Cyber Monday and the rise of e-commerce

Bargain-hunters are counting down the days to Cyber Monday – the date on which retailers around the world offer cut-price deals on products bought online.

The annual bonanza, which this year falls on Monday 27th November, comes a few days after Black Friday, when high street outlets traditionally offer huge discounts. Both have become very important events in the calendar for hard-pressed retailers to lure customers ahead of the all-important festive period.

So, how can investors take advantage? Here we take a look at the companies benefitting from the e-commerce boom.

The rise of e-commerce

Recalling a time without the convenience of online may be challenging, but despite its current ubiquity, online shopping emerged relatively recently. It tentatively surfaced in England in the late 1970s*. However, it didn't attain widespread popularity until the mid-90s, coinciding with widespread use of the Internet.

The transformative impact of e-commerce extends beyond mere convenience. By dismantling geographical barriers, online shopping has become a linchpin for businesses navigating the digital age, captivating consumers and reshaping companies in its wake.

Cyber Monday itself can be traced back almost 20 years to when the online shopping boom introduced millions of consumers to the concept of buying from their armchairs. Today, consumers annually contribute over $11 billion to Cyber Monday**, underscoring its significance in the e-commerce landscape.

The early adopter: Amazon

The first ecommerce name that comes to mind for most people is Amazon, the internet-based retailer that has been leading the way in e-commerce for decades. Launched in 1995 as an online book retailer, it only took 30 days for the company to begin shipping internationally to 45 different countries*.

Today, this site is the chosen destination for millions of people – with an unrivalled breadth of products. For the full year 2022, Amazon’s sales were up 9% to a remarkable $514bn***.

Amazon is one of the largest holdings in the T. Rowe Price US Large Cap Growth Equity fund****, which is managed by Taymour Tamaddon. This fund looks to invest in large US firms that demonstrate innovation and change, focusing on those with the potential for above average and sustainable rates of earnings growth.

The underlying platforms: Shopify

Of course, it’s not just retailers that will potentially cash-in if Cyber Monday is a success. There are plenty of linked businesses that have a hand in their growth.

Take Shopify, for example. This is a multinational e-commerce player that enables businesses to set up online outlets. It currently powers millions of businesses in more than 175 countries, including top brands such as Gymshark, the fitness apparel and accessories provider.

Shopify is the fourth largest holding in the Baillie Gifford American fund, accounting for 6.3%^ of assets under management. This fund, which sits on the Chelsea Selection, is run by a team of four co-managers that focus on the small number of US companies creating exceptional returns. Usually, these will be tapping into the trends of the future. The experienced management team at Baillie Gifford hails from a variety of backgrounds, which means they will look at companies from different angles.

The payment providers: Mastercard

Then there are payment providers. Where would most of us be today without those small pieces of plastic enabling us to make purchases easily?

The Guinness Global Innovators fund has identified payments and FinTech as one of nine core innovation themes, among them Mastercard^^, which is one of the largest payment processing corporations on the planet.

This portfolio will be of particular interest to investors who like to be at the forefront of innovation. Co-managers Matthew Page and Dr. Ian Mortimer are highly experienced and have developed a clear and consistent process, which has proven to be successful with the fund returning over 200%^^^ since the managers took over in 2014.

The cybersecurity experts: Microsoft

Unfortunately, this remarkable growth in online retail comes with corresponding threat: cyber crime. 

Online fraud, cyberattacks, and data breaches plague industries around the globe, powered by ever-evolving strategies designed to avoid detection and maximise disruption and payoff. Despite heightened cybersecurity efforts, these attacks show an upward trend, and the looming Cyber Monday is anticipated to escalate this risk further.

In response to this growing challenge, Microsoft has diligently positioned itself as a leading global cybersecurity authority^^^^. Functioning as a formidable cyber police force, the U.S. multinational meticulously analyses billions of data points sourced from its products across the globe^^^^. This extensive surveillance aims to safeguard against the daily activities of the world's foremost cybercriminals.

Microsoft is currently the second largest holding of the AXA Framlington American Growth fund, which is managed by the experienced Steve Kelly. He is on the look-out for companies that can demonstrate innovation, unique brands and intellectual property – all qualities that can help them grow into market leaders.

On the Chelsea Core Selection, we are reassured by the fact Steve’s experience in US equity markets spans more than 25 years and that he has run this fund since he joined AXA in 1997. 

*Source: Visual Capitalist, October 2021
**Source: Exploding Topics, The Latest Cyber Monday Statistics, 12 October 2023
***Source: Amazon, 2 February 2023
****Source: fund factsheet, 31 August 2023
^Source: fund factsheet, 31 October 2023
^^Source: fund factsheet, 30 September 2023
^^^Source: FE Analytics, total return pounds sterling, 31 October 2014 to 13 November 2023
^^^^Source: Tech Monitor, 21 August 2023

Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The views expressed are those of the author and fund managers and do not constitute financial advice.