I've been thinking of how this shopping season played out and what's in store for eCommerce from a macro perspective. If you believe macroeconomists are psychics with a math background, you and I will get along well but I won't take offense if you skip reading. I have indulged in some macro-gazing.
x things stand out for me, on the demand side:
This holiday season, demand stole the show.
On the supply side, the supply-chain crisis is not a one-(season)and-done event. I spoke to cross-border shipping providers that are headquartered in China. We have a few unresolved issues that will linger for a long:
Well, there is inflation.
Inflation is just as transitory as the pattern-balding of a middle-aged man. One would wish it stops quickly but it takes a long time until it shaves off the youth and the shine.
But here's why the year looks promising, in spite of inflation. One would assume that alarmingly high inflation will put the brakes on discretionary consumer spending. So far it has not. Firstly it was re-stacking of spend categories that came to the rescue. Travel spend at households got re-allocated to entertainment at home (Gadgets!) and the effect was semiconductor chip shortage. Financial stimulus poured liquidity into the market. Some bought game consoles. Others bought GameStop. The movement of physical goods came to halt and people were happy to get the thing they wanted rather than waiting for discounts.
The party and the drinks continue to flow until today.
In Q2, if the current Omicron-wave would have opened the path for the post-pandemic economy in hindsight, workers will return to produce/service, supply-chain disruption will be tamed and prices will reduce. In other words, none of the scary headlines about inflationary alarms will be sensational. Even if we have an inflationary year, the other pandemic-induced problems will recede through the year, acting as a counter-balance.
In short, my expectation for the year is continuing momentum of eCommerce aided by pandemic recovery, tamed by inflation (because there are wages and rents which will continue to keep the inflation high, even if the pandemic recedes in Q2/Q3).
I know, I sound like the talking heads on CNBC, but one hopes (unselfishly) good things continue for eCommerce and DTC, right?
If we go into the year where none of these play out as well as I imagine, put all your money on meme coins. After all, is there any asset class that combines the thrill of MMOG and Russian roulette?
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