The global retail market is growing exponentially, which could mean more money to investors who get in on the right e-commerce stocks. For over a decade, e-commerce has been transforming how consumers buy products. Technological advancements have made it easier, cheaper, and more efficient to shop online.
After all, do you know anyone right now who doesn’t shop at Amazon.com?
According to a report from the Observer, consumer spending accounted for more than three-quarters of GDP in Q3 2018, yet there are still opportunities for unlimited growth at different levels of the value chain. Market research company eMarketer estimates that the global business-to-consumer e-commerce spending will reach roughly $2.84 trillion this year, and it will rise to $4.88 trillion by 2021.
Now, there are several angles an investor can take on how to play e-commerce. Below, you’ll find seven stocks in the space that are worth watching.
E-Commerce Stocks: Marketplaces
Alibaba (NYSE: baba)Alibaba is the largest Chinese company that trades in the U.S., with a market cap larger than Wal Mart, Exxon, and JPMorgan Chase.
The company is China’s leader in online retail. However, this e-commerce stock does a lot of business overseas. Alibaba.com has leveraged the power of the marketplace model and continues to experience rapid growth in the space. In 2018, Alibaba delivered revenue growth of 58% to $39.9 billion. The firm projects even further growth in 2019.
eBay (NASDAQ:ebay) One of the first online retailers, eBay’s auction website is well known in e-commerce. Also, the company owns the ticket-reselling marketplace StubHub. Most recently, it acquired Corrigon, Flipkart, and Terapeak.
eBay’s profit margins have always been high. However, the auction-based company faces challenges from consumers who have more options. With a market cap of nearly $30B, eBay maintains a solid footing in the space.
E-Commerce Stocks: Software Providers
Shopify (NASDAQ: shop): The company provides a cloud-based multi-channel e-commerce platform. Originally, it started as a platform for Small and Medium-size Enterprises (SMEs) but has now grown large enough to handle any sized business.
It generates revenue by commissions on every item sold through its platform and payment processing services. The company’s valuation has skyrocketed by nearly 500% since its initial public offering in 2015. With approximately 160,000 online stores, at the time of its IPO, Shopify has soared to more than 600,000 online stores across 175 countries.
That said, there is still plenty of room for growth for this up-and-coming e-commerce stock.
Baozun (NASDAQ:bzun) is known as “the Shopify of China.” That said, its platform is customizable making it appealing for its customers who wish to sell their products online.
In fact, Baozun has managed to carve a niche for itself in Asia. Its clients include Microsoft, Nike, Calvin Klein, and Starbucks.
China os the largest e-commerce market. That said, Baozun is uniquely positioned to capture a large chunk of market share. The company is now collaborating with Western partners, which could help sales volumes increase and overall growth on its platform.
E-Commerce Stocks- the elephant in the room
Amazon (NASDAQ: AMZN) is the king of online sales. According to eMarketer, it owns a dominant 50% of the U.S. e-commerce market. That said, its one of the largest companies in the world, alongside Microsoft, Apple, and Alphabet.
Amazon continues to show innovation, and enter new marketplaces. For example, it recently purchased grocer, Whole Foods. It will be interesting to see what the strategy is with that acquisition, but investors know one thing- Amazon is a threat to any business that it enters.
That said, the company is growing its cloud computing business, video streaming, and voice-activated search markets, through its Amazon Web Services.
Also, the firm has shown a keen interest in the pharmacy, logistics and advertising markets. More so, the company has been able to build a strong customer base through its Prime loyalty program where it has more than 100 million members globally. It’s on track to hit $18 billion in Prime membership revenue by 2020.
E-Commerce Stocks- Direct Sellers
Wayfair (NASDAQ:W) With a market cap of under $10B, Wayfair is not the biggest company on this list. However, when it comes to online furniture sales, they are in a league of their own.
Wayfair was founded in 2002 and has been a publicly traded stock since 2014. The company’s stock has soared since its IPO. Also, it’s been growing its revenues. That said, its estimated to reach some $10 billion in sales by 2019. Wayfair is strategically positioned for growth, especially as the real estate market continues to grow, homeowners will be shopping for furniture and home goods.
Stitch Fix (NASDAQ: SFIX) is a relatively new player in the e-commerce sector. The company positions itself as a styling service. Online customers are given a stylist who caters a look based on their preferences. It sends the customer a box of clothes, the customer is then allowed to keep what they like and return the rest.
Stitch Fix uses technology and algorithms to determine its buying and selecting process, and it focuses on using the customer’s past choices to guide and select future picks.
Switch Fix’ AI-powered business model projects a disruptive nature, and pundits have noted that it could become the Netflix of fashion. For example, Stitch Fix has started producing and branding its clothing line by using its large data to its advantage.
The company is planning to launch its first international expansion this year starting with the United Kingdom and has moved into manufacturing men’s, plus-sized, and kid clothes.
The Bottom Line
E-commerce is growing exponentially. Technologies like artificial intelligence, machine learning, and cloud computing will play a significant role in the future of e-commerce.
That said, the internet has enabled people to communicate and exchange goods faster. For example, you don’t even have to leave your home to get your groceries in anymore; you can use an app on your phone to buy them.
At some point, e-commerce will be an ultra-competitive space. When that happens, expect to see mergers used as a tool for growth. However, we are not near that stage yet.
That said, brick-and-mortar retailers like Wal Mart, and Target, are pushing hard to catch up in the space. However, don’t count them out just yet.