The carnage has continued in the current year, with the coronavirus outbreak triggering unprecedented inventory and liquidity headwinds forcing even more stores to shut down.

The year kicked off with the parent of fine paper specialist Papyrus quietly going into liquidation before eventually filing for bankruptcy. A torrent was to soon follow, with 27 major retailers joining the expanding retail graveyard in the year-to-date. These include industry bellwethers such as giant department store chain JCPenney (NYSE:JCP), luxury department store operator Neiman Marcus and famous New York discount store chain, Century 21.

And now yet another potent force has emerged to put even more pressure on the battered sector: Direct-to-consumer (DTC) brand movement.

At a time when brick-and-mortar are struggling mightily with sharp declines in foot traffic, sales and profits, the DTC space has continued to flourish and even record double-digit growth amid the pandemic.

Not surprisingly, DTC stocks have been shooting the lights out, with Overstock.com Inc. (NASDAQ:OSTK) managing to reverse years of losses to power up 874% YTD; Wayfair Inc. (NYSE:W) is up 229% while Shopify Inc. (NYSE:SHOP) has gained 161% over the timeframe.

Interestingly, no mainstream online company has folded.

Source: CNN Money

The retail apocalypse 

It’s not by accident that the ever-growing wave of retail store closures has coincided with the ecommerce explosion.

Over the past decade, North American and global consumers have shifted their purchasing habits quite dramatically thanks to the meteoric rise of digital shopping. 

Online sales have been growing much faster than brick-and-mortar sales, climbing nearly 400% to $6.5 trillion in the 2014-2020 period.

According to eMarketer, ecommerce sales as a share of retail have climbed from 10.4% in 2017 to 16.1% in 2020. That trend is expected to hold over the next decade with digital sales projected to grow to 22% of total retail sales by 2023.

Source: Statista

Source: eMarketer

In contrast, retail sales growth has gone through a slump, falling from 6.2% in 2017 to 4.1% in the current year, with the lackluster growth expected to continue over the coming years.

Source: eMarketer

A big reason for the ecommerce megatrend going on a tear can be chalked up to convenience.

Online shopping allows the customer to:

• Shop 24/7
• Avoid crowds and save time
• Easily compare prices between different sellers
• Enjoy better prices compared to brick-and-mortar stores
• Enjoy expedited delivery with many companies offering same-day deliveries
• Enjoy better variety

Source: Smart Insights

A forensic analysis of this year’s high-profile retail closures proves that brick-and-mortar stores are likely to continue taking a backseat to their digital brethren.

Take Century 21, for instance. For more than six decades, the company has been a favorite retailer especially among New Yorkers, managing to survive even after its downtown flagship was destroyed in the 9/11 terrorist attacks.

Century 21 was an early entrant in the off-price game, focussing on selling high-end apparel for savvy fashionistas. But unlike peers TJX Companies Inc.(NYSE:TJX)., Ross Stores (NASDAQ:ROST) and Burlington Stores (NYSE:BURL) which have eschewed ecommerce in favor of their defining store-based treasure hunts and also partly in a bid to protect their margins, Century 21 opened a website to help it expand beyond the four states where it operates.

Unfortunately, the company has been forced to close down after insurance companies denied it $175 million in Covid-19-related claims.

Talk about doomed if you do, doomed if you don’t. In this case, merely having an online presence has not been enough to save Century 21–and dozens others like it.

J.C. Penney’s problems go back years ago when the company went on a death spiral of falling store traffic, mounting losses and constant sales declines. But years of trying to engineer a lasting turnaround failed to bear fruit, which– coupled with a deadly pandemic–forced the 118-year old retailer to throw in the towel and file for Chapter 11 bankruptcy.

JCP failed to reinvent itself and change with the times, with its stores and merchandise roundly viewed as bland and unexciting. Even more perplexing is that the company failed to build on its early lead as one of retail’s online shopping pioneers. JCP was once regarded as an online stalwart, with digital sales exceeding $1 billion by 2006. But ultimately its brick-and-mortar stores proved too much of a drag, and now the company plans to shutter 242 of its 846 nationwide stores by the end of 2021.

Neiman Marcus has been forced to pay the price after falling into an all-too common business trap–taking on too much debt. Two rounds of private equity buyouts left it saddled with a mountain of debt making it really difficult for the retailer to keep up with rivals Nordstrom Inc. (NYSE:JWN) and even Macy’s (NYSE:M). This has been further exacerbated by the fact that the department store sector has been in the dog house for years now.

Nevertheless, the century-old Dallas-based retailer remains in a much better position than other fallen icons since it has managed to maintain fierce loyalty among some deep-pocketed customers. Further, a virtual styling service has helped boost online sales with digital sales making up 30% of total sales. The company’s Mytheresa business has survived and will continue to operate independently.

The rise of DTC

Consumers are constantly in search of convenience, and the direct-to-consumer (D2C) model offers them precisely that.

A new generation of disruptive brands have been shaking up retail, with direct-to-consumer e-commerce companies building, marketing, selling, and shipping their products themselves without any middlemen.

Direct-to-consumer (or D2C) businesses manufacture and ship their own products directly to customers without going through traditional stores or other middlemen.This allows DTC companies to offer products at lower costs than traditional consumer brands, while at the same time maintaining end-to-end control over the making, marketing, and distribution of their products. D2C brands are able to experiment with different distribution models, from direct shipping to consumers and partnering with physical retailers to opening pop-up shops. In other words, they are not limited to traditional retail stores for exposure.

These trends have been helping D2C to expand at an even faster clip than traditional ecommerce, with eMarketer forecasting that D2C sales will hit $17.75 billion in 2020, good for 24.3% Y/Y growth.

D2C has taken over many corners of traditional retail, with once tiny startups now dominating.

Casper Sleep Inc. (NYSE:CSPR), which IPOed in February, is taking on the mattress industry; Harry’s and Dollar Shave Club are taking on the razor industry; The Honest Company is upending the baby products and cleaning segment while others like Soylent are building entirely new product categories. Amazon features prominently in the (partial) distribution of these products though most have managed to carve out niches away from Amazon’s dominant marketplace.

The big boys are not to be outdone though.

Overstock, the online purveyor of home decor, furniture, home improvement, and other related products, has enjoyed a monster rally thanks to its latest push to apply the DTC model to its online home furniture business. A key trend driving Overstock’s furniture business higher is a boom in home renovations as the pandemic forces more people to work from their homes. During its latest earnings call, Overstock reported Q3 revenue of $731.65M (+110.8% Y/Y); adjusted EBITDA of $40M and Q3 GAAP EPS of $0.50 thanks to new customers more than doubling. The company says its pure play e-commerce and partner supplier dropship model are a great fit for its business and support high growth.

Shopify has been recording similar bullish trends, with the company’s GMV (Gross Merchandise Volume) rising 109% in Q3 to $30.9B thanks mainly to robust merchant revenue growth of 132% to $522.1M. Overall revenue of $767.4M (+96.5% Y/Y) and GAAP EPS of $1.54 were equally impressive. And just like Overstock, Shopify’s management has revealed that it has been recording ‘‘incredible demand’’ thanks to a ‘‘decisive shift to digital commerce.’’ 

DTC headwinds

Despite the incredible opportunities that D2C has been opening up for ecommerce players, the burgeoning industry is facing its fair share of challenges.

As eMarketer has noted, the same low barriers to entry that have enabled many retailers to join the fray have, unfortunately, also led to overcrowding and increased customer acquisition costs. Indeed, the analyst expects D2C buyer growth rates to slow down to single digits from 2021 after enjoying 24% growth just three years ago.

Source: eMarketer

On the opposite end of the spectrum, stronger-than-expected demand could easily overwhelm even seasoned players and potentially lead to brand damage. Good case in point is Shopify which has reportedly been struggling to keep up with a rapid increase in merchant accounts on its platform.

Despite these growing pains, Wall Street remains bullish on the D2C sector, with eMarketer projecting 87.3 million D2C eCommerce shoppers aged 14 and older in the current year in the United States alone, up 10.3% from the prior year.

The post Death of Retail and the Rise of DTC (Direct-to-Consumer) appeared first on Global Investment Daily.

More recently, though, millennials have busted this stereotype. 

Last year, they became the largest living adult generation in the U.S. after surpassing baby boomers and Generation X. But that’s only part of the shift that’s underway. Millennials not only make up the largest working cohort but are also big drivers of megatrends such as technology, social change, urbanization, climate change and emerging global wealth. 

Millennials are also proving to be savvy stockpickers, frequently managing to outperform more seasoned investors. Indeed, according to data published by Apex Clearing, the Top 10 millennial stock picks representing ~50% of their portfolios have comfortably outpaced the market with a weighted mean year-to-date return of 108.5% compared to a 5.8% return by the broad market benchmark, S&P 500.

Here are the top megatrends favored by millennial investors.

#1 Clean Energy/eMobility

The EV megatrend is widely regarded as one of the biggest and most powerful trends that will dominate the world for decades. In 2019, electric mobility reached a tipping point with more than two million EVs sold around the world, good for a record 2.5 percent of the global light-vehicle market.

The Covid-19 crisis has exacted a heavy toll on most sectors of the global economy; however, clean energy sectors including EVs have proved amazingly resilient. At a time when the global oil and gas industry is going through its worst existential crisis, renewable energy sectors such as solar and wind have continued to record significant growth and playing an ever-bigger role in our electricity generation mix. The EV sector has not been left behind with 2020 EV sales expected to broadly match the 2.1 million units sold in 2019, as per the International Energy Agency (IEA).

The long-term outlook remains bright, with catalysts such as falling battery and vehicle costs, more stringent fuel economy and emissions standards, shared mobility services and the irresistible ESG megatrend expected to continue driving adoption levels. Indeed, Bloomberg New Energy Finance (BNEF) has predicted that EV sales will account for 58% of new cars sold by 2040 compared to 2.7% in 2020.

Although ESG investing is a multigenerational trend, millennials are definitely playing their part with one study finding that millennial investors are nearly twice as likely to invest in companies or funds that target specific social or environmental outcomes. 

Tesla Inc. (NASDAQ:TSLA) has become the quintessential millennial stock, consistently ranking among the most popular stocks on zero-fees trading app, Robinhood. According to Apex  Clearing, TSLA was the third most popular stock among millennials accounting for a 9.5% slice of the portfolios. Other popular EV stocks by this demographic are Nio (NYSE:NIO) and Nikola (NASDAQ:NKLA).

#2 Sharing Economy

The millennial generation has been driving most of the growth in the sharing economy, consisting of peer-to-peer platforms that provide access to shared goods and services. That’s according to Forrester Research, which says baby boomers are more cautious about the sharing concept.

That’s the case because millennials tend to value experiences more than material goods, characterized by their fondness for using smartphones to share their adventures on social media platforms such as Facebook and Instagram. About 47% of millennials prefer to spend money on experiences than products, compared with 29% of baby boomers. 

This cultural shift has helped propel shared mobility into a multi billion-dollar industry. 

Shared mobility, including services such as taxis, car sharing and ride hailing account for an estimated 5% of current passenger vehicle miles; BloombergNEF sees that rising exponentially with shared mobility services projected to account for 19% of the total annual mileage completed by passenger vehicles in 2040.

The economics of EVs are considerably more favorable in a sharing economy, thanks to lower fuel and maintenance costs. EVs currently account for 1.8% of the shared mobility fleet, but could climb to 80% by 2040 as per Bloomberg.

The leading stock here is Uber (NYSE:UBER) though millennials who went against the grain and continued piling in shortly after its IPO got badly burned. The other is Lyft (NASDAQ:LYFT) though it’s much less popular with millennials and does not rank among their top 100 stocks.

#3 eCommerce

Millennials and their smartphones are inseparable, and one of the activities they love doing on their hand-held devices is online shopping. Indeed, Joan Driggs, vice president of content and thought leadership at IRI, has told eMarketer that millennials are omnichannel consumers in the truest sense of the term, equally at home shopping online as they are shopping in-store.

Millennials also constitute the most digital demographic among U.S. consumers, with nearly 86% frequently shopping online compared to 78% of Generation X and 61% of baby boomers.

There are no prizes for guessing which ecommerce site millennials frequent most: Amazon Inc. (NASDAQ:AMZN). Amazon not only serves as the starting point for many millennials when they search for products online but many tend to fully commit with 73% of millennials being Amazon Prime members.

Amazon is the second most-popular stock amongst millennials, accounting for 9.8% of their portfolio holdings.

That appears to be wise investing since digital-impacted sales have been forecast to continue growing and exceed $2.4 trillion by 2022, good for more than 58% of total retail sales.

Source: CBRE

#4 Mobile

Source: Pew Research

Millennials have frequently led older generations in their adoption and use of technology, and this certainly rings true when it comes to smartphone and mobile device use.

According to Pew Research, 93% of American millennials own a smartphone; 53% own a tablet computer and 86% use social media, essentially leading in two categories except tablet adoption where Generation X leads with a 55% ownership clip. 

Although there are signs that we might have reached peak smartphone, millennials have continued to put their money where their mouths and hearts are with Apple Inc. (NASDAQ: AAPL) consistently ranking as the most beloved stock by millennials with a 10.6% share of their portfolios.

#5 Video

Three years ago, Facebook Inc. (NASDAQ:FB) CEO Mark Zuckerberg declared:

“I see video as a mega trend, same order as mobile.” 

Turns out he was right on the money.

Consumer video has been exploding, with online video consumption skyrocketing. Netflix Inc. (NASDAQ:NFLX) continues being the big daddy of the space with 190M subscribers, making it one of the world’s largest entertainment services. Alphabet Inc.’s (NASDAQ:GOOG) YouTube is hardly a sluggard though, with revenue figures very much comparable to Netflix’s.

The global video streaming market was valued at USD 42.60 billion in 2019 and is projected to record a robust growth rate of 20.4% CAGR from 2020 to 2027 with innovations such as AI and blockchain technology expected to continue improving video quality and boosting market growth.

Not surprisingly, Netflix is the 8th most popular stock in millennial portfolios while Alphabet chips in at #14.

The post Top 5 Megatrends Among Millennial Investors appeared first on Global Investment Daily.

While the energy industry is being forced to completely reinvent itself, with renewables coming out on top and diversification the new name of the game, and while travel and tourism segments aren’t likely to recover anytime soon, what happens if there’s yet another lockdown?

The investment thesis has already changed irreversibly, and 5 sectors are soaring. In the event of another lockdown, those same sectors will solidify their victories, while some sub-sectors that were still behind will catch up for the second rally.  

#1 Biopharma and The COVID Gold Mine

For the foreseeable future, the biopharma sector will be completely consumed by a high-stakes game over the development of treatments and a vaccine for COVID-19. It’s a no-holds-barred game that is geopolitical at its most vicious level. 

Indeed, stocks of companies in the race to develop Covid-19 vaccines or drugs soared over 470% from January 2020 to July 2020. 

Source: Graffiti

A handful of biopharma stocks have soared beyond imagination in 2020, including Vaxart Inc. (NASDAQ:VXRT), which enjoyed a boost of over 2,000% in the first and second quarters of 2020.

Sorrento Therapeutics (NASDAQ:SRNE) saw YTD returns from January-July of nearly 140%, with the biggest boost coming after an in vitro assay for its COVIDTRAP vaccine was able to “completely inhibit” the ability of the coronavirus to infect cell cultures at low concentrations.

And it’s not just about a COVID vaccine. The pandemic has given telemedicine a decisive boost as the “new normal” in healthcare. A case in point is Teladoc Health (NYSE:TDOC), a telemedicine and virtual health care company, which managed to rack up gains of over 173% between January and July 2020. 

#2 Work From Home–Forever

One of the biggest lifestyle shifts forced by the pandemic has been the move to remote work. Many businesses are now allowing their employees to telecommute and work from home in a bid to enhance social distancing and minimize chances at infection.

Videotelephony and online chat services company Zoom Video Communications Inc. (NASDAQ:ZM) has emerged as the biggest winner here with its stock surging over 300% in the first and second quarters of 2020. 

Now, Zoom is a household name. In December 2019, it had ~10 million active users. By April 2020, the company reported 300 million daily meeting participants.

It’s not without competitors because this is now a high-demand segment. 

By April 2020, networking company Cisco Inc. (NASDAQ:CSCO) had 300 million Webex users, while Alphabet Inc.’s (NASDAQ:GOOG) Google Meet was adding 3 million users per day and boasted over 100 million by July 2020. Not to be left out of the game, Microsoft Inc. (NASDAQ:MSFT) said in April 2020 that its Teams service recorded robust 70% growth in the number of daily active users (DAU) in a single month to 75 million.

However, unlike Zoom, these are just auxiliary businesses for these tech giants and might therefore not readily drive stock performance.

Other remote communication stocks set to rise even further include business messaging platform Slack Technologies (NYSE:WORK), which saw YTD (January-July 2020) gains of over 50%. 

#3 Streaming: The Final Push for Entertainment

With social distancing in effect, people who get their daily dopamine fix through entertainment have to mostly do at home. As a result, streaming services are booming and will continue to do so.

Netflix Inc. (NASDAQ:NFLX) is the indisputable leader in the space, gaining nearly 70% in the first two quarters of 2020, with analysts exceedingly bullish on the future. Streaming platform Roku Inc.(NASDAQ:ROKU) is also expected to continue tearing up YTD figures going forward in the “new normal”, and Amazon Inc.’s (NASDAQ:AMZN) Prime Video service is set for blockbuster performance, having seen a nearly 70% surge in subscribers for the first half of 2020. 

Video gaming companies are also doing roaring business with Americans spending more time on their consoles. Investors are all over Activision Blizzard (NASDAQ:ATVI), the maker of massively popular video games such as Call of Duty, Electronic Arts (NASDAQ:EA),Take-Two Interactive Software(NASDAQ:TTWO) and Zynga Inc. (NASDAQ:ZNGA).

Meanwhile, with gyms featuring as a dangerous venue for the spread of disease, makers of home exercise equipment Peloton Interactive (NASDAQ:PTON) and Nautilus Inc. (NYSE:NLS) have surged and will be direct beneficiaries of another pandemic lockdown. 

#4 eCommerce: Now It’s a Habit

Online shopping hasn’t just soared in the pandemic—it’s breached unthinkable new thresholds. Even without another lockdown it’s set to continue making massive gains because shoppers get used to the convenience. 

But more than that, a new age group—45 and older—has latched onto the practice where they resisted prior to the pandemic. That fact adds millions of new ecommerce participants who very likely won’t give up the habit even once we’re COVID-free.  

Again, Amazon Inc.—the ironman of ecommerce even before the pandemic—saw its stock soar over 70% in the first half of 2020. Other giants to keep an eye on include eBay Inc. (NASDAQ:EBAY) and online payment darling PayPal Holdings (NASDAQ:PYPL), is up 64.93% over the timeframe—both of which are expected to continue to rival Amazon in terms of stock boosts. In the event of another lockdown, these stocks will soar even further, but they may continue on their upward trend regardless.

#5 Information Technology: The Backbone of It All

Always the quintessential all-weather sector play, IT is set to continue to lead all 11 sectors of the U.S. stock market, with FAANG stocks—Facebook (NASDAQ:FB), Apple (NASDAQ:AAPL), Amazon, Netflix and Alphabet–seriously sharpening their incisors. 

But looking slightly below the obvious surface here, a pandemic lockdown won’t just push Apple devices sales for stay-at-home work and entertainment, it will push sales of software and hardware. 

Chip-manufacturers such as Nvidia Corp (NASDAQ:NVDA), Micron Technology (NASDAQ:MU) and Advanced Micro Devices (NASDAQ:AMD) will soar along with them—even if they’ve been playing catchup so far. 

Chips are where investors can get in on the rally if they missed it earlier in 2020 because they’re part of a broader trend. 

As Gina Sanchez, CEO of Chantico Global told CNBC recently, “The trend towards remote working, the revamping and revisiting of business continuity plans, the push towards 5G, all of that has played into the hands of semis stocks.”

The post Watch These 5 Sectors If America Is Locked Down Again appeared first on Global Investment Daily.