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Daily Intelligence Briefing
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Tuesday, February 18, 2020
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Identifying Change-Driven Investment Themes – Five sections, explained here.
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We bring you our Daily Intelligence Briefing courtesy of McAlinden Research Partners. The report is provided to Hedge Connection members for free. Below is snapshot, login to view the full report. Not a member? Join today. McAlinden Research Partners is offering a complimentary one-month subscription to receive the Daily Intelligence Briefing – to Hedge Connection clients/friends. Activate yours by contacting Rob@mcalindenresearch.com and mentioning “Sent by Hedge Connection”
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I. Today’s Thematic Investment Idea
A deep dive into a market driver with alpha generating potential.
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We’re Adding Long Social Commerce as a New Investment Theme →
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Summary: The worlds of ecommerce and social networking are rapidly converging and turning social platforms into powerful distribution channels for brands. The shift was slow to take off, but it is starting to accelerate thanks to a tipping point in global mobile adoption, the release of new shopping technologies by social media companies, and a disease outbreak in China. As such MRP is adding Long Social Commerce as a new theme that we will be tracking with a basket of stocks. Read more +
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Source material for today’s market insight…DIBs reports from the past week.
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Social Commerce: 3.8 billion people use social media
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Social Commerce: 61% of businesses to embrace social commerce in 2020
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Social Commerce: Coronavirus crisis could transform how fashion works in China
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Social Commerce: 7-Month old Simsim secures $16M for its social commerce in India
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Social Commerce: Pinterest launches virtual makeup “Try on” feature, starting with lipstick
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Social Commerce: Molton Brown sees threefold uplift in conversions with onsite social commerce
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II. Updates of Themes on MRP’s Radar
Follow-up analysis of key market drivers monitored by MRP.
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Digital Currencies: Libra threat spurs small nations to create own digital currencies
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Defense: U.S.-China Rivalry Pushes Rise in World-Wide Military Spending, Report Finds
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Auto Parts: Tesla teardown finds electronics 6 years ahead of Toyota and VW
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Cruise Lines: Royal Caribbean Cancels 18 Cruises Due to Virus, Crimping Profit
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IV. Active Thematic Ideas
MRP’s active long and short themes, with an archive of follow-up reports.
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See Them Here →
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V. Macroeconomic Indicators
Key data releases relevant to MRP’s Active Thematic Ideas.
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See Them Here →
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THEME ALERT: AN ACTIVE MRP THEME
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We’re Adding Long Social Commerce as a New Investment Theme
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Summary: The worlds of ecommerce and social networking are rapidly converging and turning social platforms into powerful distribution channels for brands. The shift was slow to take off, but it is starting to accelerate thanks to a tipping point in global mobile adoption, the release of new shopping technologies by social media companies, and a disease outbreak in China. As such MRP is adding Long Social Commerce as a new theme that we will be tracking with a basket of stocks.
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Worldwide, there were 3.8 billion social media users in January 2020. That’s about half of the world’s population and a 9% (321 million people) increase from a year ago, according to new data co-released by Hootsuite, a social media management platform, and We Are Social, a creative agency. Furthermore, the average internet user now spends 6 hours and 43 minutes online each day, which equates to over 100 days of connected time per internet user per year. More than one third of that time – two hours and 24 minutes – is dedicated to social media.
While those numbers may sound puny at the micro level, they become more formidable when you aggregate and annualize them. Altogether, the world’s internet users will spend a cumulative 1.25 billion years online in 2020, according to the Digital in 2020 report, which means the equivalent of 420 million years of time will be spent using social media this year alone.
The fact that social media offers unparalleled opportunities to tailor key messages to many different audiences is not lost on brands, which have been plowing billions of dollars into digital ads for years. Their latest hope is the promise of frictionless transactions completed on social media sites.
Social media’s role in the purchase journey continues to expand, albeit more slowly than many marketers might have hoped, however this is likely to accelerate going forward. The number of people turning to social media to research and discover new brands only grows larger each month, thanks to brands’ promoted content, user reviews & recommendations and influencer endorsement. This is especially the case among the Millennial and Generation Z cohorts, who are also more open to making purchases directly from their social media accounts.
There are now 5.19 billion unique mobile users globally and for the first time, more than half (50.1%) of all internet time is spent on mobile devices. Meanwhile, social platforms have been developing new features, like Facebook Collections and Instagram Shopping, to make the path to purchase and sharing as seamless as possible. Pinterest, for example, has recently added a new ‘Try On’ functionality that, by leveraging its AR Lens, allows people to try makeup from different brands, then shop for their favorite one with a simple swipe up.
Suzie Shaw, an executive at We Are Social, predicts that the rise of social commerce is inevitable in 2020. “This year we will see more retailers across a variety of categories of product and service trying to find their own social commerce angle, as the technology evolves and offers new ways for users to discover, trial and recommend products – then purchase, of course,” she said.
MRP concurs with that assessment. Already, 43% of internet users around the world aged 16 to 64 say they use social media for product discovery. Once that number breaches the 50% mark, and as the social networks roll out new commerce solutions and integrate them onto their platforms, social commerce will experience a tipping point. MRP believes that tipping point will likely occur in 2020.
The coronavirus outbreak could even help to accelerate that shift in Asia. The world’s second-largest economy practically shut down three weeks ago, amid restrictions on physical gathering, including for work. Since then, there’s been a surge in internet-based activities including live streaming, mobile gaming, and social networking as hundreds of millions of residents embrace online technologies and applications to help them pass the time while much of their country is under lockdown.
Just as video game downloads have spiked by 50% on average since mid-January when Chinese cities began to restrict population movements, it is quite probably that window-shopping on social media has spiked as well. Most of that shopping activity is limited to browsing for now, but that may change to actual purchases once the transportation networks begin to run again and deliveries resume.
Kate Nightingale, the founder of consultancy firm Style Psychology, notes that situations of distress like this one can increase consumption. She is cited in a Vogue Business article as saying that “customers can become more impulsive in their purchases when reminded of their mortality,” and points out that a similar phenomenon took place in the wake of 9/11 and the London attacks of 2006. |
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THEME ALERT
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A month has passed since we published the report titled: Social Commerce is Disrupting Retail. Here are the Early Winners. During that month, Chinese stocks as represented by the iShares MSCI China ETF (MCHI) have lost 4%, while the Amplify Online Retail ETF (IBUY) and the S&P 500 (SPY) have delivered respective returns of +1 and +2%.
In contrast, the basket of social commerce stocks followed by MRP has held up remarkably well, returning +15% during that one-month period. Two of the stocks in the basket are American (SNAP and PINS), while the other two are Chinese (IQ and BILI).
That resilience only confirms MRP’s view that we are in the early stages of a new retail disruption, this time driven by the rise of social commerce. As such, we are adding Long Social Commerce to MRP’s list of active themes. We will monitor the theme via our equal-weighted basket of the following four stocks: SNAP, PINS, IQ, BILI.
Below are links to two previously published MRP report on this subject:
Nelly Nyambi
Managing Director, Research
McAlinden Research Partners |
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Social Commerce vs Online Retail vs S&P 500
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Source material for today’s market insight…
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Social Commerce
3.8 billion people use social media
More than 4.5 billion people now use the internet, while social media users have passed the 3.8 billion mark. What’s more, the world’s internet users will spend a cumulative 1.25 billion years online in 2020, with more than one-third of that time spent using social media.
Search engines are the primary source of discovery for new brands and products for the world’s internet users, slightly ahead of television adverts. However, younger users are more likely to turn to social media when they’re researching brands and products, finding that social networks have already overtaken search engines as the most popular method of online research for people aged 16 to 24.
Social media’s role in the purchase journey continues to expand, with 43 percent of internet users around the world aged 16 to 64 now saying that they use social networks when researching things to buy. Social commerce hasn’t caught on to the extent that many marketers might have hoped, “however, this is something that robust branded content and inspiration can change.”
Read the full article from We Are Social +
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Social Commerce
61% of businesses to embrace social commerce in 2020
Sixty one percent of businesses are expected to embrace social commerce in 2020. This is according to a global survey carried out by Ipsos for PayPal which involved 22,000 consumers and 4,602 businesses across the world.
The research showed that 35% of businesses currently accept social commerce, with a further 26% planning to accept it in 2020. Those that are already using it have seen 45% of their sales transactions made via social channels over the last six months.
On average, 30% of consumers have used social commerce in the past six months. Of these social shoppers, a third (33%) are purchasing via social platforms weekly. The most popular platform for shopping is Facebook, followed by Instagram and WhatsApp.
Read the full article from Business World Ireland +
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Social Commerce
Coronavirus crisis could transform how fashion works in China
The Chinese government has imposed travel restrictions on around 60 million people, and citizens throughout the country have been encouraged to stay home and avoid public places. Companies including H&M, Uniqlo and Ikea have indefinitely closed stores across the country to counter the spread of the virus and protect employees.
E-commerce websites like Alibaba’s Taobao, JD.com and Pinduoduo, on the other hand, have seen a spike in sales of medical and sanitary products. Citizens in lockdown and away from their families in a traditionally festive period have flocked to social media to fight boredom, frustration and anxiety.
According to Kate Nightingale, founder of consultancy firm Style Psychology, situations of distress like this one can increase consumption. “Customers can become more impulsive in their purchases when reminded of their mortality,” she writes via email, pointing out that a similar phenomenon took place in the wake of 9/11 and the London attacks of 2006.
China is already the global e-commerce leader with an estimated $1.5 trillion sales in 2019 and 855 million digital consumers, according to McKinsey. But the transition from bricks-and-mortar to digital could accelerate even further during this period. Hong Kong and Singapore embraced telecommuting during the 2003 Sars outbreak, spurring the adoption of remote working technologies.
Read the full article from Vogue Business +
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Social Commerce
7-Month old Simsim secures $16M for its social commerce in India
Simsim, a social commerce startup in India, said on Friday it has raised $16 million in seven months of its existence as it attempts to replicate the offline retail experience in the digital world with help from influencers.
On its app, users watch short-videos produced in local languages by influencers who apply beauty products or try out dresses and explain the ins-and-outs of the products. Below the video, the items appear as they are being discussed and users can tap on them to proceed with the purchase.
“Videos help in educating users about the category. So many of them may not have used face masks, for instance. But it becomes easier when the community influencer is able to show them how to apply it,” said Rohan Malhotra, managing partner at Good Capital, in an interview with TechCrunch.
Influencers typically sell a range of items and users can follow them to browse through the past catalog and stay on top of future sales. Simsim handles the inventories, which it sources from manufacturers and brands, and it works with a number of logistics players to deliver the products.
Read the full article from Tech Crunch +
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Social Commerce
Pinterest launches virtual makeup “Try on” feature, starting with lipstick
A new Pinterest feature will allow users to virtually try on products, starting with lipstick, before they shop from retailers like Estée Lauder, Sephora, bareMinerals, Neutrogena, NYX Professional Makeup, YSL Beauté, Lancôme and Urban Decay from L’Oréal. To use the new feature, Pinners will first open Pinterest’s smart camera, “Lens,” while in Search, then click “Try it” to explore the different lipstick shades available. To shop the products, you just swipe up.
According to Pinterest, more than 52 million people search and engage with beauty content on its platform in the U.S. every month.
Read the full article from Tech Crunch +
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Social Commerce
Molton Brown sees threefold uplift in conversions with onsite social commerce
Molton Brown has seen a threefold uplift in conversions after introducing onsite social commerce technology. The luxury fragrance and bath and body brand reported conversion rates rose over a three-month period when shoppers interacted with its gallery of shoppable social content. Molton Brown also saw the average order value of customers who engaged with the site’s social commerce elements increase by 38%.
The retailer is partnering with Curalate to enrich its social offering. It sources customer and brand lifestyle images from Instagram and displays them in a dedicated ‘Love it & Share it’ gallery section and directly on product display pages. Social content also appears on the home page. Shoppers who visited the shoppable gallery spent over four times longer browsing Molton Brown’s website during this time too.
Read the full article from Internet Retailing +
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Select a theme to see when and why we added it. Also included is a link to all recent Market Insight reports we’ve written about that theme, allowing you to track its progress.
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Week Ahead
Minutes from the Federal Reserve, ECB, RBA and RBI will be in focus, while central banks in China, Turkey and Indonesia will be deciding on interest rates. On the economic data front, flash PMI surveys for the US, UK, Eurozone, Japan and Australia could provide an insight into the early impact of the coronavirus outbreak on the global economy. Other figures to follow include US housing data; UK jobs report, inflation and retail trade data; Japan Q4 GDP and trade balance; and Australia employment numbers.
Click here to access the data +
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China Stocks Surge on Beijing Support Measures
The Shanghai Composite index jumped 67 points or 2.3% to end at 2,984 on Monday, after the PBoC cut the interest rate on its medium-term lending by 10bps to 3.15% amid efforts to support the economy suffering from a virus outbreak. The move paved the way for a reduction in the country’s benchmark loan prime rate, which will be announced on Thursday. Financial stocks were among the best performers, followed by the healthcare sub-index and the consumer staples sector. Real estate equities fell.
Click here to access the data +
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Japan Economy Shrinks the Most Since 2014
The Japanese economy shrank 1.6 percent on quarter in the last three months of 2019, following a downwardly revised 0.1 percent growth in the previous three-month period and compared to market consensus of a 0.9 percent contraction, a preliminary estimate showed. It was the steepest fall in GDP since the second quarter of 2014, as private consumption fell 2.9 percent, the first period of decline in over a year following October’s sales tax hike. In addition, business spending tumbled 3.7 percent, the most since the third quarter of 2018.
Click here to access the data +
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Israel GDP Growth Strongest in Over 2 Years
The economy of Israel expanded an annualized 4.8% quarter-on-quarter in the last three months of 2019, above an upwardly revised 4.5% growth in the previous period and way above market expectations of 2.8%. It is the strongest growth rate since the third quarter of 2017. Private spending jumped 10% (2.7% in the previous period), boosted by higher car sales, before a rise in taxes took effect. Also, fixed capital investment rebounded (8.7% vs -1.4%); and both exports (2.4% vs -6.7%) and imports (6.8% vs 2.9%) increased. On the other hand, public expenditure slowed (0.9% vs 4.5%). Considering full 2019, the economy expanded 3.5%, above 3.4% in 2018.
Click here to access the data +
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S&P Revises Hungary’s Outlook to Positive
S&P Global Ratings changed on Friday 14 February 2020 Hungary’s sovereign credit rating outlook to positive from stable and affirmed the debt grade at ‘BBB’, citing as key drivers behind the revision strong economic growth outlook with macroeconomic imbalances remaining contained. Moody’s credit rating for Hungary was last set at Baa3 with stable outlook. Fitch’s credit rating for Hungary was last reported at BBB with stable outlook.
Click here to access the data +
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Gold Hovers Near 7-Year Peak
Gold eased on Monday after China lowered a key interest rate to counteract the economic impact from the coronavirus outbreak, but the metal stayed near seven-year high amid concerns about the potential fallout for the global economy from this epidemic. The new flu-like virus has infected more than 71,000 people globally. Gold prices fell nearly 0.2% to $1,585 an ounce around 01:00 PM NY time.
Click here to access the data +
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MARKET INSIGHT UPDATES: SUMMARIES
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Digital Currencies
Libra threat spurs small nations to create own digital currencies
Emerging economies are racing ahead of their industrialized counterparts in testing central-bank-issued digital currencies amid fears that their own money could be displaced by cross-border alternatives like Facebook’s Libra and China’s planned digital yuan.
The National Bank of Cambodia launched in July a trial version of Bakong, a digital currency platform, and a nationwide rollout is expected as early as next month. The Marshall Islands opened preregistration in September for the Marshallese sovereign, a blockchain-based digital currency. This will give the Pacific island nation that still uses the dollar its own legal tender.
The Organization of Eastern Caribbean States, which includes such island nations as Grenada and Antigua and Barbuda, announced plans for a digital version of the Eastern Caribbean dollar which is expected to launch this year. The Central Bank of the Bahamas’ digital currency was launched in December and is slated to expand nationwide within the year.
For small island countries like these, digital currencies offer a way to reduce the administrative costs associated with cash, including minting and transportation. Digital platforms can also reduce fees for remittances from citizens working abroad, an important source of income for many.
Read the full article from Nikkei Asian Review +
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Manufacturing & Logistics
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Defense
U.S.-China Rivalry Pushes Rise in World-Wide Military Spending, Report Finds
Global competition between the U.S. and China is spurring countries around the world to increase their military spending. Defense spending globally rose by 4% in 2019 over the previous year, amounting to the highest yearly increase in 10 years, according to the report, published Friday by the London-based International Institute for Strategic Studies. Of 171 countries surveyed in the annual IISS report, 103 increased their military spending from 2018 to 2019, while 45 others decreased their military expenditures.
While both the U.S. and China raised their military spending by similar amounts, the rate of the increase in the U.S. is accelerating while China’s is beginning to slow, according to the report. The report, called the Military Balance 2020, said spending by the U.S. and China helped to explain much of the increase in global military expenditures, including significant amounts in Europe and in Asia.
Read the full article from The Wall Street Journal +
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| There is much more to this report! McAlinden Research Partners offers Hedge Connection members weekly access to the Daily Intelligence Briefing research for free – click here to view. (You must be logged in first). Not a member? Join today. McAlinden Research Partners is offering a complimentary one-month subscription to receive the Daily Intelligence Briefing – to Hedge Connection clients/friends. Activate yours by contacting Rob@mcalindenresearch.com and mentioning “Sent by Hedge Connection” |
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