Global Themes / Global

Why the Baby Amazons should continue to outperform

  • EM e-commerce players (Baby Amazons) – Jumia, SEA, Flipkart and Ozon have outperformed Amazon ytd – driven by Covid-19
  • The pandemic will continue to boost the revenues and valuations of the Baby Amazons to a greater degree than Amazon
  • Unlike in developing markets, e-commerce is the first step for millions of emerging market consumers to access retailing
Why the Baby Amazons should continue to outperform

The Baby Amazons have outperformed Amazon by an average of 63% in 2020. Covid-19 has been kind to the Western e-commerce giants, but even kinder to the Baby Amazons.

Baby Amazons have even greater potential than Amazon in the post-Covid-19 world. EM e-commerce players are replicating the success of Amazon at a faster pace. EM e-commerce revenue grew by an estimated 18% CAGR in 2014-19, but rose by an average of 28% yoy in H1 20 alone. The Baby Amazons’ gross merchandise value (GMV) increased by 30% yoy in the same time period. Some EM e-commerce players outperformed Amazon in yoy revenue growth in 1H20.

The drivers of EM e-commerce have become stronger in Covid-19. Internet penetration in the EM world has leapt forward, powered by cheap data. In India, Jio has cut data costs by c97% in 2020. Moreover, smartphones have increasingly become the main way of accessing e-commerce.

The revenue and valuation gap could narrow in five years. Although EM e-commerce firms have just one-tenth of Amazon’s US$335bn GMV, we think the ratio could narrow to one-fifth in just five years’ time. The combined value of EM e-commerce firms is currently just 37% of Amazon’s US$1.6tn market cap – the market is still undervaluing the Baby Amazons.

The Baby Amazons’ cash flow situation is less worrying given the low interest environment. EM e-commerce companies have high costs of goods, opex and capex. Hence, they are negative CFO and FCF. However, risk-free rates have fallen by 60% in the main emerging markets, easing the cash burden.

Covid-19 has widened the e-commerce canvas

The traditional drivers of EM e-commerce have been threefold:

  1. Internet penetration has galloped forwards in the EM world, powered by cheap data;

  2. Smartphones have become the principal means of e-commerce, as cheaper accessible models have flooded the market; and

  3. Unlike in developing markets, e-commerce is the first step for millions of emerging market consumers to access retailing.

However, with Covid-19, a new set of drivers have emerged, further boosting the sector:

  1. E-commerce adoption has been much broader in the large EMs, like India, Indonesia, Brazil and Nigeria, than expected. Groceries and health-care items have moved online at a much faster pace than expected.

  2. Smartphones adoption has accelerated; and

  3. E-commerce has become more prevalent among the old age categories in emerging markets.


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This report is independent investment research as contemplated by COBS 12.2 of the FCA Handbook and is a research recommendation under COBS 12.4 of the FCA Handbook. Where it is not technically a res...

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