In episode three of our fortnightly COVID-19 webinar series, portfolio manager Sunny Bangia and Jacob Mitchell discuss Chinese retail and the secular trends being accelerated by the coronavirus pandemic.
In this highlight, Sunny Bangia explains some of the factors behind Antipodes’ positive view on the new retail revolution underway in China.
This webinar was recorded on 23 April, 2020. To view the full webinar, including comprehensive insights into where Antipodes sees compelling investment opportunities, click here.
You can register for upcoming webinars in the series here.
Episode 3 Part 1 – Transcript:
Sunny Bangia:
Firstly, we would just like to show you the breakdown of the different tier cities in China and their online adoption. So, when you look over at that table (refer to slide six) you can see the percentage of total retail that has migrated online. If you look at Tier 3 cities and below you can see there’s still a lot more adoption left and this is where we think the incremental 65% of growth will come from.
Now, you need to also take into consideration that in many of these lower tier cities, the shopping mall experience isn’t very good. A lot of these shopping malls are often crowded, there’s been under-investment in them, they lack many global brand options. So, online adoption in these lower tier cities will be a preferred avenue for many of these consumers.
Secondly, COVID-19 I think has perhaps accelerated some of the online adoption dynamics that are occurring in fresh grocery. From my own personal experience over the past few months, my own online habits have changed, and fresh grocery at the moment is a very large opportunity – it is approximately 50% of the total online e-commerce market today that will migrate more online. This presents a very large opportunity for both Alibaba (“BABA”, Alibaba Holdings Group) and JD (JD.com, Inc).
Jacob Mitchell:
Thanks Sunny. So in summary, the growth opportunity is as you say:
- The migration of fresh grocery, where we have no real online presence at the moment, if that starts to shift online.
- Adoption in these lower tier cities.
I’m sure you’re keen to get out there in the back blocks of China and visit some of these Tier 5 city locations and local shopping malls. But it is, I think, a real opportunity. If we switch to the next slide, we can go through Alibaba is some greater detail.
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