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Takeaway: We expect to have no fewer than 15 Black Books in 2015 – the first of which will be a deep dive on e-commerce.

Please mark your calendar for the first of several Hedgeye Retail Black Books we’ll be releasing this quarter. The first one will be a Deep Dive into e-commerce, and will include a detailed presentation and conference call on Thursday, January 22nd at 11am ET. As always, we’ll tie it into key stock ideas – some existing, some new.

Our Research, which will utilize many different resources including a detailed consumer on-line spending survey, will be focused  on four primary areas:

  1. Secular vs Cyclical Growth
    • The Secular growth in e-commerce is undeniable. But where exactly are we in its evolution?
    • Is e-commerce something that will allow retailers to push through historical peak margins? That’s the call that needs to be made to justify margin improvement from here. We’ll quantify the puts and takes.
  2. Category Analysis
    • Which categories in retail (Apparel, Home Furnishings, Electronics, Footwear, Home improvement, about 20 in total…) have the most advanced e-commerce models, and which are most deficient?
    • Consumer opinion on which categories they are incrementally shifting dollars away from brick & mortar, and towards online channels?  Where is there the greatest opportunity to see changes in consumer spending behavior over the next three years?
    • Are the companies aligned with the likely shift in spending, or not?
    • Where does Amazon fit in as it relates to market share in each category, and how is that evolving?
  3. Profitability Implications
    • We’ll take a look at e-commerce vs B&M margins across companies and retail sub-sectors.  There is an extremely wide bifurcation in margins between the different players.
    • A comparison across Retail of spending on IT systems, DC infrastructure, and the ability to use B&M stores as warehouses to facilitate e-commerce growth goals.
    • Where will we see the greatest incremental return on investment (sector and company) as growth continues?
    • A look at how e-commerce sales are inextricably linked to B&M and how that relationship may lead to fewer store closures than we would otherwise suspect.
  4. E-commerce Trends By Category and Company
    • A quantifiable examination at the differences in visitation, shopping patterns, and demographics across categories in retail. And how that affects spending and consumers’ willingness to take purchases online.
    • How do the key metrics (visitation, reach, basket size, and conversion) correlate with reported e-commerce sales figures and what that looks like going forward as e-commerce becomes a more meaningful driver of sales growth.