Trustnet Magazine Issue 37 February 2018 | Page 18

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LATE TO THE PARTY
After looking at how far the likes
of Alibaba and Amazon have
come already – both have gone up
more than 10-fold since Slater first
added them to Scottish Mortgage,
for example – some investors who
are wistful of missing out on the
easy money may be tempted to
look for the next big thing instead.
However Catherine Yeung,
Fidelity’s investment director
in Hong Kong, says this is an
extremely risky strategy as the
scale of the forerunners means
they are effectively running an
“e-commerce monopoly”.
She pointed to what happened
with Chinese online retailer
JD.com – which has a market cap
of $60bn – when it tried to expand.
“One of its spin-offs is called VIP
Shop whose market share is in the
low teens,” she explains. “In June
it has its equivalent to Alibaba’s
Singles Day and this quarter is
where it had its highest sales. But
Alibaba just came in over the top
and there was nothing it could do.”
16
“It is not just about having
lorries. Clothing retailers need
the returns sorted, dispatched
to a dedicated steam room, re-
hung, bagged and returned”
BACK HOME
ASOS and Boohoo are the
e-commerce leaders in the UK, but
neither has the scale of Amazon
or Alibaba, although both have
similarly weighty P/E ratios.
Many fund managers believe a
better way to play the theme of
online retail is through investing
in its “picks and shovels” instead.
Nigel Thomas, manager of AXA
Framlington Select Opportunities,
notes 40 per cent of the products
delivered by ASOS are returned,
which has led to the growth of
reverse logistics companies.
“It is not just about having
lorries, vans and distribution
centres. Clothing retailers need
the returns sorted, dispatched to
a dedicated steam room, re-hung
and bagged, and returned
to the retailer,” he says.
“We invested in Eddie
Stobart Logistics, which
has expanded into this
area, leveraging its
expertise in distribution
centres and ‘middle mile’
haulage.”
Thomas says payment
is another crucial area of
e-commerce.
“We have witnessed significant
improvements in online
transaction security and growth in
credit payment options, with firms
such as Worldpay and Experian
benefiting from the growth of
payments online,” he adds.
There is no doubt the internet’s
stranglehold on retail will tighten
over the long term, nor is there
much doubt about who the major
players will be. The question
is whether you think they are
worth the sky-high multiples
they command. You can opt for
one of the satellite industries that
supports the e-commerce boom,
but with a smaller company there
is the risk its business model will
be disrupted by the next big thing
– much like the high street itself. 
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