Tài liệu Nothing But Net 2009 Internet Investment Guide 5 pdf

Morgan Internet Team 2008 Consumer Survey Looking at the data on a site-by-site basis does not change the top-line conclusion: price remains the #1 consideration for most shoppers regar

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For our international forecast, we expect two main drivers to impact eCommerce growth: (a) a very weak consumer outlook, with historically low consumer confidence in parts of the world, including the UK, and (b) continued shift of wallet share from offline retailers to online sellers

Both in the US and worldwide, we expect the eCommerce to benefit from several drivers, some region-specific and some general Of primary importance among these

is the growing adoption of broadband, which is much more conducive to eCommerce growth than slower forms of Internet access Other factors include: (1) continued rises in online shopping penetration in Western Europe, (2) continued investments by online retailers in broadening selection, (3) improvements in shipping infrastructure, (4) improved payment systems and (5) better fraud protection

Table 18: Global eCommerce Forecast (Excluding Travel)

$ in millions

Global eCommerce Forecast 2004 2005 2006 2007 2008E 2009E 2010E 2011E ’08E – ’11E CAGR

Total 182,622 235,811 299,397 370,749 438,655 463,546 542,660 618,435 12.1%

Source: Department of Commerce, Internet WorldStats, UK eStats, Forrester Research, Iresearch, Korea National Statistics Office, Japanese Statistics Bureau, eMarketer, PhuCusWright, TIA.org,

Jupiter, company reports, J.P Morgan estimates

Increasingly, It’s Amazon vs Everybody Else

Whereas 2007 saw the large-cap eCommerce companies grow revenue at a faster pace than the US market, in 2008 it was Amazon maintaining its outperformance, while eBay fell somewhat behind, with decelerating sales and GMV growth as the Auctions business appears to be fairly mature; eBay continues to benefit from strong PayPal revenue growth

Table 19: eCommerce Industry Comparable Table Small and Large Cap Revenue Growth Rates

Market cap in $ millions

Company Ticker Rating Price Mkt Cap

12/30/2008 12/30/2008 ’05/’06 ’06/’07 ’07/’08E

Source: Department of Commerce, Company reports, Reuters, J.P Morgan est for rated companies, FactSet estimates for other companies J.P Morgan ratings: OW = Overweight; N = Neutral; UW = Underweight

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Takeaways from the J.P Morgan Internet Team’s 2008 Consumer Survey

In the second half of November, we conducted a proprietary survey of US consumers The survey had 766 participants, residents of the United States aged 18+

In addition to asking consumers about their shopping plans for the 2008 holiday season, we asked the respondents a variety of questions about their online shopping habits in general, and the key broad takeaways are summarized below:

Price Is Biggest Factor in Choosing a Site

Nearly half of shoppers indicated that price was their top factor when it comes to choosing an online store, with selection also important Of the options included in our survey, the least popular one, by a wide margin, was, “recommendations from friends and relatives.”

Table 20: Price Is Paramount: Factors that Influence Buyers’ Choices

% among respondents who indicated they shop online

Source: J.P Morgan Internet Team 2008 Consumer Survey

Looking at the data on a site-by-site basis does not change the top-line conclusion:

price remains the #1 consideration for most shoppers regardless of site, with 46-50%

of shoppers at each of Amazon, eBay, Walmart.com, Target.com and Sears.com listing price as their top factor in choosing a site

Higher-income shoppers look for slightly different things in a site More shoppers with incomes over $100K listed “Familiarity/experience with store” as one of their top five factors than did those earning less than $100K Even for the >$100K-income shoppers, price is the biggest factor, but notably fewer respondents chose it as their

#1 factor: 38% for the higher-income group, vs 50% for those with incomes below

$100K

Table 21: Familiarity Matters More to Higher-Income Shoppers

% of online shoppers who indicated factor was one of their top 5 factors in choosing a site

Income <$100K Income >$100K Difference

Access to customer reviews / product info 38.4% 43.5% -5.2%

Recommendations from friends / relatives 20.7% 23.5% -2.9%

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Walmart.com, Target.com Catching Up to Large Online Sites

Third-party metrics indicate eBay and Amazon are the two largest online-only stores

in terms of unique users, whereas Walmart.com and Target.com are the two biggest sites belonging to brick-and-mortar retailers

In ’07, Amazon and eBay drew business from more online shoppers than any other sites we asked about For the ’08 holidays, our survey reveals no significant change

in Amazon and eBay’s reach, compared to double-digit increases in the number of shoppers planning to use Walmart.com and Target.com; the only other site in our survey with a statistically significant Y/Y increase, Sears.com, also belongs to a brick-and-mortar retailer

Table 22: Online Shoppers Who Used (’07) or Plan to Use (’08) Specific Sites for Holiday Shopping

Site 2007 2008 Y/Y difference significant?

Source: J.P Morgan Internet Team 2008 Consumer Survey Statistical significance at a p<.05 level

Media, Apparel Top Categories

Books, music and video comprised the top category, with ~65% of online shoppers reporting they had bought such items online within the past year; the number was in line with our survey result a year ago Apparel and accessories, at 59% penetration, was second, tilted predominantly toward female shoppers Unsurprisingly, men were more likely to shop in both the Computers and videogames category and the

Electronics category

The results were very similar to those in our 2007 survey, with the top four categories among men unchanged (Toys replaced Health and Beauty at #5) For women, the five most popular categories remained the same, though Apparel leapfrogged over Media into first place, and Toys edged out Computers and videogames for #4

Table 23: Media Items Popular with Both Genders: Top Five Categories among Men and Women

%, among respondents who indicated they shop online, that indicated they had made purchases in category

Books, music, videos and other media 61.5% Apparel and accessories (includes shoes,

handbags and jewelry) 69.0%

Computer and videogames software and hardware 50.5% Books, music, videos and other media 68.5%

Apparel and accessories (includes shoes, handbags and jewelry) 46.2% Health & Beauty 41.1%

Electronics (includes television and

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Younger Users Shop Online More, Use Classifieds More

Among online shoppers, 40% of those aged 18-41 expect to do more than 40% of their holiday shopping online this year, compared to 27% of shoppers aged 42+ Nearly half of the older group plans to do 20% or less of their holiday shopping online At the same time, the 42+ bracket included almost twice as high a percentage

of people who planned to do almost all (over 80%) of their shopping online, 8% vs 4%

Figure 20: Expectation of Portion of Holiday Shopping to Be Done Online, Holiday Season ’08

% among respondents who indicated they shop online

34%

13%

4%

47%

25%

0%

10%

20%

30%

40%

50%

Age 18-41 Age 42+

Younger shoppers also appear to be more open to using classified sites, with significantly higher usage rates The discrepancy is even more extreme at the edges

of the age distribution: 48% of online shoppers 18-25 reported having bought something on a classified site, compared to only 17% of those aged 58 and older Likewise, more than 41% in the youngest group reported having sold something on a classified site, compared to only 16% of respondents aged 58 and older

Figure 21: Online Classified Sites Attract a Younger Demographic

% of online shoppers saying they had ever bought/sold on a classified site (such as craigslist)

40%

34%

21%

17%

0%

10%

20%

30%

40%

50%

Bought on a classified site Sold on a classified site

Age 18-41 Age 42+

Internet Sales Tax: In US, the Action Will Be in the States

In 2008, the state of New York began requiring online retailers to collect sales taxes even if they had no physical presence in the state, so long as members of their affiliate networks (who get paid a commission for driving sales traffic to the site) are present in the state

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Several companies, notably Amazon, have started collecting the NY sales tax while appealing the ruling Overstock.com, on the other hand, has chosen to drop its NY-based affiliates and not charge the tax

Given that many states are facing significant revenue shortfalls this year, we expect

to see continued efforts by states to collect tax revenue on online sales While the implementation of state sales taxes can be a slight negative, we do not expect this trend to have a material impact on US eCommerce

Catalysts for International Growth

We believe the rising tide of increased Internet use across the world is likely to help lift eCommerce globally However, we see three key challenges to overcome for eCommerce to fulfill its potential:

• Improvement of shipping infrastructure Postal and parcel service in

many parts of the world can be unreliable, and a reliable distribution channel is an essential prerequisite for the growth of eCommerce

• Improved payment systems This is not a world-wide challenge, but rather

a slew of country-specific challenges related to the idiosyncrasies of different countries’ banking systems and conventions Even in more developed countries, significant differences emerge: e.g., Germany and Austria have historically seen lower rates of PayPal use than other eBay geographies due to the prevalence of bank transfers as a mode of payment there

Table 24: PayPal Penetration on Select eBay Country Sites

% of listings that include PayPal

Country % Penetration

US 99.3%

UK 98.8%

Canada 98.6%

Australia 94.2%

Switzerland 89.4%

Italy 87.6%

Germany 82.2%

France 81.6%

Spain 78.9%

Belgium 42.2%

Source: eBay.com (and country sites), J.P Morgan estimates, data collected December, 2008

• Better fraud protection The promise of eCommerce has been one of lower

prices and/or better selection, with the trade-off that many purchases must

be made sight-unseen The threat of fraud remains present, and structures that insure buyers against fraud should help smooth operations in an eCommerce environment that is not yet fully mature (An example is eBay’s PayPal, which has, over the course of the past year, augmented the level of fraud protection it provides in the US, from $2K per transaction to as much

as the full purchase price of the transaction PayPal uses such protection to create buyer confidence, with transaction loss rates for the PayPal unit of 24-33 bps, as denominated by total payment volume)

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We note that the above is not intended to be an exhaustive list of catalysts for international growth – many specific markets can present unique challenges – such as governmental ones – for the operation of eCommerce companies

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2009 Online Travel Outlook

In 2008, online travel agency companies in the US performed relatively well compared to offline agencies, primarily due to some counter-cyclical effects of the weak macroeconomic environment The companies in our coverage universe moved

to push their lowest price or discount offerings and began a variety of promotions to woo travelers to their sites However, growth in international markets began a significant deceleration, pressured not only by the weak economy but also by weaker currency exchange rates Furthermore, any positive counter-cyclical effects seen in the US in the first half of the year were overpowered by the negative macroeconomic environment going into the second half of the year

In 2009, we expect to see the macroeconomic environment and difficult comps have

a large impact on both domestic and international growth We are lowering our estimates from those published in the 2008 Nothing But Net We are now expecting F’09 total global travel gross bookings growth of (4.7%) Y/Y We are expecting global online gross bookings growth of 3.9% Y/Y vs our prior estimate of 15.4%

Table 25: Global Online Travel Market Forecast

$ in millions

CAGR Total Travel Spend 671,000.0 701,000.0 742,040.0 787,524.4 813,340.6 774,985.4 811,714.9 859,557.7 1.8%

Online Travel Spend 127,960.0 159,830.0 208,228.8 271,927.8 329,233.7 342,199.5 405,074.0 457,955.0 11.5%

Online Travel Spend Growth 24.9% 30.3% 30.6% 21.1% 3.9% 18.4% 13.1%

Source: Company reports, PhoCusWright, and J.P Morgan estimates

Domestic Growth Expected to Slow

We expect a very challenging macroeconomic environment to impede both customer volume growth and pricing in 2H’08 and F’09 Furthermore, we believe online penetration increases will be less effective in offsetting total travel market weakness

as penetration increases begin to flatten We are now looking for F’09 US online travel market growth of 2% Y/Y, well below our prior estimate of 8% growth We think the total US travel market will decline 5% Y/Y in F’09 This is the slowest growth rate since 2003, when the market declined 8% following the effects of the Sept 11, 2001 terrorist attacks

Table 26: US Online Travel Market Forecast

$ in millions

Online Travel Spend Growth 17.2% 18.4% 17.1% 9.1% 2.0% 10.4% 8.4%

Source: Company reports, PhoCusWright, and J.P Morgan estimates

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OTAs Make US Volume Gains but Pay the Price in Discounts

According to PhoCusWright data, online travel agencies (OTAs) started to benefit from a limited counter-cyclical lift in the second half of 2007 as consumers started to shop for online bargains as airlines continued to raise fares and reduce capacity According to PhoCusWright’s CTTS10, 47% of online travelers cited online travel agencies as their primary shopping method in 2007 vs 40% in 2006

However, we think these traffic volume gains made from supplier websites are mostly being offset by pricing discounts Orbitz, Priceline, and Expedia have all offered promotions and discounts to attract new traffic and conversions In fact, PhoCusWright data shows that OTAs are attracting more infrequent leisure travelers, who may take just a few trips per year and are more price sensitive Meanwhile, suppliers are still the preferred destination for more frequent loyal leisure/unmanaged business travelers who may be less concerned with price and more interested in schedule, convenience, and booking with specific suppliers

Figure 22: Suppliers Accounted for 61% of the Online Market in 2007

Supplier Websites, 61%

Online Trav el Agencies, 39%

Source: PhoCusWright data

Advertising Revenues Are Becoming More Prominent

With US competition from suppliers for gross bookings, we think many OTAs are turning to advertising as an additional means of monetizing the traffic coming to their sites Expedia has launched several new online ad initiatives, and Orbitz and CheapTickets began using Kayak-powered search ads on their sites Expedia launched PasswordAds, an advertising network that attempts to capitalize on downstream traffic Expedia purchases advertising space on websites that consumers

go to after they visit Expedia and serve ads that click directly to the advertiser's website Orbitz links directly to suppliers and competitors from its search results display by offering a sponsored-link alongside requested travel search results

It appears that focus is shifting from transactions to more of an emphasis on the broader shopping and decision-making process In our opinion, there is a large market for this According to PhoCusWright, more than 80% of travelers who visited at least one website when planning a leisure trip read a traveler review, and 95% of those indicated the reviews were influential Furthermore, we think travelers are even more likely to spend more time shopping and less time booking in the current economic environment, thus making this revenue stream even more attractive

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Figure 23: Use and Influence of Social Media, 2008 Survey

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100

%

Read a rev iew of a product or serv ice

Read a blog Posted a rev iew

Found rev iew s by trav elers to be somew hat influential, influential, or v ery influential

Source: PhoCusWright Consumer Technology Survey Second Edition

The International Opportunity

Despite macroeconomic weakness impacting total travel spend, we think international markets will continue to benefit from increased penetration trends

According to recent PhoCusWright data, Europe has only a 32% online penetration for leisure/unmanaged business and corporate travel, which is still well below the US rate of 51% This is a significant growth opportunity for online travel agencies, as the EU27 is more than 60% larger than the US in population size Additionally, the Asia-Pacific region is only in the very early stages of online travel adoption with an estimated 15% online penetration rate Thus, we think macroeconomic headwinds will be slightly offset by online adoption forces

Table 27: Europe Online Travel Market Forecast

$ in millions

Online Travel Spend Growth 68.6% 58.4% 57.5% 34.5% 1.0% 23.7% 16.2% Source: Company reports, PhoCusWright, and J.P Morgan estimates

Table 28: Asia-Pacific Online Travel Market Forecast

$ in millions

Online Travel Spend Growth 3.9% 37.7% 29.6% 34.7% 21.2% 30.0% 17.9% Source: Company reports, PhoCusWright, and J.P Morgan estimates

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For F’09, we are projecting European online gross bookings growth of 1% Y/Y due

to macroeconomic weakness and an estimated 6 points of negative impact from foreign currency weakness We are projecting F’09 APAC online travel gross bookings growth of 21% Y/Y

Western Europe Growth Flattens Out…

The UK was the largest total and online travel market in Europe in 2007, accounting for over 50B euros in gross bookings It also had the highest online penetration rate

of 40% (excludes corporate travel), according to PhoCusWright data France and Germany were the second and third largest travel markets in Europe with online penetration rates of 23% and 20%, respectively We think these markets will be less

of a growth driver moving forward as penetration gains slow and euro weakness impacts earnings

Figure 24: Online Penetration of Key European Countries Leisure/Unmanaged Business Gross Bookings, 2007

billions euros

Ireland Scandinav ia Italy Spain Germany France UK

Total Online Gross Bookings Total Gross Bookings

58% penetration

37% penetration 13% penetration

17% penetration

20% penetration 23% penetration 40% penetration

Source: PhoCusWright reports and J.P Morgan estimates

…But Eastern Europe Has Attractive Penetration Growth

Eastern Europe is at a much earlier stage of online adoption than its Western counterparts We think countries in this region have the potential to post strong online travel growth despite macroeconomic headwinds According to

PhoCusWright data, online travel gross bookings increased 52% Y/Y in 2001 in the

US, despite an overall travel market decline of 8% due to recession, terrorist attacks and travel fears As such, we think Eastern European gross bookings may also continue to grow given similarly low penetration rates We believe online travel agencies with a larger exposure to these regions will outperform the competition

Tiêu đề	Global eCommerce Forecast (Excluding Travel)
Tác giả	Imran Khan
Thể loại	research memo
Năm xuất bản	2009

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