We sold ECOM for a gain of 22%. Our thesis was that channel managers would continue to be prevalent for retailers and DTC brands as it was in their interest to spread a “fishing net” as wide as possible. We believed the e-commerce trend had been accelerated due to COVID and as the leading channel manager, Channel Advisor would stand to benefit. However, recent data suggests that e-commerce has not accelerated ten years into the future, but instead only 1-2 years. Along with Shopify becoming a more existential threat and significant insider selling, ECOM had become less palatable.
Another salient factor are Apple Ad Tracking Transparency (ATT) changes. Apple ATT changes going into effect later this year makes it significantly harder for platforms (Instagram, Facebook etc) to follow customers off-platform. This makes it harder for advertisers to deliver effective ads as both targeting and measurement abilities are impaired. The second-order effect of this will be for platforms vying to become the everything-app so that users do not have to leave the platform; this first-party data will be scarce and invaluable. This consolidation of platforms reduces the need for channel managers. Whichever way ECOM is looked at, whether it be the competitive landscape or industry trends, it is hard to remain optimistic about ECOM.
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Past performance is not necessarily indicative of future results. All investments carry significant risk, and it’s important to note that we are not in the business of providing investment advice. All investment decisions of an individual remain the specific responsibility of that individual. There is no guarantee that our research, analysis, and forward-looking price targets will result in profits or that they will not result in a full loss or losses. All investors are advised to fully understand all risks associated with any kind of investing they choose to do.
