21 Dec 2020 3 min read

Pride, prejudice and ecommerce

By Aude Martin , Tobias Merfeld

The triumph of ecommerce isn’t about traditional versus online retailers; it’s about those who have embraced disruptive technology.



“It is a truth universally acknowledged, that a single investor in possession of a retail stock, must be in want of a whine.”

With apologies to Jane Austen, this is one prejudice we believe investors shouldn’t be too proud to challenge.

A glance at the business headlines over the past year confirms that 2020 has indeed been calamitous for high streets and main streets around the world. In the US, household names like J.Crew and JCPenney declared bankruptcy. In the UK, Topshop-owner Arcadia and Debenhams were among those to enter administration. According to S&P Global Market Intelligence, the past year has brought the largest number of retail bankruptcies since the financial crisis in 2009.

But this is only partly attributable to the ongoing tragedy of COVID-19 and associated restrictions; traditional retailers have faced well documented struggles for some time now.

This, however, isn’t another article about bricks-and-mortar stores being forced into obsolescence by online competition. Rather, we believe the real story is more nuanced: it is about what distinguishes the best retailers from the rest, specifically cutting-edge technology and state-of-the-art logistics.

As we explained earlier this year, Ocado* has thrived not because it is the only supermarket with a website – all of its main rivals do – but because it is so far ahead of the market in embracing advances from warehouse robotics to last-mile logistics.

Ocado certainly had an advantage in not being encumbered by an outmoded chain of supermarkets on the ground. But another case study demonstrates that companies don’t need to be insurgent disruptors; they can also be incumbents that adopt disruptive technology quickly and effectively.

Walmart*, for example, is about as far from a high-tech start-up as it is possible to be. Founded in 1962, the US giant came into the dotcom and digital eras with a vast legacy estate. But as its latest results reveal, its ecommerce sales have boomed – by 79% in the third quarter and 97% in the second. This was only possible thanks to early investment in its operations, including internationally.

Our colleague Jennifer recently set out the reasons to expect ecommerce to continue expanding in a post-coronavirus economy. As it does, in our view it will benefit those companies that have embedded technological innovation and logistical excellence in their businesses the most.

After an extremely difficult year in so many ways, we trust next Christmas will be a little closer to this passage from Austen’s Emma:

“This is quite the season indeed for friendly meetings. At Christmas every body invites their friends about them, and people think little of even the worst weather. I was snowed up at a friend’s house once for a week. Nothing could be pleasanter.”

But even with the pandemic hopefully behind us in December 2021 and us celebrating with friends and family again, we expect most of us will still be ordering our presents and food online – and, if you’re anything like us, relying on the miracle of same or next-day delivery!


*For illustrative purposes only. Reference to a particular security is on a historic basis and does not mean that the security is currently held or will be held within an LGIM portfolio. The above information does not constitute a recommendation to buy or sell any security.

Aude Martin

ETF Investment Specialist

Aude joined L&G ETF in July 2019 as a cross-asset ETF Investment Specialist. Prior to that, Aude worked as a delta one trader at Goldman Sachs and within the structured-products sales teams at HSBC and Credit Agricole CIB. As an investment specialist, she contributes towards the design of investment strategies and actively supports the ETF distribution and marketing efforts. She graduated from EDHEC Business School in 2016 with an MSc in Financial Markets.

Aude Martin

Tobias Merfeld

Senior ETF Investment Strategist

Tobias joined LGIM as an ETF Investment Strategist in 2019.

Tobias Merfeld