EQUITY RESEARCH | July 20, 2020 | 10:58PM EDT

Global Internet
eCommerce’s steepening curve:
Raising global forecasts &
identifying new winners
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The COVID-19 pandemic has driven a doubling of the penetration of

eCommerce globally, accelerating the acceleration we were already seeing, Raising Forecasts

58b772b07bbf4ac1979365bc65c5e3c4
and in some major categories, like Consumer Packaged Goods, driving as Old New
much as 3 years of penetration growth in 3 months. Answering the most eCommerce growth
asked question: we believe that a large part of this is sustainable, with a 16% 19%
‘19-’22 CAGR
permanent steepening of the growth curve for eCommerce, and while we
will likely see a near term decline as markets reopen, as the financial eCommerce 19% 22%
realities of fewer people in stores, particularly during key holidays, lead to penetration
even more store closures, we are likely to see a second wave driving e. 2023
eCommerce adoption above even current highs.

Heath P. Terry, CFA Kate McShane, CFA Piyush Mubayi Irma Sgarz Richard Edwards Manish Adukia, CFA
+1(212)357-1849 +1(212)902-6740 +852-2978-1677 +1(212)357-3770 +44(20)7051-6016 +91(22)6616-9049
[Link]@[Link] [Link]@[Link] [Link]@[Link] [Link]@[Link] [Link]@[Link] [Link]@[Link]
Goldman Sachs & Co. LLC Goldman Sachs & Co. LLC Goldman Sachs (Asia) L.L.C. Goldman Sachs & Co. LLC Goldman Sachs International Goldman Sachs India SPL

Goldman Sachs does and seeks to do business with companies covered in its research reports. As a
result, investors should be aware that the firm may have a conflict of interest that could affect the
objectivity of this report. Investors should consider this report as only a single factor in making their
investment decision. For Reg AC certification and other important disclosures, see the Disclosure
Appendix, or go to [Link]/research/[Link]. Analysts employed by non-US affiliates are not
registered/qualified as research analysts with FINRA in the U.S.

The Goldman Sachs Group, Inc.

 Goldman Sachs Global Internet

Table of Contents
PM summary 3

Updating the GS Global eCommerce model 7

US eCommerce: Accelerating the acceleration 9

US Traditional retail: eCommerce rising 14

Store closures update 17

Regional snapshots 20

Southeast Asia and Taiwan 45

Global eCommerce comp table 48

Disclosure Appendix 49
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Contributing Authors

58b772b07bbf4ac1979365bc65c5e3c4

20 July 2020 2
 Goldman Sachs Global Internet

PM summary

The Coronavirus pandemic has driven an acceleration in the adoption of countless

technologies and consumer behaviors, chief among them eCommerce. What
started at first with panic buying, hoarding, and nest feathering out of necessity, has
turned into an array of adaptations that have driven eCommerce penetration from 16%
of retail spending in the US in 1Q20 to over 40% in May driven by year over year
growth of nearly 70% according to some reports (Exhibit 5), with similar numbers
reported in markets around the world (Exhibit 34). This goes far beyond just Amazon,
with traditional retailers like Walmart, Target, Ahold Delhaize and Kroger reporting triple
digit growth in eCommerce revenues, while other eCommerce companies like Alibaba,
Etsy, MercardoLibre, Wayfair, and Farfetch have seen surging demand. In China, the
pick-up in discretionary spending across all categories is driving further recovery in
eCommerce as China returns to work. In Europe, after years of relatively slow growth
vs non-food online retail, enforced lockdowns and recommended social distancing have
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caused a step change in online grocery growth in Western Europe, where UK non-food
online retail sales grew +49% in May. Similar stories are seen across India, Latin
America, Australia and most other markets.

Adaptation has not been limited to consumers. At an enterprise level, we’ve seen an
acceleration in innovation over the course of the crisis as companies have rolled out
curbside pick up programs, contactless checkout, personalized consignment deliveries,
and retailers and marketplaces have adapted to reflect the shifting needs of consumers
focused on the new essentials. We’ve seen online and offline partnerships formed to
expand customer reach, broaden selection, and enable fulfillment as last mile delivery
networks have been stretched beyond their limits. COVID is driving technology adoption
beyond software as warehouse automation through robotics is being pushed both by
the need for workers to socially distance as well as the need for increased efficiency

58b772b07bbf4ac1979365bc65c5e3c4
over 24 hour work cycles.

We’re raising our estimates to reflect this acceleration. Globally, we believe that
eCommerce will grow 24% ex-FX versus our prior estimate of 17% and 18% in 2019
(ex-FX). While we expect this growth will decelerate materially in 2021, due to the
comparison and a recovery in traditional retail sales as countries reopen, we forecast
that eCommerce will grow 19% annually over the next three years, up from 16% versus
our prior estimates. This acceleration is being driven primarily by faster growth in the US,
Western Europe, Brazil and most of APAC. More broadly, we expect that retail will grow
1.4% in 2020 and 6.1% in 2021, with CAGR over the next 5 years of 4.8%. This implies
eCommerce penetration will reach 22% by 2023, which compares with 19% in our prior
estimates.

20 July 2020 3
 Goldman Sachs Global Internet

Exhibit 1: eCommerce growth estimate revisions

$ millions
’19-’22
Ecommerce growth forecast 2017 2018 2019 2020E 2021E 2022E CAGR
Global $1,839,454 $2,241,359 $2,561,554 $3,147,696 $3,707,100 $4,325,622 19%
New 22.6% 21.8% 14.3% 22.9% 17.8% 16.7%
Old 21.7% 23.0% 19.7% 17.4% 16.0% 14.8% 16%
Delta bps 90 -116 -540 549 177 188 302
China $841,446 $1,075,863 $1,233,560 $1,457,558 $1,763,231 $2,079,472 19%
New 25.9% 27.9% 14.7% 18.2% 21.0% 17.9%
Old 28.3% 29.9% 24.4% 19.7% 17.5% 15.9% 18%
Delta bps -243 -200 -975 -154 347 204 132
United States $411,515 $466,621 $536,324 $691,858 $809,474 $963,275 22%
New 15.5% 13.4% 14.9% 29.0% 17.0% 19.0%
Old 15.7% 14.2% 14.6% 14.6% 14.4% 14.0% 14%
Delta bps -20 -81 34 1440 260 500 722
Western Europe $260,307 $305,378 $322,946 $401,912 $442,103 $486,314 15%
New 14.2% 17.3% 5.8% 24.5% 10.0% 10.0%
Old 13.2% 17.2% 12.0% 12.0% 11.0% 10.0% 11%
Delta bps 103 14 -625 1245 -100 0 362
Japan $76,691 $84,209 $91,165 $111,131 $116,687 $126,022 11%
New 4.2% 9.8% 8.3% 21.9% 5.0% 8.0%
Old 4.2% 9.8% 8.3% 8.3% 8.4% 8.0% 8%
Delta bps 0 0 0 1357 -341 0 315
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Latin America $35,007 $37,926 $42,996 $49,184 $54,478 $65,815 15%

New 27.0% 8.3% 13.4% 14.4% 10.8% 20.8%
Old 28.4% 10.5% 26.7% 27.3% 26.1% 23.8% 26%
Delta bps -134 -215 -1329 -1295 -1530 -298 -1048

Source: Goldman Sachs Global Investment Research

The winners in this accelerated transition will not be limited to internet

companies. Traditional retailers with merchandising, logistics, and brand expertise that
can rationalize their fixed expenses will leverage their own investments in technology,
fulfillment, and customers to effectively compete. Providers of the enablement
technologies, marketplaces, and logistical services necessary to enable this transition
will also be major beneficiaries. Our best idea recommendations across these sectors
are below (Exhibit 2), but globally we see Alibaba, Amazon, Asos, Farfetch,
Mercadolibre, and Walmart among the most compelling investment opportunities.
Beyond updating our global ecommerce model this report brings together our analysts

58b772b07bbf4ac1979365bc65c5e3c4
from each region with updates on the impact they have seen from the current crisis as
well as their longer term outlook.

20 July 2020 4
 Goldman Sachs Global Internet

Exhibit 2: GS Top eCommerce Ideas

TOP
TO
TOP DEAS
P IIDEAS
Company Ticker Rating Mkt. Cap ($mn) Target Price
UNITED ST
UNITED ATES
STATES
[Link] Inc. AMZN Buy* $1,477,360 $3,800
The market continues to underestimate the growth, returns, and sustainability of Amazon’s leading positions in both ecommerce and cloud computing and related advertising, logistics, and other emerging business.
Walmart Inc. WMT Buy $373,081 $137
WMT continues to invest in ecommerce as evidenced by its recent partnership with Shopify, its added investment in Flipkart, and its recent announcement to launch WMT+ (subscription model offering same day delivery for groceries and general merchandise, with
opportunities for discounted fuel, access to health and wellness services, etc.) which will continue to drive top line growth and should accelerate the overall earnings algorithm.
Nike Inc. NKE Buy* $149,717 $110
This best-in-class branded apparel asset with a strong brand, solid innovation, and accelerating digital momentum is well-positioned for multi-year growth and expansion in both margins and returns.
PayPal Holdings PYPL Buy* $204,210 $205
As the digital payments vertical leader, we believe PayPal is extremely well-positioned to benefit from all aspects of growth in and around digital payments, commerce, and services. PayPal’s increasingly-ubiquitous products for merchants and consumers demonstrate
high competitive advantages for the Internet sector generally, and its global position offers optionality, including opportunities in China through GoPay and UnionPay. We see incremental growth opportunities in Braintree, Venmo, and partnerships like those struck with
MercadoLibre and Uber.
Honeywell International Inc. HON Buy $108,786 $175
HON’s Intelligrated business provides scalable automated e-commerce fulfillment capabilities including both material handling equipment as well as integrated software. Overall, productivity solutions, which includes warehouse automation was ~10% of HON’s 2019 sales
but will likely be a fastest growing segment over the medium term.
United Parcel Service Inc. UPS Buy $102,211 $120
UPS is one of few carriers that can deliver time-definite packages to meet E-Commerce needs on a global basis; With significant investment cycle almost compete, we would expect UPS to one again leverage the investments especially as business mix normalizes with
economic recovery.
Adyen NV [Link] Buy* $48,433 $1,560
Adyen provides merchants, payment acceptance and processing through a modern single integrated platform across online and offline channels with a single data back-end. Our bullish stance on Adyen is premised on: 1) an accelerated shift from cash to card payments
and faster growth in online spending/ecommerce; 2) increasing data points suggesting an acceleration in structural changes in favour of ecommerce; 3) underestimated growth potential from multiple company-specific levers - a) high growth of its customer; b) increasing
wallet share gains; and c) new customer wins that should allow the company to outpace market growth; and 4) Adyen’s position as a disproportionate beneficiary of the rise in omni-commerce given its best-in-class tech platform.
FedEx Corp. FDX Buy* $43,362 $169
Small package time definite delivery is relatively scare capability from a global perspective and with increasingly complex logistics needs shrinking time to market requirements only a handful of carriers can consistently deliver – significant volume growth and FDX self-help
actions should lead to better density and price meaning long term margin should improve.
Avalara Inc. AVLR Buy $9,832 $154
Avalara offers sales tax automation and other compliance solutions to SMB, mid-market, and enterprise businesses. We believe the recent step-function shift in e-commerce penetration will create a need for businesses to automate the calculation and remittance of sales
tax, due to the added complexity from an increasingly online, omnichannel strategy.
Macerich Co. MAC Sell $1,158 $6.5
Despite high quality properties, expect store closures and rent resets to pressure same center results, while redevelopment needs could increase leverage further. Upcoming debt maturities, reliance on property-level financing, and a potential dividend reset are also risks.

ROPE / RU
EUROPE
EU
EUROPE SSIA
RUSSIA
Unibail-Rodamco-Westfield [Link] Sell $13,392 $44
Covid-19 will accelerate the adoption of ecommerce and drive market rent / valuation declines for shopping centre landlords. We see a risk URW will have to fix its balance sheet given the increase we forecast in LTV.
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Farfetch Ltd. FTCH Buy $7,307 $21

Farfetch is best positioned to take share in the underpenetrated online luxury goods market, which is highly fragmented. Just 2mn active users on a global platform highlights its scope for expansion. We think the market underestimates its path to profitability (EBITDA
positive in 2021E).
ASOS Plc ASOS.L Buy $4,300 $4,100
Our ASOS Buy case centres on the group’s global market share opportunity within an immature global online apparel market, and related profitabilty upside.
CH
CHINA
INA
Alibaba Group BABA Buy* $663,009 $276
Alibaba operates the largest ecommerce platform in China, providing a compelling value proposition for both consumers and merchants through an ecosystem that integrates commerce/logistics, marketing tech, cloud computing, payment and entertainment, making the
Alibaba Digital Economy indispensable for Chinese netizens.
[Link] Inc. JD Buy $81,369 $71
We believe [Link], as China’s largest retailer that dominates in both electronics & appliances and supermarket sales, will continue to solidify its scale leadership with its omni-channel strategy, continued lower tier city penetration and improving operating efficiency. We
also see a clear path for margin expansion driven by advertising (across 1P & 3P) and improving margins for JD Logistics.
JAPAN
JA
JAPAN
PAN
Fast Retailing 9983.T Buy $56,733 $67,000
Fast Retailing has grown to be the No.1 player in the apparel market in China, however we believe that its eCommerce business will drive further growth mid-long term. In FY8/19, eCommerce revenue accounted for 20% of Uniqlo China, growing at c.30% yoy. Its Omni-
channel strategy has been successful as well, where pick-and-collect is 1/3 of total eCommerce sales.
Daifuku Co. 6383.T Buy $11,681 $9,800
Daifuku is one of the global top supplier of automated warehouse solution along with HON and Kion (Dematic), and the only listed pure-play stock globally. Over 60% of operating profits is generated from E-commerce related “Intra-logistics business” (FY3/21GSe), and
OP margins are set to expand from 9.1% in FY3/20 to 12.4% in FY3/25GSe, led by intra-logistics. This is one of the very few companies to grow its earnings in FY3/21GSe, despite the COVID-19 headwind; we believe the structural tailwind will help the stock to rerate in
the near term and the longer term.
SOUTHEAST
SO
SOUTHEAST
UTHEAST A
ASIA
SIA
Sea Ltd. SE Buy* $34,980 $120
We maintain Buy (CL) on Sea Ltd as we see it as a key winner in the fast-growing ASEAN/Taiwan gaming, ecommerce and payments markets, and see upside from its successful moves into LATAM and India. While share price is +183% YTD vs NYSE index -13%
YTD, we still see a relatively favorable risk reward outlook (78% upside to bull case, 54% downside to bear case), with market appearing to still under-appreciate its future earnings power.
LATIN
LA
LATIN
TIN A
AMERICA
MERICA
MercadoLibre Inc. MELI Buy $47,956 $1,160
We are Buy-rated on MELI shares, as we see the company relatively well positioned to continue to build on its scale and leading position across ecommerce and fintech, at the same time it gradually progresses into more sustainable margin levels.
Magazine Luiza [Link] Buy $24,831 $78
We are Buy-rated on MGLU shares, which we believe is well positioned to leverage its omnichannel capabilities, despite the challenging short-term outlook for its offline operations.
B2W [Link] Buy $11,331 $112
We are Buy-rated on BTOW shares, as we see scope for continued market share gains in the short- to medium-term, partially driven by the company’s hybrid 1P/3P approach and integrated logistics platform.
Ratings marked * are on the respective region’s Conviction List

58b772b07bbf4ac1979365bc65c5e3c4
Target prices are for a 12-month time frame.

Source: FactSet, Goldman Sachs Global Investment Research

20 July 2020 5
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20 July 2020
Goldman Sachs

6
Global Internet

58b772b07bbf4ac1979365bc65c5e3c4
 Goldman Sachs Global Internet

Updating the GS Global eCommerce model

We update our global eCommerce model for the most recent data, FX, and regional
expectations from our global analysts. After eCommerce share gains accelerated in the
US for multiple years, 2019 saw a slight deceleration in eCommerce penetration
increase. We expect that 2020 will see an acceleration of eCommerce penetration as
store closures have also accelerated (Exhibit 20), driven by COVID-19 and increasingly
digital consumer behavior. Globally, we expect mobile and fulfillment to remain key
drivers of eCommerce penetration, particularly in China, where share shift is expected
drive elevated growth for several years as the country approaches one third of retail
purchases made online.

Exhibit 3: GS Global eCommerce model in local currencies (ex-travel)

* unless otherwise noted CAGR
Ecommerce ex-sales tax, mn* Currency 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2019-’22 2019-’24
Regional estimates
United States USD 411,515 466,621 536,324 691,858 809,474 963,275 1,117,398 1,251,486 21.6% 18.5%
Canada CAD 31,123 37,348 46,498 59,518 68,445 80,081 92,093 102,224 19.9% 17.1%
Western Europe (incl. UK) EUR 234,178 260,040 288,883 361,104 397,214 436,936 476,260 514,361
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14.8% 12.2%
United Kingdom GBP 55,027 62,998 69,366 85,320 93,852 103,237 112,529 121,531 14.2% 11.9%
Eastern Europe (incl. Russia) USD 19,317 24,615 28,428 36,209 41,980 48,471 55,267 62,506 19.5% 17.1%
Russia RUB 1,022,495 1,356,975 1,697,847 2,207,201 2,604,497 3,073,306 3,595,768 4,171,091 21.9% 19.7%
Mainland China CNY 5,688,174 7,132,971 8,523,900 10,202,904 12,342,617 14,556,306 16,752,679 19,038,294 19.5% 17.4%
Japan JPY (bns) 8,601 9,299 10,067 12,269 12,877 13,907 14,992 16,162 11.4% 9.9%
South Korea KRW (bns) 79,607 96,733 117,788 149,280 167,987 181,018 191,182 203,515 15.4% 11.6%
India INR 1,417,323 1,800,000 2,259,000 2,674,937 3,566,238 4,540,429 5,809,957 7,436,709 26.2% 26.9%
Australia AUD 16,771 18,386 21,493 30,594 33,602 36,800 40,198 43,807 19.6% 15.3%
Taiwan TWD 297,303 358,332 417,365 499,907 573,735 658,089 747,881 846,372 16.4% 15.2%
Indonesia IDR (bns) 62,667 176,786 330,813 583,079 810,682 992,311 1,146,586 1,273,035 44.2% 30.9%
Rest of Southeast Asia USD 7,623 10,538 14,638 22,775 30,975 39,707 49,594 59,007 39.5% 32.2%
Brazil BRL 65,010 77,271 91,472 126,397 152,492 187,342 223,522 251,395 27.0% 22.4%
Rest of Latin America USD 14,849 17,017 19,899 25,109 27,530 33,214 38,030 43,235 18.6% 16.8%

yoy growth (%) 2017 2018 2019 2020E 2021E 2022E 2023E 2024E
Regional estimates
United States 15.5% 13.4% 14.9% 29.0% 17.0% 19.0% 16.0% 12.0%
Canada 26.9% 20.0% 24.5% 28.0% 15.0% 17.0% 15.0% 11.0%
Western Europe (incl. UK) 10.8% 11.0% 11.1% 25.0% 10.0% 10.0% 9.0% 8.0%
United Kingdom 16.0% 14.5% 10.1% 23.0% 10.0% 10.0% 9.0% 8.0%
Eastern Europe (incl. Russia) 23.7% 27.4% 15.5% 27.4% 15.9% 15.5% 14.0% 13.1%
Russia 27.0% 32.7% 25.1% 30.0% 18.0% 18.0% 17.0% 16.0%
Mainland China 28.0% 25.4% 19.5% 19.7% 21.0% 17.9% 15.1% 13.6%
Japan 7.5% 8.1% 8.3% 21.9% 5.0% 8.0% 7.8% 7.8%
South Korea 21.7% 21.5% 21.8% 26.7% 12.5% 7.8% 5.6% 6.5%
India 48.0% 27.0% 25.5% 18.4% 33.3% 27.3% 28.0% 28.0%
Australia 10.7% 9.6% 16.9% 42.3% 9.8% 9.5% 9.2% 9.0%
Taiwan 20.5% 16.5% 19.8% 14.8% 14.7% 13.6% 13.2%
Indonesia 182.1% 87.1% 76.3% 39.0% 22.4% 15.5% 11.0%
Rest of Southeast Asia 38.2% 38.9% 55.6% 36.0% 28.2% 24.9% 19.0%
Brazil 17.4% 18.9% 18.4% 38.2% 20.6% 22.9% 19.3% 12.5%
Rest of Latin America 29.9% 14.6% 16.9% 26.2% 9.6% 20.6% 14.5% 13.7%

Regional Weight (%) 1999 2017 2018 2019 2020E 2021E 2022E 2023E 2024E

58b772b07bbf4ac1979365bc65c5e3c4
Regional estimates
North America 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
United States 94.5% 94.2% 93.9% 93.9% 94.0% 94.1% 94.2% 94.2%
Canada 5.5% 5.8% 6.1% 6.1% 6.0% 5.9% 5.8% 5.8%
Europe 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Western Europe (incl. UK) 88.2% 87.1% 85.7% 85.4% 84.7% 84.1% 83.5% 82.8%
Eastern Europe (incl. Russia) 11.8% 12.9% 14.3% 14.6% 15.3% 15.9% 16.5% 17.2%
APAC 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Mainland China 79.2% 80.1% 79.5% 78.0% 78.6% 79.2% 79.6% 79.8%
Japan 7.2% 6.3% 5.9% 5.9% 5.2% 4.8% 4.5% 4.3%
South Korea 6.0% 5.9% 6.3% 6.6% 6.2% 5.7% 5.3% 5.0%
India 1.8% 1.8% 1.9% 1.9% 2.1% 2.3% 2.6% 2.9%
Australia 1.2% 1.0% 1.0% 1.1% 1.1% 1.0% 1.0% 1.0%
Taiwan 0.9% 0.9% 0.9% 0.9% 0.8% 0.8% 0.8% 0.8%
Indonesia 0.4% 0.9% 1.5% 2.2% 2.6% 2.7% 2.7% 2.7%
Rest of Southeast Asia 0.7% 0.8% 0.9% 1.2% 1.4% 1.5% 1.6% 1.7%
Rest of Asia 2.5% 2.3% 2.2% 2.1% 2.0% 1.9% 1.9% 1.8%
LatAm 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Brazil 57.6% 55.1% 53.7% 48.9% 49.5% 49.5% 50.2% 49.5%
Rest of Latin America 42.4% 44.9% 46.3% 51.1% 50.5% 50.5% 49.8% 50.5%
Middle East & Africa 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Weighted Growth (%) 2017 2018 2019 2020E 2021E 2022E 2023E 2024E
Regional estimates
North America 16.1% 13.8% 15.5% 28.9% 16.9% 18.9% 15.9% 11.9%
Europe 12.3% 13.2% 11.7% 25.3% 10.9% 10.9% 9.8% 8.9%
APAC 25.6% 25.2% 20.0% 22.2% 20.2% 17.2% 14.6% 13.4%
LatAm 22.7% 16.9% 17.7% 32.1% 15.1% 21.7% 16.9% 13.1%
Middle East & Africa 25.2% 24.9% 22.2% 28.0% 20.0% 22.0% 24.0% 26.0%
Total 21.1% 20.7% 17.8% 24.4% 18.0% 16.8% 14.4% 12.6%

Source: Company data, Goldman Sachs Global Investment Research, Census Bureau, Euromonitor, IBGE, IPCA, AKIT, METI, iResearch, NBS China, UK Office of National Statistics

20 July 2020 7
 Goldman Sachs Global Internet

Exhibit 4: GS Global eCommerce model in USD (ex-travel)

$ millions
CAGR
Ecommerce ex-sales tax, $ millions 2017 2018 2019 2020E 2021E 2022E 2023E 2024E 2019-’22 2019-’24
Regional estimates
United States $411,515 $466,621 $536,324 $691,858 $809,474 $963,275 $1,117,398 $1,251,486 21.6% 18.5%
North America $435,498 $495,445 $571,314 $736,646 $860,980 $1,023,536 $1,186,699 $1,328,409 21.5% 18.4%
Rest of Western Europe $189,460 $221,380 $234,435 $293,044 $322,348 $354,583 $386,495 $417,415 14.8% 12.2%
United Kingdom $70,847 $83,998 $88,511 $108,868 $119,755 $131,731 $143,587 $155,073 14.2% 11.9%
Rest of Eastern Europe $19,317 $24,615 $28,428 $35,535 $40,510 $45,777 $50,812 $55,893 17.2% 14.5%
Russia $15,439 $20,489 $25,636 $33,326 $39,325 $46,404 $54,292 $62,979 21.9% 19.7%
Europe $295,062 $350,482 $377,010 $470,774 $521,939 $578,494 $635,186 $691,361 15.3% 12.9%
Mainland China $841,446 $1,075,863 $1,233,560 $1,457,558 $1,763,231 $2,079,472 $2,393,240 $2,719,756 19.0% 17.1%
Japan $76,691 $84,209 $91,165 $111,131 $116,687 $126,022 $135,852 $146,176 11.4% 9.9%
South Korea $63,344 $79,321 $97,764 $123,902 $139,429 $150,245 $158,681 $168,918 15.4% 11.6%
India $18,898 $24,000 $30,120 $35,666 $47,550 $60,539 $77,466 $99,156 26.2% 26.9%
Australia $12,859 $13,754 $14,946 $20,485 $24,460 $27,094 $30,802 $34,272 21.9% 18.1%
Taiwan $9,776 $11,889 $13,505 $16,176 $18,564 $21,294 $24,199 $27,386 16.4% 15.2%
Indonesia $4,700 $12,375 $23,488 $41,399 $57,558 $70,454 $81,408 $90,386 44.2% 30.9%
Rest of Southeast Asia $7,623 $10,538 $14,638 $22,775 $30,975 $39,707 $49,594 $59,007 39.5% 32.2%
Rest of Asia $26,996 $31,120 $33,405 $39,417 $44,148 $49,887 $55,873 $62,578 14.3% 13.4%
APAC $1,062,332 $1,343,069 $1,552,590 $1,868,508 $2,242,602 $2,624,714 $3,007,114 $3,407,634 19.1% 17.0%
Brazil $20,158 $20,910 $23,097 $24,075 $26,948 $32,601 $38,317 $42,432 12.2% 12.9%
Rest of Latin America $14,849 $17,017 $19,899 $25,109 $27,530 $33,214 $38,030 $43,235 18.6% 16.8%
LatAm $35,007 $37,926 $42,996 $49,184 $54,478 $65,815 $76,347 $85,667 15.2% 14.8%
Middle East & Africa $11,556 $14,437 $17,645 $22,585 $27,102 $33,065 $41,000 $51,660 23.3% 24.0%
Total $1,839,454 $2,241,359 $2,561,554 $3,147,696 $3,707,100 $4,325,622 $4,946,346 $5,564,732 19.1% 16.8%
$279,623 $329,993 $351,374 $437,447 $482,614 $532,090 $580,894 $628,382 13.5% 12.0%

yoy growth (%) 2017 2018 2019 2020E 2021E 2022E 2023E 2024E
Regional estimates
United States 15.5% 13.4% 14.9% 29.0% 17.0% 19.0% 16.0% 12.0%
North America 16.2% 13.8% 15.3% 28.9% 16.9% 18.9% 15.9% 11.9%
Rest of Western Europe 15.6% 16.8% 5.9% 25.0% 10.0% 10.0% 9.0% 8.0%
United Kingdom 10.6% 18.6% 5.4% 23.0% 10.0% 10.0% 9.0% 8.0%
Rest of Eastern Europe 23.7% 27.4% 15.5% 25.0% 14.0% 13.0% 11.0% 10.0%
Russia 27.0% 32.7% 25.1% 30.0% 18.0% 18.0% 17.0% 16.0%
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Europe 15.4% 18.8% 7.6% 24.9% 10.9% 10.8% 9.8% 8.8%

Mainland China 25.9% 27.9% 14.7% 18.2% 21.0% 17.9% 15.1% 13.6%
Japan 4.2% 9.8% 8.3% 21.9% 5.0% 8.0% 7.8% 7.6%
South Korea 41.0% 25.2% 23.3% 26.7% 12.5% 7.8% 5.6% 6.5%
India 48.0% 27.0% 25.5% 18.4% 33.3% 27.3% 28.0% 28.0%
Australia 14.1% 7.0% 8.7% 37.1% 19.4% 10.8% 13.7% 11.3%
Taiwan 21.6% 13.6% 19.8% 14.8% 14.7% 13.6% 13.2%
Indonesia 163.3% 89.8% 76.3% 39.0% 22.4% 15.5% 11.0%
Rest of Southeast Asia 38.2% 38.9% 55.6% 36.0% 28.2% 24.9% 19.0%
Rest of Asia 22.2% 15.3% 7.3% 18.0% 12.0% 13.0% 12.0% 12.0%
APAC 27.5% 26.4% 15.6% 20.3% 20.0% 17.0% 14.6% 13.3%
Brazil 25.0% 3.7% 10.5% 4.2% 11.9% 21.0% 17.5% 10.7%
Rest of Latin America 29.9% 14.6% 16.9% 26.2% 9.6% 20.6% 14.5% 13.7%
LatAm 27.0% 8.3% 13.4% 14.4% 10.8% 20.8% 16.0% 12.2%
Middle East & Africa 25.2% 24.9% 22.2% 28.0% 20.0% 22.0% 24.0% 26.0%
Total 22.6% 21.8% 14.3% 22.9% 17.8% 16.7% 14.3% 12.5%

Ecommerce as a % of Total Retail 2017 2018 2019 2020E 2021E 2022E 2023E 2024E
Regional estimates
United States 12.7% 13.7% 15.2% 19.0% 21.5% 24.8% 28.0% 30.6%
North America 12.2% 13.3% 14.8% 18.4% 20.8% 24.0% 27.0% 29.5%
Rest of Western Europe 7.6% 8.4% 9.2% 11.2% 11.9% 12.6% 13.3% 13.9%
United Kingdom 16.3% 18.0% 19.1% 22.8% 24.3% 25.8% 27.3% 28.5%
Rest of Eastern Europe 5.2% 6.0% 6.8% 7.9% 8.5% 9.1% 9.6% 10.0%
Russia 4.9% 6.1% 7.2% 8.8% 9.7% 10.8% 11.9% 12.9%
Europe 8.1% 9.1% 10.0% 12.0% 12.8% 13.6% 14.4% 15.0%
Mainland China 17.4% 21.1% 23.4% 27.8% 30.6% 33.5% 36.1% 38.6%
Japan 5.8% 6.2% 6.8% 8.2% 8.5% 9.1% 9.7% 10.4%
South Korea 22.6% 26.4% 31.4% 39.8% 42.2% 44.2% 45.3% 46.8%
India 3.6% 4.1% 4.7% 5.6% 6.8% 7.9% 9.2% 10.7%
Australia 5.4% 5.7% 6.5% 8.9% 9.5% 10.0% 10.5% 11.0%
Taiwan 9.8% 11.5% 13.1% 14.5% 16.0% 17.7% 19.4% 21.2%
Indonesia 3.0% 7.7% 13.4% 24.0% 30.4% 35.4% 39.0% 41.2%

58b772b07bbf4ac1979365bc65c5e3c4
Rest of Southeast Asia 2.4% 3.1% 4.1% 6.5% 8.0% 9.5% 11.1% 12.6%
Rest of Asia 4.9% 5.5% 5.9% 6.6% 6.9% 7.3% 7.7% 8.0%
APAC 12.8% 15.4% 17.2% 20.7% 23.0% 25.3% 27.3% 29.3%
Brazil 5.5% 6.2% 7.0% 9.7% 11.2% 12.9% 14.4% 15.2%
Rest of Latin America 3.2% 3.8% 4.5% 6.4% 7.1% 8.2% 9.0% 9.6%
LatAm 4.2% 4.8% 5.6% 7.7% 8.7% 10.1% 11.1% 11.7%
Middle East & Africa 1.2% 1.4% 1.7% 2.0% 2.2% 2.4% 2.6% 2.8%
Total 10.6% 12.4% 13.9% 16.8% 18.7% 20.7% 22.4% 23.9%

Ecommerce penetration increase (decrease), bps 2017 2018 2019 2020E 2021E 2022E 2023E 2024E
United States 126 108 151 373 251 334 319 259
North America 125 108 153 361 240 318 304 245
Rest of Western Europe 79 84 82 194 71 76 68 58
United Kingdom 164 165 116 365 147 158 143 122
Rest of Eastern Europe 61 78 81 119 60 58 46 40
Russia 81 127 109 158 95 106 107 107
Europe 82 98 87 201 79 84 76 66
Mainland China 243 367 227 444 278 293 262 248
Japan 36 43 55 140 32 61 63 66
South Korea 475 376 499 839 245 195 112 152
India 89 55 60 87 116 110 132 155
Australia 40 35 79 242 52 52 52 52
Taiwan 980 172 157 141 148 169 171 181
Indonesia 298 476 563 1,068 635 504 356 224
Rest of Southeast Asia 241 69 97 240 153 153 159 149
Rest of Asia 63 55 47 63 32 41 36 39
APAC 132 259 189 348 224 229 204 197
Brazil 71 73 79 275 150 170 150 75
Rest of LatAm 54 58 74 192 70 112 71 65
LatAm 62 61 77 214 99 135 101 68
Middle East & Africa 22 24 26 29 18 20 23 21
Total 119 175 151 294 185 198 175 148

Source: Company data, Census Bureau, Euromonitor, IBGE, IPCA, AKIT, Japan METI, iResearch, NBS China, UK Office of National Statistics, Goldman Sachs Global Investment Research

20 July 2020 8
 Goldman Sachs Global Internet

US eCommerce: Accelerating the acceleration

The pandemic has driven a sharp increase in eCommerce penetration in 2Q20 so far.
Groceries and other early stage eCommerce categories such as apparel and consumer
packaged goods with low digital penetration saw accelerated growth during COVID-19,
some of which we expect to be sticky even after the pandemic. This follows 1Q20 when
total US digital commerce ex-travel (desktop, tablet, and mobile) grew +17.0% y/y
(+17.4% in Q4 and +14.9% in 1Q19), per comScore data, reaching $161.5bn in total
spend as eCommerce share gains remained elevated (+177bps y/y vs. +225bps in Q4
and +159bps in 1Q19), according to Census Bureau and comScore data. With the
lockdowns having a more significant impact on Q2, we expect more share gains to be
reported in the quarter-ended June.

Exhibit 5: Total US digital commerce ex-travel +17% in 1Q20 Exhibit 6: Mobile sees outsized share gains (+400bps y/y)
US desktop + mobile, $ millions Mobile penetration of total digital eCommerce (ex-travel) reached 32%
in 1Q
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$200,000 25.0% $200,000 50%

$180,000 $180,000 45%
$160,000 20.0% $160,000 40%
$140,000 $140,000 35%
$120,000 15.0% $120,000 30%

$100,000 $100,000 25%

$80,000 10.0% $80,000 20%

$60,000 $60,000 15%

$40,000 5.0% $40,000 10%

$20,000 5%
$20,000
$0 0%
$0 0.0%
4Q15
1Q16
2Q16

2Q18
3Q18
4Q18
1Q19
1Q15
2Q15
3Q15

3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18

2Q19
3Q19
4Q19
1Q20
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
4Q19
1Q20

Total Desktop Total Mobile Mobile % of digital ex-travel

Total Digital Commerce ex-travel yoy % growth Penetration

Penetration = total digital commerce ex-travel as a percent of total retail (ex-food, auto, and gas) US mobile commerce % of total digital commerce ex-travel, $ millions

Source: comScore, Census Bureau Source: comScore

58b772b07bbf4ac1979365bc65c5e3c4
1H trends and 2020 impacts
Per ComScore’s US desktop eCommerce data (Exhibit 7), growth recorded in categories
such as Home & Garden, Furniture & Appliances and CPG have seen strong acceleration
between 1Q20 and in the first two months of 2Q20, which should benefit companies
such as Wayfair and Etsy. According to MasterCard, US eCommerce for April and May
2020 constituted 22% of all retail sales, vs. 11% in 2019, with eCommerce sales in
May growing ~93% y/y driven by healthy growth across grocery and furniture. In the
US, eMarketer expects ecommerce growth to accelerate to +18% y/y for 2020
(+15% in 2019), reaching roughly 14.5% of total retail sales (+350bps y/y). A recent
report by Deloitte also highlighted that by mid-April, online orders grew 130% y/y,
particularly in grocery. On the other hand, discretionary categories such as Event Tickets
and Apparel & Accessories have recorded sharp deceleration in the same period (Exhibit
7).

Beyond our own estimates, eMarketer expects brick-and-mortar retail spending to

shrink by 14% y/y. From a global perspective, based on eMarketer data, the US is not
only expected to see eCommerce growth outpace the global rate (+18% vs. 16%

20 July 2020 9
 Goldman Sachs Global Internet

global) for 2020, but also see retail sales decline more aggressively (-14% vs. roughly
-5% global).

Exhibit 7: US Desktop commerce trends category-wise

Growth y/y in %

Event Tickets -8%

-91%

Toys & Hobbies 6%

-45%

Books & Magazines -30%

-44%

Apparel & Accessories 8%

-15%

Video Games & Consoles 6%

-13%

Sports & Fitness 18% 1Q20

-11%
April + May 2020
12%
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Computer Hardware -11%

Office Supplies 21%

-2%

Home & Garden 8%

51%

CPG 16%
56%

Furniture & Appliances 16%

120%

-150% -100% -50% 0% 50% 100% 150%

Source: comScore

eCommerce and groceries see accelerated adoption during COVID-19

Restricted mobility and lockdowns in the US have led to a surge in eCommerce

58b772b07bbf4ac1979365bc65c5e3c4
adoption across household items. Sensor Tower data shows that on average, major
eCommerce players’ app downloads were up ~150% at the peak of surging demand
in April/May, and were still up ~60% in mid-June. Notably, these growth rates are off
of already significant bases. Amazon and Walmart’s apps both reached almost 900K
downloads in a single week in May, while eBay saw >400K and Etsy saw >100K in the
same time frame. We believe that a number of these users will continue to be sticky
after the pandemic as they become accustomed to the convenience and increasingly
fast fulfillment provided by these services.

20 July 2020 10
 Goldman Sachs Global Internet

Exhibit 8: eCommerce app downloads surge during COVID-19 and remain elevated
y/y growth %

350%

300%

250%

200%

150%

100%

50%

0%
2/3 2/10 2/17 2/24 3/2 3/9 3/16 3/23 3/30 4/6 4/13 4/20 4/27 5/4 5/11 5/18 5/25 6/1 6/8 6/15
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-50%

eCommerce average Amazon Walmart Shopping Target Ebay Wayfair Etsy

Source: Sensor Tower, Data compiled by Goldman Sachs Global Investment Research

COVID-related measures brought grocery from an under penetrated eCommerce

category to a highly necessary one in the US. App downloads for a number of grocery
apps such as Instacart, Costco and Kroger spiked several hundred % in late March and
early April as households stocked up on food. Per Catalina data, flour, household
cleaning compounds, alcohol, staples and food all saw significant increases in $
spent/store, peaking at +134% y/y on average in mid-March when lockdown measures
were first implemented across most states. Grocery providers have responded to
surging demand by rapidly expanding fulfillment networks and decreasing delivery time
— infrastructure that we believe will last through the crisis and support higher digital

58b772b07bbf4ac1979365bc65c5e3c4
grocery penetration.

20 July 2020 11
 Goldman Sachs Global Internet

Exhibit 9: Grocery app downloads spike in late March/early April

y/y growth %

900%

800%

700%

600%

500%

400%

300%

200%

100%

0%
2/3 2/10 2/17 2/24 3/2 3/9 3/16 3/23 3/30 4/6 4/13 4/20 4/27 5/4 5/11 5/18 5/25 6/1 6/8 6/15
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-100%

Groceries average Instacart Costco Kroger

Source: Sensor Tower, Data compiled by Goldman Sachs Global Investment Research

Early stage eCommerce categories gain traction

As companies started implementing work from home strategy in 1Q20 and retailers
temporarily closed stores, some early-stage eCommerce categories gained share at a
pace not seen prior to the crisis. Apparel & Accessories saw an 18% y/y decline in brick
and mortar sales even as online sales increased by 9%. This resulted in online share for
Apparel & Accessories reaching 37.2% in 1Q20 (vs. 30.9% in 1Q19 and 31.5% in
4Q19). Consumer Packaged Goods (CPG) recorded an increase in penetration from
5.0% in 1Q19 to 6.9% in 1Q20 as people relied more heavily on digital channels for
everyday items amid shelter-in-place measures. Online ordering for Home and Garden

58b772b07bbf4ac1979365bc65c5e3c4
products also became popular during the pandemic, where desktop purchase
amounts went from mid single-digit y/y growth in 1Q to 44% and 57% growth in
April and May, respectively.

With lockdown implementation coming into full effect around March in the United
States, we expect to see significant eCommerce acceleration in 2Q20, although several
of these companies already spoke to surging demand trends on Q1 earnings calls.
Amazon highlighted surge in demand for household staples and home office supplies
while seeing low demand for discretionary purchases such as apparel, shoes and
wireless products. eBay‘s marketplace recorded acceleration in confinement categories
such as home offices, gym equipment and indoor leisure activities such as video games
and consoles. Etsy saw face masks comprising nearly 17% of Gross Merchandise Sales
(GMS) with healthy growth across categories such as toys & games, baking products
and gardening supplies. Wayfair experienced pickup in demand for kitchen appliances,
home renovation/decoration projects, children’s furniture and home office products.

20 July 2020 12
 Goldman Sachs Global Internet

Exhibit 10: Consumer Packaged Goods online purchases Exhibit 11: Home & Garden see outsized spending digitally since
accelerate in April and May lockdown
Desktop purchases Desktop purchases

$7 60% $3 60%
Billions

Billions
$6 50% 50%
$2
$5
40% 40%
$4 $2
30% 30%
$3 $1
20% 20%
$2
$1
$1 10% 10%

$0 0% $0 0%

MONTHLY - DOLLARS MONTHLY - PERCENT CHANGE Y/Y MONTHLY - DOLLARS MONTHLY - PERCENT CHANGE Y/Y

Source: comScore Source: comScore

Mobile continues to gain share

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Mobile’s share of digital commerce has stayed roughly at 32% for the past 3 quarters.
While shelter-in-place (SIP) measures might result in greater preference for desktop
usage over the shorter term, we continue to see potential for mobile penetration to
increase over the longer term. In 1Q20, 3 out of 7 categories with above average digital
commerce growth actually saw below average mobile penetration. As mobile
penetration increases across these categories we would expect the potential for
acceleration to increase. Category-wise, CPG saw the sharpest acceleration with
+18ppts y/y followed by Toys & Hobbies and Video Games with +9ppts and + 7ppts,
respectively. Computer Hardware and Furniture & Appliances saw acceleration by 5ppts
and 2ppts, respectively.

58b772b07bbf4ac1979365bc65c5e3c4

20 July 2020 13
 Goldman Sachs Global Internet

Exhibit 12: US digital commerce growth vs. mobile penetration 1Q20

y/y growth

70%

60%

CPG
50%
Toys & Hobbies

40%
Digital commerce yoy % growth

Sports & Fitness

30%

Computer Hardware
20% Office Supplies Furniture, Appliances
Flowers & Misc. Gifts
Consumer Electronics Video Games
Average, 15% Home & Garden
10% Apparel & Access.
Computer Software Music & Movies
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0%
-40% -20% 0% 20% 40% 60% 80%
Jewelry & Watches
Event Tickets
-10%

-20%
Books & Magazines

Average, 40%
-30%
Mobile % of digital commerce

Source: comScore

US Traditional retail: eCommerce rising

58b772b07bbf4ac1979365bc65c5e3c4
Ecommerce encroachment remains the predominant disruptive force in retail. Indeed,
the fortunes of traditional retailers and brands are to a large extent determined by their
positioning with respect to the rise of eCommerce, and the strategies they have
deployed in this area.

During COVID-19, we have witnessed an acceleration of several themes already in place

prior to the crisis. Most pertinent here are the increased penetration of eCommerce,
particularly in discretionary categories, and the accelerated shift of brands selling
direct-to-consumer (as opposed to through third party retailers).

This has several implications for the traditional retail ecosystem. Brick-and-mortar led
retailers have seen eCommerce penetration grow during the crisis (Exhibit 13), even
those that have been open throughout (Exhibit 14). These retailers are investing more
behind eCommerce offerings (Exhibit 15) and either closing stores or reconsidering the
planned pace of store roll out. As for brands, many are accelerating their shift towards
selling product direct to consumer. This has been a trend for several years already, and
was originally facilitated by rise of eCommerce. Now, the impetus to shift has been
intensified by the growing channels among many multi-brand traditional retailer partners

20 July 2020 14
 Goldman Sachs Global Internet

(particularly department stores) and by the faster pace of online adoption among
consumers.

Overall, we expect the actions of traditional retailers to contribute to rising eCommerce

penetration. Retailers’ investments in eCommerce alongside store closures encourages
customers to spend more online, and brands’ shifting more product (often exclusive) to
their own websites has the same effect.

Exhibit 13: On average, digital penetration was ~2x higher than last Exhibit 14: Even if digital sales growth moderates in 2Q-4Q - we
year still see penetration ~1.5x vs. last year
Comparison of 1Q19 and 1Q20 digital penetration
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Source: Company data, Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research

Exhibit 15: We are Seeing Increased Prioritization of Ecommerce Investment

Ticker Company commentary on prioritization of e-commerce investment
BBBY Prioritizing $250 mn capex on digital & BOPIS
BBY Remains committed to spend in areas such as technology, automation and health strategy.
DKS Will continue to invest in technology, curbside pickup and footwear app. Considers mobile to be a big piece going forward.

58b772b07bbf4ac1979365bc65c5e3c4
LOW Has reprioritized capital projects to focus on the near-term need to improve our omnichannel capabilities
TSCO Deferring spending in certain areas while accelerating spending in digital and other more consumer-facing areas.

ULTA $80 million for supply chain and IT. Accelerating investments on shipping capacity including pull forward of Jacksonville fast fulfillment
center into 2020 and expansion of our ship-from-store capabilities.
WMT Accelerated investments in omni fulfillment solutions. Commented on a multiyear plan for ahead
WSM Continued investment to strengthen our digital-first model and enhancing the online channels.

Source: Company data, Goldman Sachs Global Investment Research

When stores closed during COVID-19

Here, we take a deeper look at retailers’ eCommerce growth for those stores that had
their stores closed and those stores that were deemed “essential” and remained open.

Among those hardline retailers who had closed doors during the crisis, those with
robust eCommerce offerings saw significant growth (Exhibit 16). For most of the
retailers that were closed, we saw a level of increased nimbleness with many offering
curbside pick up to help deal with the demand coming from the digital channel, with the
exception of Ulta who had no pick up option (BOPIS or curbside) and where customers
were only able to get their product via home delivery. Digital channels played a very
important role for these closed doors as they were able to make up a notable

20 July 2020 15
 Goldman Sachs Global Internet

percentage of sales (Exhibit 17).

Even with doors that were deemed essential and remained open, we saw a significant
acceleration in eCommerce growth in Q1, with most retailers seeing more eCommerce
as a percentage of sales than in Q4, which is traditionally the highest eCommerce sales
quarter because of the holiday season (Exhibit 18). Anecdotally, several retailers
indicated that eCommerce demand on some days was equal to the volume that they
would see on Cyber Monday, one of the biggest digital sales days in the year.

Exhibit 16: E-Commerce Growth for those retailers which closed doors during COVID

1Q19 E-comm growth 1Q20 E-comm growth

180%

160%

140%

120%
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100%

80%

60%

40%

20%

0%
ULTA DKS BBY WSM

Source: Company data, Goldman Sachs Global Investment Research

Exhibit 17: Analyzing How Much of Brick and Mortar Sales were Exhibit 18: Ecommerce as a Percentage of Sales for those Doors
Made up By Digital that Remained Open

58b772b07bbf4ac1979365bc65c5e3c4
B&M Sales Loss E-comm Sales Gain % sales retained 1Q19 4Q19 1Q20 E-comm growth in 1Q20 (RHS)

3000.00 120% 18.0% 400.0%

97% 16.0% 350.0%

2000.00 100%
14.0%
300.0%
1000.00 78% 80% 12.0%
250.0%
10.0%
0.00 60% 200.0%
8.0%
150.0%
-1000.00 40% 6.0%
100.0%
32% 4.0%
-2000.00 20%
26% 50.0%
2.0%
-3000.00 0% 0.0% 0.0%
ULTA DKS BBY WSM COST WMT LOW HD BJ TGT

Source: Company data, Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research

Prior to the COVID-19 crisis, brick and mortar retailers were increasing their investment
in digital capabilities. Because of the unprecedented level of demand and what retailers
think will be sticky behavior, several retail companies have mentioned a pull forward or
re-prioritization of digital investments as a result of the demand seen for digital during
the COVID-19 crisis.

20 July 2020 16
 Goldman Sachs Global Internet

Who is best and worst positioned in this environment?

We believe mall based retailers (GPS) and department stores (M) will be particularly
challenged against this backdrop, as well as wholesale-led brands which are heavily
dependent on department stores today (PVH). On the other hand, we are positive on
scaled omnichannel retailers (WMT, TGT) and those that have retail locations that allow
for contactless transactions, like curbside pick up (BBY, DKS). We also think strong
brands with well invested and scaled eCommerce ecosystems, which benefit from the
shift in sales towards their own websites and apps, are well positioned (NKE).

Store closures update

Amid temporary store closures as part of shelter-in-place measures,

announcement/completion of permanent store closures YTD (~7,430) (Exhibit 19) has
already reached more than half of 2019 figures (~12,370) due to slowing/declining sales
growth, leveraged balance sheets, and rising occupancy costs. According to Coresight
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Research, around 20,000-25,000 stores could permanently close in 2020 on COVID-19

headwinds in the US, implying an accelerated store closure schedule in the second half
of the year. Further, it expects to see an increase in bankruptcy filings owing to
reorganizations or difficulties with financing activities amid the current pandemic.

While retailers are experiencing surge in digital volumes, pure-play eCommerce

companies like Amazon continue to benefit from greater access to consumer data and
purchase history that not only enables compelling consumer experiences but also
delivers efficiency and competitive benefits through advertising, product
recommendations, and dynamic pricing. We believe eCommerce growth will accelerate
over the course of the second half amid social distancing measures, record number of
retail store closures, investments in fulfillment by Amazon, dynamically evolving
marketplace companies like Etsy and increasing tech investments by traditional retailers.

58b772b07bbf4ac1979365bc65c5e3c4

20 July 2020 17
 Goldman Sachs Global Internet

Exhibit 19: Select announced US store closures - 2020

Not an exhaustive list; excl. Zara’s announcement of up to 1,200 closures worldwide

0 100 200 300 400 500 600 700 800 900 1,000
Pier 1 Imports
Stage Stores
Starbucks
GameStop
GNC Holdings
Signet Jewellers
Schurman Retail Group
L Brands
Victoria’s Secret
Chico’s
JCPenney
Tuesday Morning
Gap
Art Van Furniture
The Children’s Place
Walgreens
Destination Maternity
Payprus
H&M
Macy’s
Modell’s
A C Moore
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Wilsons Leather
Express
24 Hour Fitness
Guess
Office Depot
Olympia Sports
Gordmans
Bed Bath & Beyond
Sears
Earth Fare
Bath & Body Works
Bose
Kmart
Neiman Marcus
Christopher & Banks
Lucky’s Market
New York & Co.
CVS
Hallmark
Nordstrom
Lord & Taylor
Bloomingdale’s

58b772b07bbf4ac1979365bc65c5e3c4
Source: Press reports, company data, compiled by Goldman Sachs Global Investment Research

With apparel & accessories continuing to record large share of store closures (Exhibit
21), we believe Amazon will be a primary beneficiary considering this segment
already sees >20% online penetration. As Stitch Fix focuses on mass-market consumer
outside of NY and California, store closures should provide further incentive for
consumers to shift spending online and leverage a service like Stitch Fix to access
personalized fashion at scale.

20 July 2020 18
 Goldman Sachs Global Internet

Exhibit 20: Announced/completed store closures in US over the Exhibit 21: Announced/completed store closures in US in Apparel
years & Accessories

14,000 14,000 60%

12,000 12,000 50%

10,000 10,000
40%
8,000 8,000
30%
6,000 6,000

4,000 20%
4,000

2,000 10%
2,000

0
0 0%
2012 2013 2014 2015 2016 2017 2018 2019 2020
2017 2018 2019 2020 YTD
YTD

2012 2013 2014 2015 2016 2017 2018 2019 2020 YTD Total Share of Total

Source: Press reports, Company data, compiled by Goldman Sachs Source: Press reports, company data
For the exclusive use of [Link]@[Link]

58b772b07bbf4ac1979365bc65c5e3c4

20 July 2020 19
 Goldman Sachs Global Internet

Regional snapshots

China
COVID-19 has transported us to a “digital everything” world, one where the
purchase of goods and services online is a necessity, raising the long-term
penetration and TAM of the broader online sector, including eCommerce, local
services, gaming and cloud computing. The pick-up in discretionary spending across all
categories is driving the further recovery in eCommerce as China returns to work. On
Alibaba’s platform, GMV growth rates have been well north of 25% QTD for FMCG and
electronics, while the warmer weather has driven apparel demand. Simultaneously, feed
monetization has picked up. The market leader’s growth is from less-developed areas,
where its penetration is only 45%. In contrast, PDD is growing in urban China, targeting
subsidies to customers with specific shopping behavior, such as the purchase of
multiple categories of products or higher usage of the social network. Within our China
For the exclusive use of [Link]@[Link]

internet coverage, we expect ecommerce to continue to be one of the highest growth

verticals into 2H20, and we expect steady/sustainable growth in eCommerce into the
next 5 years. We expect the overall China internet sector to have accelerated growth
trends in revenue/profit into 2H20, with sector-wide margin improvement in the next
few years.

Exhibit 22: PDD’s time spent market share has been growing Exhibit 23: PDD has the highest time spent yoy growth rate
Time spent (TS) market share by E-commerce platform Time spent yoy growth rate of E-commerce platforms
70% 66% 52% 120% 111%
62% 61%
59% 59% 51%
60% 57%
51% 100%
50%
83%
50% 49%
80% 72%
47% 48%
40% 47% 35% 61%
33% 32%
30% 47% 60% 53%
28%
30% 26%
47% 46% 38% 39%

58b772b07bbf4ac1979365bc65c5e3c4
46% 40% 31%
20% 45%
45% 24%
34% 36%26%
8% 10% 9% 8% 9% 8% 44%
10% 20%
9% 7%
43%
14% 12%
0% 42% 0% 7% 10%
1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20

BABA (TB+TM) JD PDD TS HHI (RHS) BABA (TB+TM) JD PDD

TB+TM stands for Taobao+Tmall; HHI stands for Herfindahl–Hirschman Index Source: Questmobile, Goldman Sachs Global Investment Research
Source: Questmobile, Goldman Sachs Global Investment Research

20 July 2020 20
 Goldman Sachs Global Internet

Exhibit 24: eCommerce remains one of the highest growth verticals Exhibit 25: ... and we expect steady/sustainable growth in
within the China internet space into 2H20... eCommerce into the next 5 years
Quarterly China Internet Revenue Growth, yoy Annual China Internet Revenue Growth, yoy

GTV stands for Gross Transaction Volume; LS stands for live streaming; GE stands for general Source: Company data, Goldman Sachs Global Investment Research
entertainment

Source: Company data, Goldman Sachs Global Investment Research

For the exclusive use of [Link]@[Link]

Exhibit 26: We expect the overall China internet sector to have Exhibit 27: ... with sector-wide margin improvement in the next few
accelerated growth trends in revenue/profit into 2H20... years
China Internet Total Revenue, Operating Profit and Net Income growth China Internet Total Revenue, Operating Profit and Net Income growth
(yoy) (yoy)

58b772b07bbf4ac1979365bc65c5e3c4
Source: Company data, Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research

Meanwhile, live streaming has emerged as another channel for retail, becoming
incrementally mainstream. However, as the business is built on top of the relatively
mature and diversified ecommerce industry, it is likely to be yet another
marketing/promotional channel for online retail — in parallel to search-driven,
feed-driven, and social-driven ecommerce. As the GMV sales curve tends to be
concentrated on the operating hours for live streaming (zigzag), i.e., sales only take
place during live streaming sessions, it often serves as a complementary channel to the
smoother, more consistent sales curve with search ecommerce. Since this is a fast
developing trend, we believe live streaming could contribute 20% of China’s total online
retail sales in the long run.

The latest June data from National Bureau of Statistics confirms the continuation of the
sharp recovery in online retail: online retail sales of goods jumped +25.2% yoy from
22.0% in May, 16.2% in April and 10.7% in March. Overall retail sales recovered to
-1.8% from -2.8%/-7.5%/-15.8% in May/Apr/Mar. respectively, indicating that offline retail
was -9% in June as online gained further share. Specifically, we estimate online apparel
had a strong double-digit yoy growth in June. Parcel volumes grew +37% yoy from

20 July 2020 21
 Goldman Sachs Global Internet

41%, 32% and 23% in the prior 3 months. The resilient recovery in online goods
retail data is consistent with the record-breaking June 18 shopping festival, as
major E-commerce players reported strong data points during the festival: BABA’s
GMV of Rmb698bn, JD’s GMV of Rmb269bn (+34% yoy), and PDD’s transaction orders
up 119% yoy.

The rise in consumption was primarily driven by strengthened demand from consumers,
boosted by supportive policies from the government and promotional activities from
merchants, in our view. We also believe that the online spending recovery patterns are
underpinned by a rise in total user time spent on e-commerce shopping apps. With (a)
abundant express delivery capacity as workers in China return to work, and (b) recovery
trends continuing in categories that were heavily impacted during COVID-19 (Apparel,
Jewelry, autos, etc.), we expect the marketplace models to be the principal
beneficiaries.

Exhibit 28: Chinese growth in online retail sales of goods rebounded to +25.2% yoy in June
For the exclusive use of [Link]@[Link]

Parcel volume growth Online goods sales growth Total retail sales growth
50%
41.0%
38.8%
37.0%
40% 35.6%
32.0%
29.9% 31.1% 29.3%
29.0% 29.0% 29.1%
35.6% 27.3% 28.6%
30% 25.8%
25.1% 25.7% 25.2% 25.2% 25.0% 24.3% 25.2%
24.1% 24.4% 23.3% 22.7% 23.0%
32.4% 21.5%
24.2% 20.1% 22.0%
25.9% 25.3% 25.4% 25.7% 19.1%
20% 22.6%
25.1% 23.6%
21.7% 13.5% 16.2%
19.7% 21.2%
19.5% 19.9% 18.4% 17.9%
18.2% 19.5% 16.8%
10% 14.6%
10.7%
0.2%
3.0% 3.0%
0%

-10%

-16.4%
-20%

-30%
Jul-18

Jul-19
Mar-18

Nov-18
Dec-18

Mar-19

Nov-19
Dec-19

Mar-20
Jan-18

Jun-18

Jan-19

Jun-19

Jan-20

Jun-20
May-18

May-19

May-20
Feb-18

Apr-18

Oct-18

Feb-19

Oct-19

Feb-20
Aug-18
Sep-18

Aug-19
Sep-19
Apr-19

Apr-20

58b772b07bbf4ac1979365bc65c5e3c4
Source: Goldman Sachs Global Investment Research, NBS China

Accelerating online penetration for grocery retail

China’s online groceries market has been a bright spot in eCommerce with accelerated
growth driven by customers’ increasing online shopping behavior shifts during the
COVID-19 pandemic, and we also see favorable trends at key players:

n Meituan Instashopping‘s order volume more than doubled sequentially during the
pandemic (we expect it represented 20% of food delivery orders, from c. 5% in
2019) and reached profitable unit economics for the first time in the month of Feb
2020;
n JD Daojia‘s GMV growth accelerated to 172% yoy in 1Q20, from 69% in 4Q19. We
expect growth to normalize back down to 104% yoy over 2Q-4Q20E, but still at an
accelerated pace vs. pre-COVID-19 on increased user adoption and expanded
on-demand offerings.

Being an under-penetrated category that still has one of the lowest online penetration
rates of 6% in 2019, vs. 34%/45% for apparel/home appliances, grocery sales in China

20 July 2020 22
 Goldman Sachs Global Internet

is still dominated by the rather fragmented, traditional “wet markets”, consisting of small
merchants, and is markedly different from US/Japan grocery markets where structured
retailers (e.g. supermarkets) have captured the majority of the market. This, in our view,
is creating opportunities for eCommerce giants (Alibaba, JD and Meituan) to break into
the market with new business models which have emerged over the past 2-3 years, and
further expanding their footprints in more areas in China with the change in user
behavior during the COVID-19 pandemic.

n Warehouse-to-home model with deliveries made next-day/same-day, for which

users make purchases from the online supermarket. Largest players: JD
Supermarket (Rmb115bn revenue in 2019, 20% larger than the scale of the biggest
offline-focused supermarket group) and Tmall Supermarket.
n On-demand store-to-home or micro-warehouse-to-home models with
deliveries made within 30 min to 1 hour, for which users can place orders from
nearby supermarkets, convenience stores, front warehouses within the
neighborhoods via location-based platforms. We note Alibaba + Freshippo, JD’s
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affiliate Dada Nexus and Meituan Instashopping + Meituan Grocery have introduced
various models to both expand their retail share (via. first-party/third-party models)
with their large online user base, and empower supermarkets/local merchants to
drive further digitalization of grocery retail.

Exhibit 29: China’s fresh grocery market is still dominated by Exhibit 30: We expect online penetration of fresh groceries sales to
fragmented wet markets and small merchants expand further post COVID-19, supported by cultivation of user
% Fresh food sold via. un-structured retail (small merchants, wet behavior as well as multiple business models launched by
markets etc.) ecommerce giants
Our forecasts of online penetration of fresh groceries/O2O
(online-to-offline) on-demand penetration of supermarket sales

Fresh food sold via. traditional channels Our forecasts of online/O2O penetration
(mainly small merchants)
Fresh groceries online penetration Supermarket O2O penetration
China US Japan
30%

58b772b07bbf4ac1979365bc65c5e3c4
70%
62.3% 61.4% 60.4% 59.3% 57.4% 56.3% 25%
60%
20.0%
50% 20% 17.0%

40% 13.8%
15%
9.8% 10.6%
30%
10%
6.3% 6.7%
20% 14.3% 14.3% 13.9% 13.9% 13.9% 13.8% 5.0%
3.7% 4.1%
5% 2.8% 2.5%
10% 4.4% 4.3% 4.3% 4.3% 4.1% 4.1% 0.8% 1.4%
0.2% 0.4%
0% 0%
2014 2015 2016 2017 2018 2019 2016 2017 2018 2019 2020E 2021E 2022E 2023E

Source: Euromonitor Source: Euromonitor, iResearch (for supermarket O2O penetration forecast), Goldman Sachs
Global Investment Research

20 July 2020 23
 Goldman Sachs Global Internet

Exhibit 31: A summary of the online grocery business models and scale of the three largest camps: Alibaba, JD and Meituan
Operating data as of 2019
Alibaba [Link] Meituan
Online grocery business of
major players

Tmall Supermarket JD Supermarket

Revenue: Revenue:
Online supermarket
Rmb21bn Rmb115bn for JD Does not have its
(Inter/intra-city same day, (Tmall Global and Supermarket Group own online supermarket
next day or 2-3 day delivery) Supermarket), some (including FMCG, fresh
also included in Tmall

7Fresh Ella Supermarket

O2O stores (1P)
Hema Cautious measures, Only two stores in
GMV: Rmb40bn mainly as a testbed for Beijing left
omni-channel systems

Distributed micro
warehouses
Hema mini-warehouse Meituan Grocery
DMW model GMV: <Rmb1bn (GSe)
(DMW, 1P)
Grocery retail
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(intra-city within
3km, 1 hour
delivery)
Upgraded O2O Taoxianda Orders: 1.3mn daily
GMV: Rmb6-7bn average (GSe)
supermarket (3P)
supermarket O2O GMV

JD’s affiliate
Meituan
[Link] JD Daojia
Instashopping
O2O marketplace (3P) GMV: Rmb12bn, amongst
GMV: c. Rmb4bn GMV: Rmb29bn (GSe),
which c. Rmb10bn was
supermarket O2O GMV supermarket O2O GMV amongst which c. Rmb7bn
was supermarket O2O GMV

On-demand Express Warehousing, On-demand On-demand

sorting & delivery & last mile

Fengniao Dada Now

Orders: Dianwoda JD Logistics Orders: 2.1mn
Danniao Meituan Delivery
7.3mn daily Orders: Orders: 9mn daily average in
200+ cities, Orders: 16mn food delivery 1P,
average 0.3mn daily daily average total (GSe),
5mn+ daily 1.3mn grocery retail (1P+3P)
(delivered average in total (GSe) 1.3mn last mile,
Logistics solutions capacity
by its own, (GSe)

58b772b07bbf4ac1979365bc65c5e3c4
0.3mn JD Daojia
GSe)

+ Other third-party couriers / + Other third-party couriers / + Other third-party delivery agencies
delivery agencies delivery agencies

ZTO, Yunda, YTO, BEST, STO,

ZTO, EMS (China Post) Quhuo Technology
Quhuo Technology

Source: Company data, CCFA, Goldman Sachs Global Investment Research

20 July 2020 24
 Goldman Sachs Global Internet

Japan
eCommerce platforms in Japan such as Rakuten, Yahoo Japan and Amazon Japan
benefited from 2 events in 2019, resulting in a relatively high GMV growth in the second
half. Firstly, the Japanese government has been promoting the use of cashless
payments through points-based rebate system in retail stores and these eCommerce
platforms, which meant that consumers had incentives to utilize these platforms more.
Moreover, the rush demand prior to the consumption tax-hike in October 2019 also
benefited these platforms as overall consumption was positively impacted. As a result,
we believe that the overall eCommerce space, which is highly occupied by Rakuten,
Yahoo Japan and Amazon Japan continued to grow extensively (estimated at 8.3%) in
2019.

However, there is an increasing trend in apparel companies (Fast Retailing, Adastria etc.)
to strengthen their own eCommerce websites rather than relying on platforms to avoid
paying take-rate fees and to have control over their branding, UI and UX.

In 2020, we estimate that self-isolation and social distancing measures due to COVID-19
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positively impacts the eCommerce space. In fact, both Adastria and United Arrows,
which are apparel retailers reported online sales growth of around 50% yoy in May. We
believe that COVID-19 particularly encourages those over 40 years old to become more
digitalized, therefore expanding the user base and increasing eCommerce penetration.
However, we see a limit to the extent to which apparel e-commerce can expand, as
Japan has a 24x larger size of store network than that of the US (see Exhibit 32), which
implies a favorable environment for store-oriented retail. Therefore, we believe that food
category, which is the second biggest eCommerce category after apparel will be the key
to drive growth moving forward.

Exhibit 32: Japan has 24x larger size of store network than that of the
US (2016)
Stores/space per sqm comparison

58b772b07bbf4ac1979365bc65c5e3c4

Source: Euromonitor, Ministry of Economy, Trade and Industry, Goldman Sachs Global Investment
Research

20 July 2020 25
 Goldman Sachs Global Internet

Europe
We expect 2020 online growth to accelerate in Europe ex-Russia (+18% CAGR
2019-2021E) driven by COVID-19 related store closures and continued investment from
both pure-play online and omni-channel retailers to improve their proposition (mobile
apps, fulfillment options, choice/assortment). Specifically, we expect W. Europe to see
an eCommerce CAGR +17% 2019-2021E, with +25% yoy growth in 2020E (vs +12%
2017-19 CAGR). We expect E. Europe (ex-Russia) to see modestly stronger growth
relative to W. Europe, reaching a ~20% 2019-2021E CAGR, albeit below the 2018 peak
(+27% y/y on USD-basis).

Exhibit 33: Overall online retail sales penetration has increased Exhibit 34: We expect a step up in online penetration in 2020,
+300bp since 2015 to c.10% following a COVID-19 related migration to the online channel
Retail online sales penetration in Europe Europe eCommerce y/y growth (%)

$800,000 35.0%
2015 2019
$700,000 30.0%
20%
18% $600,000
25.0%
16% $500,000
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14% 20.0%
$400,000
12% 15.0%
10% $300,000
10.0%
8% $200,000
6% 5.0%
$100,000
4%
$0 0.0%
2%
2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E
0%
United Germany Western France Eastern Italy Spain Western Europe Eastern Europe incl. Russia
Kingdom Europe Europe W. Europe y/y (%) E. Europe y/y (%)

Source: Euromonitor, Goldman Sachs Global Investment Research Source: Euromonitor, Goldman Sachs Global Investment Research

UK non-food online penetration expected to rise to 38% this year

Within Europe, the UK‘s already high non-food online penetration peaked at 58% in April
following the COVID-19 related store closures. From here, we expect new online
consumers/higher purchase frequency post lockdown, to increase 2020 UK non-food

58b772b07bbf4ac1979365bc65c5e3c4
online sales +17% yoy taking UK online penetration to 38% (from 30% in 2019). Taking a
similar approach to Western Europe, we assume c.25% 2020 online penetration (from
19% in 2019).

20 July 2020 26
 Goldman Sachs Global Internet

Exhibit 35: Over the last 4 years, non-food retail online penetration Exhibit 36: COVID-19 related store closures has driven UK non-food
has increased c.600bp in both Western and Eastern Europe to 19% online retail sales +49% in May...
and 14% UK non-food retail sales growth, split stores vs online
Non-food retail online penetration

2015 2019 UK
35%
Non-food retail sales growth Online non-food sales growth
30% Store only non-food sales growth
60%
25%
40%
20%
20%

15% 0%
-20%
10%
-40%
5% -60%
-80%
0%

Jul-19
Jun-19

Nov-19
Apr-19

May-19

Apr-20

May-20
Jan-19

Feb-19

Mar-19

Aug-19

Sep-19

Oct-19

Jan-20

Feb-20

Mar-20
Dec-19
United Germany Western France Eastern Italy Spain
Kingdom Europe Europe

Source: Euromonitor, Goldman Sachs Global Investment Research Source: ONS, Goldman Sachs Global Investment Research
For the exclusive use of [Link]@[Link]

Exhibit 37: ... led by electricals, home/garden and health & beauty Exhibit 38: We expect new online customers/higher purchase
categories, reflecting the consumers’ ‘stay at home’ status frequency to increase UK non-food online sales +17% yoy in 2020,
UK non-food online sales growth, by category taking online penetration to c.38% (from 30% in 2019)
UK non-food online penetration and yoy growth
70% 60%
Apr-20 May-20 50%
60%
120% 40%
100% 50% 30%
80%
20%
60% 40%
40% 10%
20% 30%
0%
0% -10%
20%
-20%
-20%
-40% 10%
Gifts

Fashion Accessories
Home & Garden

Womenswear

Footwear
Electricals

Health & Beauty

Lingerie

Clothing

Menswear

-30%
0% -40%
Jul-12
Jul-10

Jul-11

Jul-13

Jul-14

Jul-15

Jul-16

Jul-17

Jul-18

Jul-19
Jan-12

Jan-13

Jan-21 E

Jan-22 E
Jul-22 E
Jan-10

Jan-11

Jan-14

Jan-15

Jan-16

Jan-17

Jan-18

Jan-19

Jan-20
Jul-20 E

Jul-21 E

58b772b07bbf4ac1979365bc65c5e3c4
UK non-food online penetration UK non-food online growth yoy (RHS)

Source: IMRG, Goldman Sachs Global Investment Research Source: ONS, Goldman Sachs Global Investment Research

Key themes in European retail

Increasing reach - Platform strategy vs. focus on international expansion. ASOS
and boohoo are focused on increasing international presence (US/Europe) whereas
Zalando is expanding its offer with platform service (marketplace for brands, fulfillment
services and media solutions). Notably boohoo has also recently acquired additional
brands (Karen Millen Fashions Ltd.), to add to their brand portfolio.

Elevated promotional activities weigh on gross margin reduction. In the last two
years a combination of unpredictable weather patterns and price investment from
multiple players has led to gross margin reduction, especially for Apparel and Footwear
retailers. Promotional activities in 2019 also remained elevated. Post COVID-19 we
expect industry-wide excess inventory to result in still elevated markdown activity.

Higher fulfillment cost and capex. Pure-play retailers like Zalando, ASOS and boohoo
continue to reduce delivery times and extend order cut-off which has led to higher

20 July 2020 27
 Goldman Sachs Global Internet

fulfillment costs (as a percentage of sales). To support higher growth, these companies
have also accelerated expenditures on warehousing and IT but Zalando and ASOS do
expect some operating leverage on warehousing/admin/other cost in the near to
medium term.

Integration of offline and online channels. Store-based retailers are also investing
heavily to differentiate their proposition, as well as integrate their store and online
operations to provide a seamless shopping experience. Inditex has been investing
substantially ahead of its peers and is becoming a leader in omni-channel retail.

Online grocery surging

After years of relatively slow growth vs. non-food online retail (online grocery has taken
c.20bps per year market share of total grocery across Western Europe for the past 10
years at a c.10-15% annual growth rate), enforced lockdowns and recommended social
distancing have caused a step change in online grocery growth in Western Europe. We
forecast growth of c.50% in 1H20, vs 13% in 2019. With restaurants closed for much of
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2Q20, underlying growth across the entire grocery market has also been strong, but we
estimate this means penetration would have gone from 2.2% (2019) to 3.0% in 1H20
and 3.4% by FY20.

Exhibit 39: Food e-commerce has grown at c13% per year in Exhibit 40: Online grocery penetration has remained relatively low
Western Europe since 2015 across Europe
Food & Drink e-commerce sales (USDbn) Food & Drink e-commerce as % Food Retail

2015 2019 2015 2019

35 5.0% 4.6%
32.0
Food * Drink E-commerce penetration

4.5%
Food & Drink E-commerce ($bn)

30
4.0%
3.5%
25 3.5% 3.2%
19.9 3.0%
20
2.4%
2.5% 2.2%
15
2.0% 1.6%
10.6 1.5%
9.0 1.5% 1.3%
10

58b772b07bbf4ac1979365bc65c5e3c4
7.2 6.3
1.0% 0.8%
0.7%
5 2.1 0.4%
1.4 1.9 0.5% 0.3%
0.5 1.1 1.0
0 0.0%
Western UK France Spain Italy Germany Western UK France Spain Italy Germany
Europe Europe

Source: Euromonitor Source: Euromonitor

Online grocery growth continues to accelerate; we think share is sticky

However, many grocers have noted that demand continues to outstrip delivery capacity
(Exhibit 41). As such, the online grocery growth rate has continued to accelerate, with
the average growth rate in the last reported 4 weeks across major Western European
markets +c.100% (Exhibit 43). With online customers generally sticky, and the desire for
less store based interaction likely to endure for some customers, we believe this growth
will remain high in 2H20 at +85% across Western Europe. Although we forecast this
penetration acceleration will slow in 2021, we believe the share gains made by online
grocery in 2020 will prove sticky and grow further beyond 2021.

20 July 2020 28
 Goldman Sachs Global Internet

Exhibit 41: Since the start of the crisis, European grocers have noted high levels of demand and online being less profitable than in stores
Summary of comments from recent reporting
Comments Demand Profitability vs store
Online grocery grown to 16% (from 9%) of total UK sales. Can keep Online less profitable than stores
Tesco available slots at 1.3-1.4 million to satisfy demand.
Online grocery grown to almost 15% from just under 8% of sales and Online is least profitable channel
Sainsburys that would be additional demand if could open more slots
Online home delivery slots doubled through click and collect and at No specific comment
Morrisons home delivery
Closed website to new customers in late March. Remains closed in July N/a
Ocado 2020
Ahold Delhaize No specific comment Online sales have lower margin quality than those in store
Saw a sudden increase in e-commerce demand Saw a positive impact on the variable costs margin due to volume
Carrefour increases but online sales still less profitable than those in store
New level of demand across all channels including click and collect and No specific comment
Casino home delivery

Source: Company data

Exhibit 42: Online grocery growth has accelerated materially Exhibit 43: The average online grocery growth rate across major
across major European markets Western European markets is +c.100% for the last 4 weeks
CPG E-commerce growth (YoY) last reported reported
Total CPG e-commerce growth YoY (%)
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Feb-20 Mar-20 Apr-20 May-20 200%

180% 174%
200%
178%
180% 160%
160% 140%
140% 120% 115%
119%
120%
100% 91%
100%
83% 80%
80% 68% 60%
59% 56%
60%
60%
40% 40%
24%
20% 9% 11% 20%

0% 0%
UK (Kantar) France Spain Italy UK (Kantar) France Spain Italy Germany

Source: IRI, Kantar Source: IRI, Kantar

Penetration even higher for some grocers; Tesco 17.5% online in last 4 week period

58b772b07bbf4ac1979365bc65c5e3c4
We would also note that the above number for Western Europe is an aggregate of some
very different penetration rates across different geographies. The figure also captures
penetration of the entire market, while penetration rates of the formal grocery retail
channel are generally noticeably higher. As we note below (Exhibit 45) in major
European markets, Kantar and IRI data focused on the formal channels, suggest online
penetration rates almost double that of the broader Euromonitor estimate. For individual
grocers, penetration rates are even higher, with the latest data from Kantar in the UK
suggesting that market leader Tesco made 17.5% of its sales online in the 4 weeks
ending 14th June.

While UK grocers were able to respond quickly to increased demand through store-pick
models, they recognise that online sales remain less profitable than those in store
(Exhibit 41). With recent reporting, they have flagged negative margin impacts despite
benefits of higher basket sizes and consistent demand for slots throughout the week.
On the other hand, Ocado, operating through its centralised, automated facilities,
demonstrated operating leverage through their UK grocery business, with operating
margins up c.150bps in 1H20 (though capacity constraints meant growth of c.40% in

20 July 2020 29
 Goldman Sachs Global Internet

2Q20 was below some UK peers).

Exhibit 44: Online grocery penetration has stepped up materially Exhibit 45: Tesco’s online sales have accelerated since the start of
across key European markets since the start of the crisis the crisis, with penetration reaching c18% sales
E-commerce as % Total CPG sales last reported As labelled

Feb-20 Mar-20 Apr-20 May-20 Online as % total sales (LHS) Online YoY % sales growth (RHS)

14.0% 20% 17.5% 80%

12.0% 18% 74.0%
12.0% 70%
16%
10.3% 14.3% 60%
10.0% 14% 55.0%
8.4% 11.8% 50%
12% 11% 11% 10.9%
10.4% 10.3%
8.0% 6.9% 10% 40%
6.0% 8% 30%
6%
4.0% 3.5% 20%
4% 7.8% 16.8%
2.0% 2.0% 10%
2.0% 2% 1.3% 3.1%
1.1% 0.1% 1.5%
0% 0%
0.0% 2018 2019 4 w/e 26 4 w/e 23 4 w/e 22 4 w/e 19 4 w/e 17 4 w/e 14
UK (Kantar) France Spain Italy Jan 20 Feb 20 Mar 20 Apr 20 May 20 Jun 20

Source: IRI Source: Kantar

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Online luxury gaining momentum

The luxury peers have made significant digital progress over the past five years — the
launch of omnichannel services, new marketing initiatives — but the penetration of
online sales remains low relative to its opportunity. We estimate that only 7% of luxury
sales (ex-beauty) are online, despite the fact more than one-third of luxury consumers
are millennials and digital informs 70% of consumers’ purchasing decisions, according
to Farfetch. We expect the current environment (store closures, social distancing
measures) will encourage brands to re-think their digital strategies. For example, online
sales for the Gucci brand increased to 9.5% of total revenues in 1Q20 (versus 6% in
2019) and we expect this trend to continue. For luxury brands, control of distribution and
the customer experience is a key priority. As such, we believe the preferred channel will
be [Link], but also E-Concessions (our term for retail structured distribution

58b772b07bbf4ac1979365bc65c5e3c4
agreements with third-party platforms). We see this is as positive for Buy-rated Farfetch,
the leading global platform and largest online marketplace for luxury fashion.

Exhibit 46: Structural growth story remains strong - online just Exhibit 47: We see E-Concessions taking the most share amongst
c.12% of luxury sales; expected to rise to 30% in 2025 (Bain) third-party platforms - Farfetch is best positioned in our view
Market Size, € bn % Online and by Channel*

350

300

250

200

Offline
150
Online
100

50

0
2020E

2021E

2022E

2023E

2024E

2025E
2014

2015

2016

2017

2018

2019

Source: Bain, Goldman Sachs Global Investment Research Source: Company data, Goldman Sachs Global Investment Research, *Excludes Beauty

20 July 2020 30
 Goldman Sachs Global Internet

Exhibit 48: Online luxury is gaining momentum, with Farfetch Exhibit 49: Farfetch app downloads are more than triple YNAP’s
taking share YTD
Global iPhone app downloads No. of global iPhone app downloads, 1 Jan 2020 – 31 May 2020

700,000 3,000,000
2,500,000
600,000
2,000,000
500,000
1,500,000
400,000 1,000,000

300,000 500,000
0
200,000

Saks Fifth Avenue

YNAP total

Nordstrom

Gucci
Mr Porter

Hugo Boss
Net A Porter

Luisa Via Roma

Moncler
Yoox

24 Sevres

Selfridges
Harrods

Burberry
Farfetch

YNAP off season

YNAP in season
My Theresa

The Outnet

Louis Vuitton
Matches Fashion
100,000

E-commerce platforms Department Brands

YNAP Total Farfetch stores

Source: Sensor Tower, Goldman Sachs Global Investment Research Source: Sensor Tower, Goldman Sachs Global Investment Research
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58b772b07bbf4ac1979365bc65c5e3c4

20 July 2020 31
 Goldman Sachs Global Internet

Latin America
E-commerce in Latin America benefited from the offline to online shift which was
accelerated by the Covid-19 crisis. In USD terms, we forecast ecommerce sales in 2020
to grow by +14%, reaching a 7.7% share of the overall retail market and implying an
acceleration in the online shift to +215bp, up from on average 66bp in 2017-19. For
2021-24, we forecast an average annual online shift of 100bp for the region. For LatAm
Ex-Brazil we expect 2020 ecommerce sales to grow by +26% in USD and forecast an
ecommerce penetration level of 6.4%, up from 4.5% in 2019.

In local currency terms, growth rates are much higher given the appreciation of the
USD. We expect Argentina, Mexico and Chile to grow at +86%,+67% and +27%
respectively for the year 2020 in their respective local currencies. For Mexico, the
second largest market in LatAm after Brazil, we expect a +275bp gain in ecommerce
penetration in 2020, reaching 7.7%. By 2024, we project penetration to reach 11.7%,
with an average annual shift of +100bp from 2021-24 (vs. on average c.80bp in 2017-19).
For Chile, we forecast penetration to advance to 7.4% in 2020E (+125bp yoy), followed
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by an average annual penetration gain of c.80bp, roughly in line with the pace in
2017-19. We also expect Chile to be the third largest market for ecommerce in LatAm
from 2021, surpassing Argentina.

Brazil

Exhibit 50: Brazil eCommerce growth in BRL

in R$

300,000 45.0%

40.0%
250,000
35.0%

200,000 30.0%
BRL millions

25.0%
150,000
20.0%

58b772b07bbf4ac1979365bc65c5e3c4
100,000 15.0%

10.0%
50,000
5.0%

- 0.0%
2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E

Brazil yoy growth (%)

Source: Ebit, IBGE, Euromonitor, Goldman Sachs Global Investment Research

Online penetration leaps on the back of lockdown measures

2020 will mark a turning point in Brazil ecommerce. Even ahead of the significant
moves brought about by the Covid-19 pandemic, we expected a breakout in the pace at
which share was shifting online. We saw this being driven by increased investments
from Brazil’s ecommerce leaders and venture capital that were contributing to the
build-out of the ecommerce ecosystem, including new fulfillment and payment
solutions. Widespread lockdown measures were implemented roughly from mid-March,
driving a sharp acceleration in ecommerce growth in 2Q20.

We estimate that market GMV growth accelerated to +59% yoy in 2Q20E, up from

20 July 2020 32
 Goldman Sachs Global Internet

+25% in 1Q20 and +18% in 2019.

We believe a large portion of the online shift will stick, in line with GS Research
views in the other regions. We project full-year 2020E ecommerce growth at +38% yoy,
driving another +275bp of the total retail market online and reaching penetration of
9.7%. This compares to an average annual online shift of +74bp in the prior three years.
Much like in other regions, the temporary closure of non-essential retail formats,
combined with shifts in demand patterns, propelled the online shift for categories that
were previously largely offline. According to data compiled by Compre & Confie, food
and beverage sales grew 143% yoy from late February through early May, followed by
health care and musical instruments (both +135%), home items (+109%) and toys
(+104% yoy).

And even retailers that were able to maintain their stores open experienced a
substantial acceleration in online sales in this period. For grocery retailers, Carrefour
Brasil and CBD (Grupo Pao de Acucar), food ecommerce GMV grew by +235% and
+82% yoy in 1Q20.
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Leading ecommerce companies to concentrate even further share, as they leverage

the broad assortment of their marketplaces, fulfillment solutions and robust front- and
back-end systems to execute against the challenge of the sudden and sharp rise in site
traffic and order volumes. We project MELI Brazil to grow by +28%, B2W by +40%,
MGLU by +82% and VVAR by +118% in 2020E. Our estimates imply that the share of
Brazil’s four ecommerce leaders will reach a combined total of 80% in 2020E, up from
62% in 2017.

Exhibit 51: We project ecommerce to reach 9.7% of total retail Exhibit 52: MELI remains at the top while MGLU has gained
sales in 2020E, but see risk skewed to the upside significant share in ecommerce, reaching second position in 2022E
Brazil e-commerce penetration and yoy change (bps) Market share evolution of leading e-commerce companies in Brazil

+275bp +300bp
16.0% 32% 32%
31% 32%
30%

58b772b07bbf4ac1979365bc65c5e3c4
14.0% +250bp
27%
23% 26%
12.0% 22% 22%
21% 21% 21%
+170bp +200bp 19%
18%
10.0% 18% 23% 22%
+150bp +150bp 16% 15%
+150bp 14%
8.0% 10% 11%
14.4% 14% 9% 9% 9%
12.9% 13% 8%
6.0% 7%
+73bp +79bp 11.2% +100bp
+71bp 9.7% 9%
4.0% 7%
7.0% 5% 4% 5%
5.5% 6.2% +50bp
2.0%
2021E

2022E
2014

2016

2017

2019

2020E
2015

2018

0.0% +0bp
2017 2018 2019 2020E 2021E 2022E 2023E Mercado Libre B2W Via Varejo Magazine Luiza

Ecommerce as % of total retail Change yoy (bp) * Total ecommerce market based on total GMV reported by Ebit and MercadoLibre

Source: Company data, Ebit, IBGE, Goldman Sachs Global Investment Research Source: Company data, Ebit, IBGE, Goldman Sachs Global Investment Research

However, store-based retailers are fighting back, prioritizing technology investments

and accelerating the launch of new omnichannel initiatives. We believe discretionary
retailers that have strong brands or value propositions and that have previously invested
into omnichannel capabilities will be (1) able to salvage a relatively higher share of offline
sales, and (2) decouple even further from less prepared and underfunded peers. In
addition to MGLU, which already derived 48% of LTM gross sales volume from its
online operation, we also see Centauro ([Link]), Arezzo & Co ([Link]), Lojas

20 July 2020 33
 Goldman Sachs Global Internet

Renner ([Link]) and Lojas Americanas ([Link]) as benchmark operations in their

respective sub-sectors.

Traditional retailers and brands have also accelerated the testing and roll-out of
new digital sales channels. VVAR, MGLU, ARZZ, LREN, CNTO and others are using
WhatsApp to contact clients with promotional offers, including the possibility to finalize
the entire transaction through this channel. Social Commerce is also on the rise, with
MGLU and NTCO also working with Facebook Stores, set up by sales staff, independent
sales reps or third-party individuals. LREN also offers social selling through WhatsApp
and other social media. Moreover, retailers and brands quickly moved to experiment
with live streaming, a marketing tool that had previously only been used around major
digital holidays (e.g. MGLU for Black Friday).

New fulfillment models, with store-based retailers quickly accelerating ship-from-store

operations, in order to leverage their store bases (esp. off-mall), store staff and
inventories to fulfill online orders with shorter delivery periods and lower unit shipping
cost. Curbside pick-up is less frequent in Brazil, but CNTO and LAME, for example, also
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launched this option. Prior to the lockdown, Click & Collect accounted for a significant
share of online orders (e.g. c.28% for MGLU). We believe this was largely a result of
high shipping costs, long delivery periods or limited visibility on the timing of deliveries
across many regions of Brazil, rather than an actual customer preference. We therefore
see the massive shift to doorstep deliveries as a watershed moment for Click & Collect,
which we believe may not return to prior levels.

Informal and SME retail chains may be left behind, in our view, as the current
environment makes the ability to invest behind technology and drive organic traffic to
their websites even more important. Smaller and less well-capitalized chains may
therefore struggle to navigate what will also be a prolonged period of economic
downturn. We believe this will create new opportunities for market leaders to
consolidate further share, either organically or through M&A.

58b772b07bbf4ac1979365bc65c5e3c4
No widespread store closures announced yet, but new store openings delayed or
suspended. Unlike in more developed retail markets where leading retail chains reached
greater density in physical store footprints, Brazil has not seen announcements of
widespread store closures. That said, we expect to see a sharp rise in the closure of
retail doors over the next months as the reopening process continues to be volatile and
overall SSS growth remains relatively weak, although a larger share of this may be
concentrated in privately held companies, especially for those with more restricted scale
and higher cash flow/balance sheet constraints.

We are Buy-rated on MELI, BTOW, and MGLU, on the back of expectations for an
accelerated structural shift to online retail in Brazil. Although we recognize the
demand risk from more cyclical categories, such as electronics and appliances (which
account for 50%-60% of Brazil’s ecommerce GMV pre-Covid), we believe this can be
partially offset by an accelerated online shift of other categories that so far have been
under-penetrated online (e.g. food, HPC, toys, pets, and home & bath), and the ongoing
physical constraints to traditional offline retailers could shift entire new demographics
online. In our view, the benefits of this shift could last beyond the current period of store

20 July 2020 34
 Goldman Sachs Global Internet

closures and social distancing, accelerating a dynamic that was already underway. In
this scenario, we think that assortment, scale and logistics could be critical structural
advantages, and we see MELI and B2W relatively better positioned to capture this
opportunity.
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58b772b07bbf4ac1979365bc65c5e3c4

20 July 2020 35
 Goldman Sachs Global Internet

India
The biggest near term theme in India internet, in our view, is the foray of Reliance
Industries (India’s largest market-cap company with presence across sectors such as
energy, telecom and retail) into ecommerce, and the company’s tie-up with WhatsApp
for online grocery.

We forecast India e-commerce will reach US$99 bn by 2024, growing at a 27%

CAGR over 2019-24E, with grocery and fashion/apparel likely to be the key drivers of
incremental growth in our view. Overall, we expect online penetration of retail to
reach 10.7% by 2024, vs 4.7% in 2019. Growth in India’s ecommerce is likely to come
from (1) better penetration into categories such as grocery/FMCG; (2) Improving
payment ecosystem; (3) Ease of shopping (though WhatsApp etc.).

We expect non-grocery ecommerce penetration to see a sharp increase of 500 bps

over the next two years to reach 16.1% by 2021; for context, the last 500bps of
increase took four years. While online penetration in categories such as consumer
electronics is fairly high at c.40% as of 2019 (per Euromonitor), we see room for
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significant growth in categories like apparel, appliances, health & personal care, where
online penetration in India remains materially lower vs. peers such as China.

Grocery is the biggest growth driver

As far as incremental growth in ecommerce is concerned, we expect grocery to be the
biggest driver with 40% contribution to incremental ecommerce GMV between
2019 and 2024. Grocery in India is a US$380 bn category as of 2019 (Euromonitor, GSe),
making up c.60% of the total retail market. However, online penetration currently stands
at <0.5% (absolute size <$2 bn), one of the least among categories. We expect the
online grocery market in India to grow 20x over the next 5 years, to reach US$29 bn
in value (5.1% penetration) by 2024E. We view the following as the key drivers of this
shift: (1) Higher acceptance of online purchases among Indian consumers, especially

58b772b07bbf4ac1979365bc65c5e3c4
since COVID-19; (2) RIL’s foray into the space leveraging its large offline distribution
capabilities; (3) Ability to order grocery through WhatsApp, a platform with >400 mn
MAUs in India. (4) Higher support from brands (we note HUL recently talked about
higher focus on e-commerce). Overall, we forecast online grocery orders to grow from
<300k per day in 2019, to more than 5mn per day by 2024.

In online grocery, Bigbasket and Grofers accounted for 80%+ of the market in 2019, as
per Grofers (link here). The category has been growing at >50% YoY for the last couple
of years, but with the outbreak of COVID-19 resulting in shift to online, and the recent
entry of RIL, we believe growth will accelerate to 81% CAGR during 2019-24E. We
believe RIL’s partnership with Facebook could result in the company becoming a market
leader in the online grocery space, with >50% share by 2024E. Having said that, we do
see grocery as a large category for two or more players to co-exist over time.

COVID-19 impact
We do not get a lot of high frequency data for India ecommerce to accurately assess
the impact of COVID-19 on the sector thus far. However, as per Nykaa, one of India’s
largest online beauty/lifestyle platforms, the company was at 20%/65%/85% of

20 July 2020 36
 Goldman Sachs Global Internet

pre-COVID sales in April/May/June, with business expected to be back to normal by

July (Economic Times, 19 June). In addition, the company highlighted that average order
value has risen by 30-40% since COVID. Within grocery, BigBasket recently stated that
it has seen doubling of volumes vs. pre-COVID levels (Economic Times, 22 May). For
grocery, we expect online penetration to reset to a higher level due to COVID, further
aided by the entry of Reliance Industries in this space; we expect Reliance ([Link],
Buy rated (on CL), covered by Nikhil Bhandari) to be one of the key beneficiaries of
shift to online in this segment. See Reliance Industries: Expanding the retail
opportunity for more details.

Exhibit 53: We expect online retail to account for 11% of the overall Exhibit 54: We expect grocery and apparel/fashion to be the
retail market in India by 2024 biggest drivers of India ecommerce
Penetration of online retail 2024E vs 2019 India ecommerce market size by category (US$ bn)

23.0%
$12 bn $99 bn

$14 bn

15.2% $15 bn
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$28 bn
10.7%

7.0% 7.0% $30 bn

4.7%

2.0%

2019 market Grocery Apparel & Electronics & Others 2024E India
2014 2019 2024E Brazil Indonesia USA China
size footwear appliances ecommerce
India Other countries (2019) market size

Source: Euromonitor, Goldman Sachs Global Investment Research Source: Euromonitor, Goldman Sachs Global Investment Research

58b772b07bbf4ac1979365bc65c5e3c4

20 July 2020 37
 Goldman Sachs Global Internet

Russia
We believe COVID-19 will lead to a steep increase in eCommerce penetration in Russia,
significant part of which will be sustained in the medium term as we observe shift in the
consumer patterns and re-assessment of digital commerce strategies by offline players.
During the pandemic, Russia’s leading eCommerce players experienced accelerated
growth: Ozon GMV growth accelerated to c.200% in April (vs 115% in 1Q20 and 93% in
2019), Wildberries increased sales by 180% yoy in April 2020 (in number of units sold),
Beru marketplace increased GMV by 300% yoy in May 2020.

Russian eCommerce market is still highly underpenetrated (c.7%; half of global

average levels) and very fragmented with top 5 leading e-commerce players controlling
c.36% of the market (vs. c.54% top-5 concentration across other major markets on
average). We see 4 domestic multi-category market leaders emerging, all growing at
close to 100% or higher – Wildberries (initially focused on fashion, but moving to
multi-category now), Ozon (multi-category 1P player initially, now more focusing on
marketplace), TMall (initially Chinese cross-border platform AliExpress, with recent
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focus on TMall domestic marketplace) and Beru (1P and 3P multi-category marketplace
with a price comparison platform [Link]. Yandex recently announced an
agreement to acquire Sberbank’s entire stake in [Link]. The companies expect
the transaction to close in 3Q20).

As highlighted in our prior reports: Local dominance strengthens; competition

among ecosystems intensifies and Russia’s Internet champions positioned to keep
US giants at bay, we believe Russian eCommerce will be the largest Internet
sub-segment by 2030, attracting extra focus from the existing market players and
potential new-comers. We have observed >US$1 bn fund raising for several existing
players over the last 2-3 years. This indicates the focus on this market opportunity by key
players, which will only accelerate on the back of COVID-19 developments. The
pandemic has materially accelerated growth of e-grocery in Russia with key players

58b772b07bbf4ac1979365bc65c5e3c4
recording triple digit growth rates, and major tech platforms (Yandex and
[Link]/Sberbank JV) are rolling-out their fast, hyper-local grocery delivery from the dark
stores. We have also observed various offline players re-assessing their online strategies
by launching own online platforms and accelerating their move towards existing
marketplaces.

20 July 2020 38
 Goldman Sachs Global Internet

Exhibit 55: Russia eCommerce growth

Russian eCommerce market size (US$mn, LHS) and y/y growth (%, RHS)

$70,000 35.0%

$60,000 30.0%

$50,000 25.0%

$40,000 20.0%

$30,000 15.0%

$20,000 10.0%

$10,000 5.0%

$0 0.0%
2014 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E 2024E

Russia y/y growth (%)

Source: Euromonitor, Goldman Sachs Global Investment Research

We believe Russian eCommerce market will face the following major trends in the
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medium term:

(1) Sustainable market growth (GSe 21% CAGR over 2020-23E, a notch below 2015-19
CAGR of 23%) at structurally higher penetration levels compared to pre-COVID era; We
expect up to 100 bpts boost to eCommerce penetration on the back of COVID-19.

(2) Organic market consolidation, with multiple times higher growth rates for the leading
well-capitalized marketplaces; less capitalized players will be challenged; M&A could
intensify as well, given the strategic attractiveness of the sector. We note that Yandex
recently announced a buyout of Sberbank’s entire stake in [Link] eCommerce
JV in June. Separately, Reuters (June 4) reported potential interest of Sberbank in
acquiring a stake in Ozon.

(3) Offline players moving online at accelerated pace as they recognize the vital
importance of online channel in the post-COVID environment. In our view, some players

58b772b07bbf4ac1979365bc65c5e3c4
will try to explore online opportunities by themselves; others will join existing
marketplaces (or combine both options);

(4) Increasing focus on assortment expansion as key market players are aiming to lock
consumers on their platform and offer one stop-shop solution. We have observed
transformational move by Wildberries expanding from clothes and fashion into a
multi-category player. Ozon is rapidly expanding its marketplace (contributes to c.50% of
GMV as of May 2020); TMall and Beru are expanding category offerings as well. We
believe key players will increasingly focus on loyalty programs with various fintech,
promotional activities and cross-ecosystem synergies;

(5) Ongoing gradual reduction of cross-border share, since domestic leaders are
increasing assortment, improving delivery time and offer attractive pricing terms.
Cross-border will remain a large part of the market, given price advantages and large
assortment, especially relevant for regional consumers;

(6) Focus on social commerce features by AliExpress Russia (together with VK, OK
social networks) as well as potential entrance of Yandex via its Zen newsfeed

20 July 2020 39
 Goldman Sachs Global Internet

integrations.

(7) Faster adoption of payment solutions (mainly prepayment through bank cards)
instead of cash on delivery, accelerated by the pandemic. The cashless experience
proved to work well for consumers;

(8) Certain categories potentially moving to online (alcohol, medicine) as COVID-19

accelerated regulatory discussions over lifting constraints in those sub-segments;

(9) Evolution of last-mile delivery solutions with ride-hailing services offering their
logistics capabilities, contactless delivery to consumers’ premises and various
partnerships with offline players around pick-up points;

10) Deep technological sophistication of the marketplaces, including relevant

personalized offers for the consumers and advertising capabilities for merchants. We
would note that key local players are expanding their tech talent teams. In particular, in
2020 AliExpress Russia has moved its main IT-development platform from China to
Russia with a plan to hire 200-300 IT-specialists in 2020 and another 100-150 in 2021;
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Wildberries has doubled its IT-team size from 200 in Dec-18 to 400 in Sep-19.

58b772b07bbf4ac1979365bc65c5e3c4

20 July 2020 40
 Goldman Sachs Global Internet

Australia
Australian eCommerce penetration has remained below the average global penetration,
at c. 6.5% in CY19 vs. global penetration at c. 13.3%. COVID-19 has, however, led to a
step change in this penetration with e-commerce sales in April 2020 being at 11.1%
(Source: ABS).

On a monthly basis, we note that penetration peaks in the month of November each
year and then resets to a new level, reverting to the November peak around April/May.
However, in March this year, penetration has already exceeded the levels from
November 2019 and penetration in April 2020 was c. 400bps ahead of that implied by
the trend expectations.

According to Auspost, more than 200k new households shopped online in April 2020.
Online purchase was up 6.8% in April vs. the 30 days to 18th Dec 2019. Interesting
trends noted during this period are:

n E-commerce in major cities doubled yoy in April 2020. However, strong growth was
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broad based across all regions with inner and outer regional Australia up +89% and
+72% respectively and sales in remote and very remote Australia up +64% and
+56% respectively.
n Of the 200k new shoppers in April 2020, 35.5% purchased online more than once
and 16.7% three or more times.
n Home deliveries made up 91% of all delivery orders. Alternative delivery options
(like parcel lockers) were up +30.3%.
n In terms of categories, while the initial focus was on essentials, this transitioned to
stay at home categories like entertainment, DIY, casual clothing etc post that.
Fashion was down -5% yoy initially, but improved to +100% yoy later. Wine and
Liquor sales were up +160% yoy over March and April while Department stores
were up +400% yoy during the Easter week.

58b772b07bbf4ac1979365bc65c5e3c4
Exhibit 56: Pre-COVID online penetration trend forecasts vs. Exhibit 57: We forecast COVID-19 to result in a 200bps of reset in
COVID-19 reset forecasts e-commerce penetration

12.0% 14.0%

12.0%
10.0%
10.0%
8.0% 8.0%

6.0%
6.0%
4.0%
4.0%
2.0%

2.0% 0.0%
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e 2023e 2024e 2025e

0.0%
E-commerce penetration in Australia retail Pre-COVID19 trend expectations

GSe post COVID-19 related reset

Source: ABS, Goldman Sachs Global Investment Research Source: ABS, NAB, Goldman Sachs Global Investment Research

We previously noted that a key issue in Australia resulting in the lower e-commerce
penetration is the difficulty to achieve economies of scale in distribution given the large
urban market density and sparsely populated regional areas. As a result, we’ve

20 July 2020 41
 Goldman Sachs Global Internet

historically had pockets of consumption in urban areas while the regional areas
remained under-penetrated. Interestingly, we note that in the month of April, online
sales growth in the regional areas were higher than that of the metro areas in the two
most populous states of NSW and Victoria. This may reflect a demand driven shift in
e-commerce penetration in regional areas, implying a more sustainable increase in
e-commerce penetration. We expect the temporary lift in e-commerce penetration to
wane by July 2020 and settle towards the sustainable lift (which we estimate to be c.
50% of the 400bps of increase), resulting in online penetration of 8.9% in CY20. Beyond
CY20 we forecast annual e-commerce penetration to grow by the historical average rate
of c. 50bps p.a. Additionally, due to the COVID-19 reset we expect e-commerce to
capture 73% of retail growth in CY20 vs. an average capture ratio of 21% in the prior
years.

Exhibit 58: Share of Retail growth captured online

80.0%
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70.0%

60.0%

50.0%

40.0%

30.0%

20.0%

10.0%

0.0%
2012 2013 2014 2015 2016 2017 2018 2019 2020e 2021e 2022e 2023e 2024e 2025e

Source: ABS, NAB, Goldman Sachs Global Investment Research

By category:

n Grocery and liquor: c. 78% of the online grocery and liquor sales in Australia are

58b772b07bbf4ac1979365bc65c5e3c4
sold through Woolworths Group (Woolworths Supermarkets and Endeavour Drinks)
and Coles Group. Recognizing the surge in demand for online services post
COVID-19, both of these players have doubled their capacity for this channel, though
skewed to delivery and kerbside pick up/drive-thru. We expect this growth to be
sustained even as social distancing restrictions are relaxed as consumers get used
to the convenience of avoiding prolonged public contact in one of their most
frequent shopping requirements amidst the virus scare. In CY19, online penetration
in the grocery sector was c. 3.3%.
n Household retailing: Penetration in this segment was c. 14% in CY19. These goods
are usually more of a planned higher value purchase than the other categories. While
consumers are likely to increase their pre-purchase research on this category, we
believe the sudden increase in e-commerce penetration is likely to be less sticky in
this segment.
Online retailing is less concentrated in this segment. Amongst the listed
omni-channel electronics players, JB Hi-Fi holds a 5.4% online market share. While
HVN does not disclose their online sales, we estimate this to be c. 2% of online
market share.

20 July 2020 42
 Goldman Sachs Global Internet

n Clothing and accessories: E-commerce penetration in this segment was at 14.3%

in CY19 and has increased significantly in April 2020. We expect this shift to be
sticky even after the category growth normalizes since the touch and feel factors of
shopping, especially in fashion is likely to be restricted in the medium term,
resulting in physical shopping becoming less attractive than prior to COVID.
n Department stores: E-commerce penetration in this segment was at 23.2% in
CY19. This data includes sales through mass market formats online, including
marketplace models, and is likely to reflect increased online activity for marketplace
models to a greater degree than for multichannel department stores.

Top exposures to the online thematic in ANZ:

1. City Chic Collective ([Link], Analyst: Ashwini Chandra, rated Buy, 12m TP
A$3.20)

n CCX is focused on plus sized women’s clothing. It has diversified channels to market
but the strongest exposure to the online channel in our ANZ coverage with over
For the exclusive use of [Link]@[Link]

60% of group sales coming through a combination of its own websites and
third-party marketplaces with the balance from in-store in ANZ and wholesale
channels in the US and EU.
n Its growth engines include (1) broadening its presence across all categories from
casual to formal to lingerie to activewear, (2) cross-sell opportunities across its four
major brand platforms: City Chic, CCX, avenue and Hips & Curves, and (3) further
expansion into the US/UK/EU markets with a capital light business model (focused
on online and wholesale channels) which is likely to be a combination of organic
driven growth and M&A.
n CCX has a strong balance sheet to support these growth initiatives organically which
drives a 3yr EPS CAGR (FY190-FY22E) of 19%.
n Our 12-month TP of A$3.20 is derived as a blend of our fundamental valuation

58b772b07bbf4ac1979365bc65c5e3c4
methodology and M&A valuation as follows: (1) 85% fundamental valuation (20%
premium to the FY21E Small Ordinaries P/E multiple of 18.5x resulting in a target
multiple of 22.2x) applied to FY22E EPS, and (2) 15% M&A valuation - which
remains unchanged (we apply a 28.4x P/E multiple (CCX’s peak 12m forward P/E
multiple over past 12m) to FY22E EPS).
n Key risks: Consumer spending environment in Australia & US deteriorates;
COVID-19 has a larger impact on sales than we expect; increase in competition from
either specialist plus size retailers and/or increased plus size offerings from straight
size retailers; tariff risk; loss of wholesale and/or online marketplace partners.

2. Redbubble ([Link], Analyst: Ashwini Chandra, rated Buy, 12m TP A$2.35)

n RBL operates an online print-on-demand marketplace with products including

apparel, homewares, stationery and accessories for consumer electronics across
ANZ, North America and Europe. Its business model is based on a platform that
allows artists to sell their designs to consumers around the world, while third-party
fulfillers produce and ship the items directly to the consumer and avoiding the need

20 July 2020 43
 Goldman Sachs Global Internet

for artists to create or hold any inventory themselves.

n It is currently experiencing very strong revenue growth (GSe 4Q20 revenue growth
+70%) driven by the very strong migration to online commerce we have been
observing globally.
n This strong pull forward of demand is laying the foundation for an acceleration in
growth as its ‘flywheel’ kicks in (i.e. consumer growth drives acceleration in artists
joining, which increases content created, which combined with broadening product
categories attracts a broader range of consumers, and so on). As RBL continues to
invest in optimising the user experience for both artists and consumers, we believe
its potential to get improving returns per dollar of paid acquisition from returning
customers, organic searches, and transactions through its app remains positive.
n Our FY19-FY22E EBITDA CAGR of 95% remains amongst the highest in our
coverage universe and it trades at attractive multiples relative to peers. For more
detail refer to our most recent note here.
n 12m TP of A$2.35 is based on: 85% fundamental valuation (equal weighted blend of
For the exclusive use of [Link]@[Link]

EV/EBITDA, 22.0x FY21E EV/EBITDA derived from a 15% discount to peers applied
to FY22E EBITDA, and DCF), and 15% M&A valuation (peak 12m fwd EV/sales over
the past 2 years [1.5x] applied to FY22E sales).
n Key risks: Consumer discretionary spending slows with further economic
weakness, changes to search algorithms/rankings negatively impact RBL’s organic
traffic, competition, worse than expected paid acquisition cost control, litigation risks
from content on RBL’s platforms breaching copyright/trademark restrictions.

3. Afterpay ([Link], Analyst: Ashwini Chandra, rated Neutral, 12m TP A$70.15)

n APT is a market leading ‘buy now, pay later’ service provider in the ANZ market with
3.3mn active users and is rapidly scaling in the US market having recently surpassed
5.6mn active users and another 1.0mn in the UK.

58b772b07bbf4ac1979365bc65c5e3c4
n It facilitates a short-duration installment repayment service (4x fortnightly
repayments) which provides customers with a budgeting tool that has proved to be
popular with a younger demographic (early adopters tend to be 20-30 years of age)
and with merchants in the fashion and beauty category (US merchants include the
likes of Urban Outfitters, Shein, Designer Shoe Warehouse, Ulta Beauty).
n Structural demand drivers include migration to online shopping, reducing use of
cash/increasing use of debit cards and a consumer that is increasingly showing
signs of avoiding revolving lines of credit that come with high interest costs.
n APT is likely to receive a further boost in growth by being available as an in-store
payment option in the US market through recently announced partnerships with
Apple Pay and Google Pay that will allow Afterpay to be added to the digital wallet as
a virtual payment card that can be accepted wherever Afterpay is integrated with the
merchant and where Apple Pay and Google Pay are accepted.
n Strong growth in consumer numbers and rising frequency of use are the critical
value drivers of APT as these help create a network effect by attracting new
merchants and new consumers to the platform as it scales.

20 July 2020 44
 Goldman Sachs Global Internet

n 12m TP of A$70.15 is based on: Fundamental valuation (70% weighting) driven by a

DCF approach of A$63.95 (WACC 8.9%, TGR 2.5%) while our M&A valuation
remains a 30% weighting (A$84.75).
n Key risks: (+) New market opportunities, faster-than-expected economic recoveries
in each geography, competitors exit/lose momentum relative to APT, migration to
online shopping continues to accelerate. (-) Weak September/December quarters as
fiscal stimulus subsides, credit loss rates may exceed our forecasts, competition
more effective than our forecasts assume.

Southeast Asia and Taiwan

Southeast Asia has experienced one of the highest ecommerce GMV growth rates
globally in the past 3 years, given the confluence of rapidly growing disposable income,
significant improvements in regional infrastructure, fast growing domestic
For the exclusive use of [Link]@[Link]

manufacturing capabilities as customers outsource away from China, a massive influx of

capital in internet companies and heavy competition among Chinese and local
ecommerce players.

As a result, Southeast Asia’s 2019 ecommerce GMV (US$38.1bn) is already significantly

larger than markets like India, and is showing no signs of slowdown (2017-2019 CAGR of
76% and 2019-2021 CAGR of 52%). Taiwan has also enjoyed an uplift in ecommerce
growth rates, reflecting mainly the heavy competition in the market since 2016, though
unlike Southeast Asia, most of the ecommerce players remain profitable there.

The COVID-19 pandemic has clearly accelerated ecommerce penetration in Southeast

Asia and Taiwan this year, with these following impacts on the industry:

n Rising B2C GMV mix, especially on FMCG: With offline retail being forced to
close or operate under much shorter working hours, we have seen brands/retailers

58b772b07bbf4ac1979365bc65c5e3c4
moving online. This is in fact a more profitable sales channel for brands, as online
platforms take lower commission rates than offline. The FMCG category is the key
beneficiary, as consumers naturally look to stock up on essentials in the initial phase
of lockdowns. Indeed, our analysis shows that online vs. offline SKU differentiation
for key brands have significantly narrowed during this period. Longer term, the key
difference could be simply in bulk sales (online) vs. single pack sales (offline) for
SKUs.
n New brands and private labels may emerge: As brands move online, C2C
merchants have to differentiate by facilitating and introducing smaller or less known
brands online. This will create more brand fragmentation, and open up room for
ecommerce platforms to consider private label products (e.g. Momo in Taiwan) too.
There may also be opportunity to work closer with certain major brands on a
win-win partnership. These are all likely positive for platform economics, as offline
revenues (commission, advertising, value added services etc.) from major
brands/retailers can now shift online as well.
n Platforms may accelerate logistics build-out: We believe that the COVID-19

20 July 2020 45
 Goldman Sachs Global Internet

outbreak has surprised platforms in terms of the supply chain challenges they
created, both for cross border and domestic. In addition, to grow their B2C business
alongside brands/retailers, platforms have to offer warehousing, fulfillment and
logistics services as well. This will compel platforms to grow their in-house logistics
capabilities and likely do more 1P business, favoring those already with such assets
(e.g. Lazada).
n Competition stays aggressive: While there are signs of higher monetization since
2H19, we believe it remains too early for platforms to be profitable. Indeed,
ecommerce platforms who keep re-investing back into the business will be better
placed to be winners. There are also new challengers; e.g., Facebook has
announced an investment in local ride hailing / payments player Gojek.
n Breakthrough to lower tier cities vital: As ecommerce penetration rises further,
the tier 1 cities are already well penetrated and ecommerce platforms have to move
deeper into tier 2-3 cities, where there are significant challenges. Hence, the ability
to leverage learnings from China and other markets (e.g. Pinduoduo) on consumer
For the exclusive use of [Link]@[Link]

engagement and distribution will be vital.

n Balance and capital is key: The surprise for platforms during the COVID-19
pandemic was the sudden surge in demand for FMCG products, and a subsequent
shift towards other categories (e.g. entertainment/gaming). The cross border
business also effectively disappeared overnight, as China supply chains were
negatively impacted, while demand for digital products surged. Hence, we see
platforms that were more diversified across different product categories and
different business verticals as being more resilient in this situation. We also see
platforms like Shopee as being more aggressive during this period in merchant
support programs, given its strong balance sheet and supported by strong gaming
cash flows, and this has allowed Shopee to stand out as being the most successful
platform during this period.

58b772b07bbf4ac1979365bc65c5e3c4
Conclusion
Given the above trends, we expect ecommerce demand to pull forward given the
COVID-19 impact, with Indonesia’s ecommerce market leading the region, with
penetration expected to rise from 24.0% in 2019 to 41.2% by 2024E. Other countries
are also expected to see significant uplift ahead. With greater B2C GMV mix, we also
expect ecommerce platform profitability to improve over time. Shopee (Sea Ltd) and
Lazada (Alibaba) are among the best positioned ecommerce platforms in this space.

We maintain Buy (CL) on Sea Ltd as we see it as a key winner in the fast-growing
ASEAN/Taiwan gaming, ecommerce and payments markets, and see upside from its
successful moves into LATAM and India. Indeed, Sea is transforming into a global
Emerging Markets internet player, with a much larger TAM to compete for. Our 12m
SOTP based target price is US$120, implying 10% share price upside — significantly
higher than the median potential share price return of -5% for our Asia internet
coverage. While the share price is +183% YTD vs NYSE index -13% YTD, we still see a
relatively favorable risk reward outlook (78% upside to bull case, 54% downside to bear
case).

20 July 2020 46
 Goldman Sachs Global Internet

Key Risks: 1) Competition from global peers; 2) Macroeconomic and geopolitical risks
and exchange rate volatility; 3) Execution in new markets e.g. LATAM/India; 4) Inability
to derive synergies from all three businesses.

Exhibit 59: Summary of offline retail closures in Southeast Asia and Taiwan

As of July 16, 2020

Ban / limit tourist - cut Banned non-

Market Offline retails suspension
on passenger aircrafts residents since?

From To

Indonesia YES 2-Apr-20 4-Apr-20 1-Jun-20

Malaysia YES 18-Mar-20 18-Mar-20 9-Jun-20

For the exclusive use of [Link]@[Link]

Philippines YES 22-Mar-20 16-Mar-20 1-Jun-20

Singapore YES 23-Mar-20 7-Apr-20 15-Jun-20

Taiwan YES 19-Mar-20 N/A

Thailand YES 26-Mar-20 22-Mar-20 17-May-20
Vietnam YES 22-Mar-20 31-Mar-20 23-Apr-20

Source: Jakarta Globe, the Straits Times, Bangkok Post, compiled by Goldman Sachs Global Investment Research.

Exhibit 60: Ecommerce penetration to grow the fastest in Indonesia Exhibit 61: FMCG products are leading the growth in Indonesia
in 2020

Ecommerce penetration Indonesia ecommerce penetration by FMCG categories

2019 2020E 2024E 2019 2020E 2024E

58b772b07bbf4ac1979365bc65c5e3c4
41.2% 36%

26% 26%

24.0% 21%
23.3% 19%
21.2%
15%
15.2% 14.4%
13.4% 12.8% 12.5% 8%
11.4% 10.5% 7%
7.9% 3% 4% 4% 5% 3%
7.0% 6.8% 7.3% 2% 3%
4.4% 5.0% 4.7%
3.4% 3.2%
2.3%
Beauty and Consumer Health Home Care Other FMCG Total FMCG
Indonesia Vietnam Thailand Philippines Malaysia Singapore Taiwan Personal Care

Source: Goldman Sachs Global Investment Research Source: Goldman Sachs Global Investment Research, Euromonitor

20 July 2020 47
 Goldman Sachs Global Internet

Global eCommerce comp table

Exhibit 62: Global eCommerce comp table
EV / Sales EV / Gross profit EV / EBITDA 3yr CAGR
Company Name Ticker Rating 2020 2021 2022 2020 2021 2022 2020 2021 2022 Sales GP EBITDA
E-Commerce
Alibaba BABA Buy 8.7x 6.6x 5.2x 19.0x 14.5x 11.0x 28.3x 22.2x 16.2x 32% 31% 31%
Amazon AMZN Buy 4.2x 3.6x 3.0x 10.5x 8.6x 7.2x 32.8x 22.9x 18.5x 21% 21% 23%
Asos ASOS.L Buy 1.1x 1.0x 0.9x 2.4x 2.1x 1.8x 17.5x 14.4x 11.7x 15% 14% 42%
Cafe24 [Link] Sell 2.2x 1.9x 1.7x 2.4x 2.1x 1.9x 20.7x 13.6x 11.5x 12% 12% 24%
eBay EBAY Neutral 4.0x 3.5x 3.4x 5.2x 4.6x 4.4x 10.7x 9.5x 9.0x 6% 6% 10%
Etsy ETSY Buy 10.2x 8.9x 7.1x 15.2x 12.9x 10.2x 41.1x 34.2x 26.1x 28% 30% 36%
Eventbrite EB Neutral 6.4x 3.9x 2.7x 13.6x 6.4x 4.4x NA NA 11.7x -3% -2% NM
Farfetch FTCH Buy 5.6x 3.9x 3.0x 17.2x 11.2x 8.5x NA NM 38.9x 35% 39% NM
Groupon GRPN Sell 0.4x 0.4x 0.5x 0.8x 0.7x 0.8x NA 5.6x 6.1x -20% -14% -26%
Grubhub GRUB Not Rated 3.8x 3.4x 3.0x 9.9x 8.1x 7.2x NM 57.4x 39.6x 18% 13% -4%
Info Edge India [Link] Sell 28.8x 29.6x 25.2x 49.9x 54.5x 44.4x NM NM NM 10% 9% 10%
iQiyi IQ Neutral 4.0x 3.4x 2.9x 173.6x 26.9x 13.5x 12.3x 10.1x 7.5x 15% NM 23%
[Link] JD Buy 0.8x 0.6x 0.5x 5.3x 4.3x 3.6x 27.6x 21.9x 16.6x 21% 22% 34%
Meituan Dianping [Link] Buy 8.8x 5.6x 4.0x 26.7x 15.3x 10.2x NM 44.1x 23.7x 36% 43% 78%
MercadoLibre MELI Buy 16.7x 13.4x 10.1x 35.1x 28.1x 21.1x NA NM NM 25% 25% NM
Naspers NPNJn.J Buy 21.8x 19.5x 15.2x NA NA NA NA NA NA -5% NA -198%
Netflix NFLX Buy 9.2x 7.5x 6.3x 23.6x 18.5x 14.8x 48.1x 34.7x 25.7x 22% 26% 42%
Ocado OCDO.L Neutral 7.7x 7.0x 6.1x 19.1x 17.1x 15.4x NM NM NM 12% 11% 9%
Pinduoduo PDD Neutral 12.0x 7.3x 5.6x 15.0x 8.9x 6.8x NA 42.2x 21.6x 52% 54% NM
Schibsted [Link] Buy 3.7x 3.3x 3.0x 8.5x 6.8x 5.8x 23.8x 15.9x 12.8x 7% 14% 13%
Stitch Fix SFIX Buy 1.5x 1.3x 1.0x 3.5x 2.8x 2.3x NA NM 34.7x 17% 17% 24%
[Link] [Link] Not Rated 6.2x 5.1x 4.3x NA NA NA 52.5x 37.2x 26.6x 96% NA 246%
Vipshop VIPS Neutral 1.0x 0.9x 0.8x 4.3x 4.0x 3.7x 11.1x 9.6x 8.6x 6% 6% 17%
Wayfair W Buy 1.7x 1.6x 1.3x 6.6x 6.0x 4.9x NM NM 38.7x 22% 27% NM
[Link] WUBA Neutral 2.9x 2.3x 2.1x 3.3x 2.6x 2.3x 13.8x 8.4x 7.2x 12% 12% 15%
For the exclusive use of [Link]@[Link]

Zalando [Link] Neutral 2.1x 1.7x 1.5x 5.1x 4.1x 3.5x 33.3x 25.1x 19.8x 18% 18% 32%
MEDIAN 4.1x 3.6x 3.0x 10.2x 7.4x 6.3x 25.7x 22.0x 17.5x 18% 17% 23%
AVERAGE 6.7x 5.7x 4.6x 19.8x 11.3x 8.7x 26.7x 23.8x 19.7x 20% 19% 23%

Amazon, Alibaba and Netflix are on the regional Conviction Lists.

Source: FactSet, Goldman Sachs Global Investment Research

58b772b07bbf4ac1979365bc65c5e3c4

20 July 2020 48
 Goldman Sachs Global Internet

Disclosure Appendix
Reg AC
I, Heath P. Terry, CFA, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or
companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific
recommendations or views expressed in this report.
Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Goldman Sachs’ Global Investment Research division.

GS Factor Profile
The Goldman Sachs Factor Profile provides investment context for a stock by comparing key attributes to the market (i.e. our coverage universe) and its
sector peers. The four key attributes depicted are: Growth, Financial Returns, Multiple (e.g. valuation) and Integrated (a composite of Growth, Financial
Returns and Multiple). Growth, Financial Returns and Multiple are calculated by using normalized ranks for specific metrics for each stock. The
normalized ranks for the metrics are then averaged and converted into percentiles for the relevant attribute. The precise calculation of each metric may
vary depending on the fiscal year, industry and region, but the standard approach is as follows:
Growth is based on a stock’s forward-looking sales growth, EBITDA growth and EPS growth (for financial stocks, only EPS and sales growth), with a
higher percentile indicating a higher growth company. Financial Returns is based on a stock’s forward-looking ROE, ROCE and CROCI (for financial
stocks, only ROE), with a higher percentile indicating a company with higher financial returns. Multiple is based on a stock’s forward-looking P/E, P/B,
price/dividend (P/D), EV/EBITDA, EV/FCF and EV/Debt Adjusted Cash Flow (DACF) (for financial stocks, only P/E, P/B and P/D), with a higher percentile
indicating a stock trading at a higher multiple. The Integrated percentile is calculated as the average of the Growth percentile, Financial Returns
percentile and (100% - Multiple percentile).
Financial Returns and Multiple use the Goldman Sachs analyst forecasts at the fiscal year-end at least three quarters in the future. Growth uses inputs
for the fiscal year at least seven quarters in the future compared with the year at least three quarters in the future (on a per-share basis for all metrics).
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For a more detailed description of how we calculate the GS Factor Profile, please contact your GS representative.

M&A Rank
Across our global coverage, we examine stocks using an M&A framework, considering both qualitative factors and quantitative factors (which may vary
across sectors and regions) to incorporate the potential that certain companies could be acquired. We then assign a M&A rank as a means of scoring
companies under our rated coverage from 1 to 3, with 1 representing high (30%-50%) probability of the company becoming an acquisition target, 2
representing medium (15%-30%) probability and 3 representing low (0%-15%) probability. For companies ranked 1 or 2, in line with our standard
departmental guidelines we incorporate an M&A component into our target price. M&A rank of 3 is considered immaterial and therefore does not
factor into our price target, and may or may not be discussed in research.

Quantum
Quantum is Goldman Sachs’ proprietary database providing access to detailed financial statement histories, forecasts and ratios. It can be used for
in-depth analysis of a single company, or to make comparisons between companies in different sectors and markets.

Disclosures
Rating and pricing information
[Link] Inc. (Neutral, $55.11), ASOS Plc (Buy, 3,408p), Adyen NV (Buy, €1,434.00), Afterpay Ltd. (Neutral, A$69.49), Alibaba Group (ADR) (Buy,
$254.81), [Link] Inc. (Buy, $3,196.84), Avalara Inc. (Buy, $130.58), B2W (Buy, R$119.64), Cafe24 Corp. (Sell, W55,700), City Chic Collective Ltd.
(Buy, A$3.03), Etsy Inc. (Buy, $106.69), Eventbrite Inc. (Neutral, $8.74), Farfetch Ltd. (Buy, $21.69), Fast Retailing (Buy, ¥58,600), FedEx Corp. (Buy,

58b772b07bbf4ac1979365bc65c5e3c4
$164.13), Groupon Inc. (Sell, $16.22), GrubHub Inc. (Not Rated, $70.05), Honeywell International Inc. (Buy, $153.39), Info Edge India Ltd. (Sell,
Rs3,253.85), [Link] Inc. (ADR) (Buy, $63.40), Just Eat [Link] NV (Not Rated, €93.12), Macerich Co. (Sell, $7.80), Magazine Luiza (Buy,
R$87.00), Meituan Dianping (Buy, HK$188.40), MercadoLibre Inc. (Buy, $1,024.81), Naspers Ltd. (Buy, R3,153.10), Netflix Inc. (Buy, $502.41), Nike Inc.
(Buy, $95.65), Ocado Group (Neutral, 2,099p), PayPal Holdings (Buy, $178.82), Pinduoduo Inc. (Neutral, $84.83), Redbubble Ltd. (Buy, A$2.29), Reliance
Industries (Buy, Rs1,919.30), Schibsted ASA (Buy, Nkr286.70), Sea Ltd. (Buy, $115.25), Stitch Fix Inc. (Buy, $25.90), Unibail-Rodamco-Westfield (Sell,
€50.94), United Parcel Service Inc. (Buy, $118.35), Vipshop Holdings (Neutral, $21.68), Walmart Inc. (Buy, $131.47), Wayfair Inc. (Buy, $229.88), Zalando
SE (Neutral, €65.12), eBay Inc. (Neutral, $58.47) and iQIYI Inc. (Neutral, $22.68).

Company-specific regulatory disclosures

The following disclosures relate to relationships between The Goldman Sachs Group, Inc. (with its affiliates, “Goldman Sachs”) and companies covered
by the Global Investment Research Division of Goldman Sachs and referred to in this research.
Goldman Sachs beneficially owned 1% or more of common equity (excluding positions managed by affiliates and business units not required to be
aggregated under US securities law) as of the month end preceding this report: Afterpay Ltd. (A$69.49)
Goldman Sachs has received compensation for investment banking services in the past 12 months: Afterpay Ltd. (A$69.49) and Sea Ltd. ($115.25)
Goldman Sachs expects to receive or intends to seek compensation for investment banking services in the next 3 months: Afterpay Ltd. (A$69.49) and
Sea Ltd. ($115.25)
Goldman Sachs had an investment banking services client relationship during the past 12 months with: Afterpay Ltd. (A$69.49) and Sea Ltd. ($115.25)
Goldman Sachs had a non-securities services client relationship during the past 12 months with: Afterpay Ltd. (A$69.49), City Chic Collective Ltd.
(A$3.03) and Sea Ltd. ($115.25)
Goldman Sachs has managed or co-managed a public or Rule 144A offering in the past 12 months: Afterpay Ltd. (A$69.49) and Sea Ltd. ($115.25)
Goldman Sachs makes a market in the securities or derivatives thereof: Sea Ltd. ($115.25)
There are no company-specific disclosures for: Redbubble Ltd. (A$2.29)

Distribution of ratings/investment banking relationships

Goldman Sachs Investment Research global Equity coverage universe

20 July 2020 49
 Goldman Sachs Global Internet

Rating Distribution Investment Banking Relationships

Buy Hold Sell Buy Hold Sell
Global 47% 36% 17% 65% 58% 54%

As of July 1, 2020, Goldman Sachs Global Investment Research had investment ratings on 3,015 equity securities. Goldman Sachs assigns stocks as
Buys and Sells on various regional Investment Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell for
the purposes of the above disclosure required by the FINRA Rules. See ‘Ratings, Coverage universe and related definitions’ below. The Investment
Banking Relationships chart reflects the percentage of subject companies within each rating category for whom Goldman Sachs has provided
investment banking services within the previous twelve months.

Price target and rating history chart(s)

For the exclusive use of [Link]@[Link]

58b772b07bbf4ac1979365bc65c5e3c4
Regulatory disclosures
Disclosures required by United States laws and regulations
See company-specific regulatory disclosures above for any of the following disclosures required as to companies referred to in this report: manager or
co-manager in a pending transaction; 1% or other ownership; compensation for certain services; types of client relationships; managed/co-managed
public offerings in prior periods; directorships; for equity securities, market making and/or specialist role. Goldman Sachs trades or may trade as a
principal in debt securities (or in related derivatives) of issuers discussed in this report.
The following are additional required disclosures: Ownership and material conflicts of interest: Goldman Sachs policy prohibits its analysts,
professionals reporting to analysts and members of their households from owning securities of any company in the analyst’s area of coverage.
Analyst compensation: Analysts are paid in part based on the profitability of Goldman Sachs, which includes investment banking revenues. Analyst
as officer or director: Goldman Sachs policy generally prohibits its analysts, persons reporting to analysts or members of their households from
serving as an officer, director or advisor of any company in the analyst’s area of coverage. Non-U.S. Analysts: Non-U.S. analysts may not be
associated persons of Goldman Sachs & Co. LLC and therefore may not be subject to FINRA Rule 2241 or FINRA Rule 2242 restrictions on
communications with subject company, public appearances and trading securities held by the analysts.
Distribution of ratings: See the distribution of ratings disclosure above. Price chart: See the price chart, with changes of ratings and price targets in
prior periods, above, or, if electronic format or if with respect to multiple companies which are the subject of this report, on the Goldman Sachs
website at [Link]

Additional disclosures required under the laws and regulations of jurisdictions other than the United States
The following disclosures are those required by the jurisdiction indicated, except to the extent already made above pursuant to United States laws and

20 July 2020 50
 Goldman Sachs Global Internet

regulations. Australia: Goldman Sachs Australia Pty Ltd and its affiliates are not authorised deposit-taking institutions (as that term is defined in the
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