How to Invest in the Emerging Market Internet Revolution
The internet and ecommerce revolution has not been limited to the developed world. Today, an online economy thrives in emerging markets. Rising disposable incomes, positive reform momentum, population growth, urbanisation, an under-leveraged consumer and the widespread adoption of digital devices collectively form the bedrock of this new megatrend. Digitisation has unlocked new opportunities for emerging market innovators. We have seen the rise of the emerging market digital consumer. And fast forwarding, the convenience of 24-hour shopping and home delivery combined with greater product selection are likely to become valuable steppingstones in emerging countries’ journeys to digital adoption. DTC brands, social commerce, live selling and voice commerce are already some examples of increasingly sophisticated and targeted channels used by emerging market internet giants to meet consumers in their own comfort zones. These companies have the potential in the years ahead to transcend operating only in their own internet economies to shaping and defining the direction of global ones. As this innovation is unleashed and market competition further strengthened, we believe digitisation has the potential to be the lever that is needed to unlock the emerging world’s next growth phase. Our new ETF – the Rize Emerging Market Internet and Ecommerce UCITS ETF – seeks to invest in the companies that are championing this digital innovation across all emerging markets. To further explore this theme, in this piece, we unpack the nine sub-sectors we invest in within our fund.
- Digital Commerce and Online Marketplaces
- Ecommerce Services
- Social Commerce
- Food, Ride-Hailing and On-Demand Retail
- Digital Media, Gaming and Entertainment
- Online Search, Ads and Classifieds
- Online Travel
- Ecommerce Logistics
- Internet Services
1. Digital Commerce and Online Marketplaces
Companies in this Sub-Sector focus on transacting goods and services across online ecommerce channels only. They do not operate across physical brick and mortar retail outlets. Ecommerce channels can include own branded online websites or online marketplaces where third party buyers and sellers come together to sell goods and services. Examples of companies in this Sub-Sector include Global Fashion Group SA, which operates ecommerce platforms for fashion and lifestyle markets in Latin America, and Coupang Inc, a South Korea-based company, which sells various products and services in the categories of home goods and décor products, apparel, beauty products, sporting goods, electronics and everyday consumables.
2. Ecommerce Services
Companies in this Sub-Sector provide ecommerce services that facilitate the development and enhancement of ecommerce platforms. Such services include cloud-based commerce hosting, host domain registrars, online integration tools, application software solutions and other related ecommerce services. An example of a company in this Sub-Sector is Infracommerce CXAAS SA, which provides digital solutions for ecommerce operations in Brazil and Latin America.
3. Social Commerce
Companies in this Sub-Sector provide online social media virtual community platforms that allow users to share ideas, content, build virtual networks and share common interests via video and music uploads. These social media platforms generate a majority of their revenue from advertising, and community members can also trade goods and services in these online virtual community marketplaces with other platform members. Examples of companies in this Sub-Sector include Pinduoduo Inc and Weibo Corporation in China.
4. Food, Ride-Hailing and On-Demand Retail
Companies in this Sub-Sector include businesses that operate on-demand online food delivery services, retailing of goods and services and mobile application ride share/transport services to end-consumers. These businesses operate via mobile applications or online webpages with an emphasis on convenience, quick response and delivery turnaround of goods and services. An example of a company in this Sub-Sector is Dada Nexus Limited, which operates a platform of local on-demand retail and delivery in China.
5. Digital Media, Gaming and Entertainment
Companies in this Sub-Sector provide online entertainment media content and other related media services. This includes broadcasting services, online streaming of video, tv, music, films, publishing and licencing of online games and mobile game applications. Examples of companies in this Sub-Sector include Douyu International Holdings Ltd, which provides interactive games and entertainment live streaming services in China, and Netmarble Corporation, which develops and publishes online and mobile games in South Korea and internationally.
6. Online Search, Ads and Classifieds
Companies in this Sub-Sector provide platforms for online search engines, online buy and sell classifieds for goods and services and online digital media advertising services. An example of a company in this Sub-Sector is Naver Corporation, which provides internet and online search portal and mobile messenger platform services in South Korea.
7. Online Travel
Companies in this Sub-Sector provide online travel services for accommodation reservation, transportation ticketing (e.g., airline flights, cruises and land transportation), corporate travel management and other travel-related services. An example of a company in this Sub-Sector is MakeMyTrip Limited, an online travel operator in India.
8. Ecommerce Logistics
Companies in this Sub-Sector provide logistics services such as fulfilment, last mile and express delivery services to ecommerce merchants that sell to end-consumers. An example of a company in this Sub-Sector is ZTO Express Inc, which provides express delivery and other value-added logistics services in China.
9. Internet Services
Companies in this Sub-Sector include investment holding conglomerates that provide a wide range of consumer internet and ecommerce related business services. An example of a company in this Sub-Sector is South African company, Naspers Holdings, which operates ecommerce, media, social and internet platforms. Another example of a company in this Sub-Sector is Prosus NV, which operates internet platforms across retail, payments and fintech, education and health.
EMRJ: Rize Emerging Market Internet and Ecommerce UCITS ETF
- Euromonitor International, “Euromonitor’s Classification for Emerging Market Internet & Ecommerce”, Pages 5, 6 and 7, September 2021. Available at: https://rizeetf.com/wp-content/uploads/2022/04/Euromonitors-Classification-for-Emerging-Market-Internet-Ecommerce.pdf