What are the implications of a potential recession for eCommerce growth?

Investing.com -- Rising recession fears are casting a shadow over the US e-commerce sector, prompting investors to reassess growth expectations, according to a recent note from Bernstein analysts. 

"Recession fears are growing again, or at the very least the expectation for an economic slowdown has increasingly become the base case narrative," said the firm. 

The shift in economic sentiment has led to a drop in e-commerce and retail stocks, down 15% since mid-February.

In the note, Bernstein analysts explored the implications of a potential recession on e-commerce growth, drawing lessons from past economic downturns. 

They cautioned that "there is no perfect historical period for us to look back to in order to size the impact of a recession on eCommerce growth." 

However, they suggest that while eCommerce trends should broadly mimic retail, online channels are likely to "take share from brick & mortar through these periods (and bounce back quicker), as we largely saw in 2001, 2008/09, and again in 2023/24."

The analysts estimate that a severe retail spending pullback, similar to the 2008/09 recession, could cause US eCommerce growth to plummet to "–LSD to –MSD" (low single-digit to mid-single-digit decline). A milder downturn, akin to 2001, could see growth retract to "+LSD to +MSD." 

Bernstein also notes a unique factor this time around, citing that "several discretionary categories have been under pressure for a few years now (e.g., home goods) on the back of the COVID pull-forward." 

Bernstein believes that "GMV mix and lock-in" will differentiate company performance during a recession. 

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They highlight companies like Amazon (NASDAQ:AMZN), Walmart (NYSE:WMT), and Costco (NASDAQ:COST) as being "best positioned to ride a macro storm" due to their defensive category mix and membership lock-in. 

Conversely, they believe discretionary platforms such as eBay (NASDAQ:EBAY), Etsy (NASDAQ:ETSY), Wayfair (NYSE:W), and Target could face greater risks.

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