The retail landscape has been shifting for decades, ever since the mid-1990s when the start of today’s giants, such as Amazon, introduced the concept of eCommerce to consumers. 

Since then, retail has been driven by the evolution of online markets and, as a result, wider consumer purchasing habits have changed. We have seen more traditional bricks-and-mortar retailers that failed to get their online offering right go under, while independents have struggled to survive on the high street as the need for scale and reach became critical.

These trends were clearly heightened over the last 18 months as the COVID-19 pandemic changed the face of retail and eCommerce once again. Many shops were forced to close, and high streets were empty, leaving the public with little to do and nowhere else to spend their money other than online. 

We saw many traditional retailers working hard to get their eCommerce services up to speed to stay afloat, while those with a strong eCommerce set up soared. A number of eCommerce players then took the opportunity to capitalise on this incredible surge in demand and made the decision to go public. 

The latest research from GCA Altium found that the number of IPOs undertaken by eCommerce businesses more than doubled in the first half of 2021 to 1,147 to a tune of $215bn. To put it into context, the volume of eCommerce IPOs this year to date is more than the figure for 2019 and 2020 combined, with 553 and 482 total transactions respectively. 

The most notable IPOs during this latest period include the £775m of, THG and the record-breaking £850m listing of bathroom specialist Victorian Plumbing.

The reason for the influx of IPOs? Put simply, the market was offered the opportunity to invest in growth trajectories that they had not seen for years and in many instances, shareholders felt that they could not miss out on.

eCommerce businesses seemed to offer a glimpse of the future of retail, backed by a step change in consumers’ appetite to purchase online. The thinking being that even when the high street reopened many consumers, having found how easy it was to buy everything from a full bathroom suite to a birthday card online, would not go back to the restricted choice and often higher price of the high street.

Outside of IPO, M&A has been less active, with few online businesses bought or invested in by private equity. The demand and valuations available via IPO proved prohibitive to many private equity investors who instead took the opportunity to divest rather than invest in the sector.

It will be interesting to see how this plays out in the months and years ahead. There are a lot of eCommerce IPOs being talked about for the remainder of 2021, but how many of them come to fruition remains to be seen. 

Almost without exception, the last few weeks has seen eCommerce share prices take a hammering. A mixture of slow summer trading as consumers ventured outside, supply issues, cost inflation and staff shortages have led to a number of profit warnings and downgrades in the sector. 

There are undoubtedly still exceptionally strong performers out there, but they may now be forced to look at alternative solutions if the IPO market tightens for eCommerce as appears likely. Future eCommerce M&A is likely to face considerable scrutiny around what really is post-COVID trading, just how much was the last year or so a spike rather than a step change and how well prepared they are for the cost inflation that is hitting nearly every element of daily life.  

As for the sectors to keep an eye on, I suspect we will see investors focus more on COVID recovery plays. Leisure assets such as restaurants, bars and experiential assets and travel more broadly look set for some very positive performance as the world navigates its way to a ‘new normal’ and consumers catch up on lost time.