weight), Wal-Mart (WMT, 1.8% index weight), FedEx (FDX, 1.6% index weight), and United Parcel Service (UPS, 1.7% index weight).(2)

Picture1-Jul-21-2022-04-53-02-38-PM

Picture1-Jul-21-2022-04-53-02-38-PMDemand for expedited deliveries spurs the necessity for cleaner, extra environment friendly supply automobiles (i.e., electrical automobiles).

The surge in e-commerce demand has additionally elevated demand for prime quantity, expedited deliveries. Whereas delivery fashions beforehand consisted of sending merchandise by way of heavy-duty vehicles to retail shops, e-commerce has contributed to the rise of “final mile supply” which entails delivery instantly from distribution middle to the buyer, sometimes by way of parcel vehicles like these from FedEx and UPS. Parcel carriers and enormous retailers like Amazon and Wal-Mart have been increasing their final mile fleets to maintain up with demand, whereas additionally investing in cleaner, extra environment friendly, and extra technologically superior electrical automobiles. The desk under reveals a number of main parcel carriers and retailers who're electrifying their fleets and partnering with electrical automobile producers as a way to match demand from e-commerce. There are additionally a number of different smaller partnerships not proven within the desk—for instance, Amazon additionally has a partnership with Stellantis (STLA IM) to be its first industrial buyer in 2023 for an undisclosed variety of its Ram ProMaster Battery Electrical Car.(3) FedEx additionally has smaller orders for electrical supply automobiles with Xos Vans (XOS).(4)

The S-Community Electrical & Future Car Ecosystem Index (FUTURE) present entry to shares which are materially engaged within the growth and gross sales of electrical and autonomous automobile applied sciences. These embrace corporations talked about under like Rivian Automotive (RIVN, 0.5% index weight), Stellantis NV (STLA IM, 0.5% index weight), and Common Motors (GM, 0.9% index weight).

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Shift towards success fashions prioritizes bigger actual property house in strategic places.

As talked about above, Amazon has shifted retail fashions to prioritize strategic location of success facilities and extra actual property house. E-commerce tenants sometimes require 3 times the logistics actual property as a standard retailer as a result of wider product ranges, larger stock ranges, and bigger outbound delivery necessities, in line with Prologis (PLD).(5) Amazon is the highest tenant in most US and UK industrial REITs; nevertheless, it's nonetheless a comparatively small portion of whole annualized hire, illustrating the fragmentation of the market. Even with Amazon pulling again on a few of its actual property house as demand normalizes post-pandemic, there's nonetheless demand for actual property house amongst different e-commerce tenants.

The Alerian Disruptive Know-how Actual Property Index (LANDX) is an index of shares that personal, function and/or lease actual property that helps superior wired and wi-fi communication, information storage and processing infrastructure, e-commerce warehouses and success facilities. As of July 15, 58.1% of LANDX by index weight was in e-commerce warehousing.

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Amazon cloud and internet companies assist the general shift to digital tendencies.

Whereas Amazon has develop into well-known for its impact on retailing and delivery fashions, it’s straightforward to miss over the corporate’s important influence on web know-how. Whereas revenues from Amazon Net Companies (AWS) make up solely 13% of the corporate’s web income (throughout FY2021), AWS contributes near 75% of the corporate’s working earnings—far larger than its e-commerce/retail income. AWS consists of cloud computing and different IT infrastructure companies. Demand for cloud computing has grown considerably together with penetration of linked gadgets, distant workforce, and the rising international scale of companies. Amazon’s AWS prospects vary from Netflix (who makes use of AWS for its databases, analytics, and advice engines), Coca-Cola (who makes use of AWS structure for its touchless soda fountains), and Expedia (who makes use of AWS infrastructure to satisfy excessive site visitors and excessive availability necessities of its on-line platform).(6) Amazon AWS is at the moment the chief in cloud computing with roughly 33% market share in 1Q22 adopted by Microsoft Azure (21% market share), and Google Cloud (8%) market share.(7)

The O’Shares World Web Giants Index (OGIGX) offers entry to corporations that derive the vast majority of their revenues from web know-how and/or web commerce. These embrace corporations like Amazon (AMZN, 5.0% index weight), Alphabet (GOOGL, 6.3% index weight), and Microsoft Corp (MSFT, 6.2% index weight).

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Backside Line:

Amazon has had each a cultural and financial influence throughout the globe. Whereas e-commerce is likely one of the most compelling tales underlying the corporate, Amazon’s dimension, scale, and cultural affect has pushed a number of different key megatrends in addition to on-line procuring together with electrical automobiles, e-commerce actual property, and cloud computing.

The S-Community World E-Commerce Index (ECOMX) is the underlying index for the First Belief S-Community E-Commerce ETF (ISHP).

The S-Community Electrical & Future Car Ecosystem Index (FUTURE) is the underlying index for the First Belief S-Community Future Automobiles & Know-how ETF (CARZ).

The Alerian Disruptive Technology Real Estate Index (LANDX) is the underlying index for the First Belief Alerian Disruptive Know-how Actual Property UCITS ETF (DTRE).

The O’Shares World Web Giants Index (OGIGX) is the underlying index for the ALPS O’Shares World Web Giants ETF (OGIG). The OGIGX Index is owned by O’Shares ETF Investments.

Associated Analysis:

Thematic Times: Secular Shift to Online Shopping Continues

Investing in E-Commerce: The Future of Search, Shop, & Ship

Legacy Automakers Charge Ahead of New Entrants in EV Push

LANDX Provides Solid Ground for Future of Disruptive Tech

Global Internet Giants Dominate in 2020

 

(1) Prime Day 2022 was the Biggest Prime Day Event Ever

(2) All index weights on this report are as of July 15, 2022

(3) Amazon and Stellantis Collaborate|Stellantis

(4) Xos Q12022 Earnings Call Script

(5) Global E-Commerce Impact on Logistics Real Estate | Prologis

(6) Cloud Computing Services – Amazon Web Services (AWS)

(7) Cloud Market Share 2022



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