Redbubble Ltd (ASX: RBL) has undeniably been one of the largest beneficiaries throughout COVID-19, with its shares returning over 1000% since the bottom of the market in March last year.
It’s not just its valuation that’s gone through the roof recently though.
Lockdowns and generous stimulus have provided the perfect storm for creative artists and retail shoppers to transact through its platform. Its last trading update indicated it now has over 572,000 artists and 6.2 million customers that’s been accelerated through a push towards e-commerce.
Redbubble share price
Here are two reasons why I like Redbubble at these levels:
- Attractive business model
Traditional retailers that buy and hold inventory face a significant amount of risks, which can negatively impact customer satisfaction and profitability.
One of the largest risks involves inaccurately forecasting the right inventory that suits customer needs as well as the correct quantity. These days, the process is usually automated to an extent through software, but there’s always the risk in retail that consumer preferences change over time and businesses have to continually play catch up in order to remain competitive.
Redbubble doesn’t hold any inventory like some of its competitors.
Artists are able to upload designs with the customer receiving a one-off product that is created only after it’s been ordered.
This eliminates the need for any inventory forecasts and correctly aligns the supply of artistic designs to the corresponding level of customer demand.
- Large market opportunity with structural tailwinds
As part of the Rask investment philosophy, we often look for companies that have a large Total Addressable Market (TAM) that operate in structurally growing industries.
Redbubble operates in multiple online retail market sectors including apparel, stationery, art, electronic accessories and home decor.
Due to the recent COVID-19 acceleration towards e-commerce, I think it would be fairly tricky to come to any sort of close estimate, but management has indicated this number to be around $366 billion globally across online apparel and homewares.
It would probably be unrealistic to extrapolate Redubble’s recent growth and expect it to achieve these levels consistently for years, but I think the continued adoption of e-commerce will be an ongoing tailwind for years to come.
Summary
No investment comes without risks, but these are just two reasons why Redbubble stands out to me amongst other ASX retailers.
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