The year 2020 has been monumental in accelerating digital transformation, while no other industry has seen such an unprecedented and unforeseen growth than eCommerce. Amidst slowing economic activity and lockdowns becoming the new normal, COVID-19 has led to a surge in eCommerce as more consumers turned to their devices for everything ranging from their grocery, apparel and home furnishing purchases, while businesses took their stores online. In effect, retail eCommerce sales worldwide topped $4.28 trillion in 2020, whereas the industry’s share of global retail trade has risen from 14% in 2019 to about 17% in 2020.
And while the pandemic has certainly triggered the digital and eCommerce turning point, the industry continues to change and adapt. Over the last few years, it has become an indispensable part of the gobal retail framework and as both consumers and businesses are profiting from the perks of online transactions, the industry is only set to grow further.
With this in mind, below is a list of some top eCommerce stocks.
Amazon Inc (AMZN)
Founded in the garage of Jeff Bezos’ rented home in Washington, Amazon’s unconventional business model had initially left investors worried that this was just another dot-com fever dream that would quickly fizzle out. Yet, what started as an online book retailer soon morphed into an omnipresent eCommerce giant, sporting every imaginable type of product, media and service.
And while before the COVID-19 crisis, Amazon was already a vast presence in the global economy and its customers’ lives, as online retail grew massively during lockdown, the company was the first in line to reap the benefits and count jaw-dropping revenues. Like many other retailers, it focused on initiatives and solutions to the way the pandemic has reshaped consumers’ shopping habits. With its seemingly endless selection of products and drive to deliver convenience and low prices, Amazon became the default retailer and an essential service for many consumers at the height of the pandemic. By the end of July 2020, the company announced that it had managed to double its quarterly profits to $5.2 billion compared with $2.6 billion at the same point in 2019, while net sales rose by 40%.
So far, 2021, doesn’t seem to have slowed its momentum despite competition from traditional brick-and-mortar stores which have since reopened their doors. Amazon delivered a strong beat for Q1 2021, with earnings per share at $15.79, marking a 65.2% above the $9.56 projected by analysts. Its total revenue was $108.5 billion, with Amazon Web Services (AWS) maintaining its position as a key driver of profitability. At the same time, for its Q2 2021 results, it posted its third $100 billion quarter in a row.
Its retail services may be the company’s primary focus, but Amazon is also expanding its revenue sources beyond consumer products. As major sports leagues have put rights to their games up for grabs, Amazon snatched this opportunity, making itself into a hub of live sports. So far, its acquisition spree included rights to stream Yankees games, Seattle Sounders soccer games and 16 WNBA games. At the same time, it bought MGM, the U.S. movie studio home to the James Bond franchise for $8.45 billion, giving it a huge library of films and TV shows, not to mention ramping up competition with the likes of Netflix and Disney+.
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Alibaba Group Holding (BABA)
A Chinese success story like no other that has soared to record-breaking commercial height, Alibaba is by far an eCommerce leader in the country, providing direct marketplace services for both consumers and third-party wholesale services for retailers, as well as transactions into and out of China. It has also gained traction as a cloud and digital advertising company over the years, hosting the largest B2B marketplace through Alibaba.com, C2C marketplace with Taobao.com and B2C marketplace with the Tmall.com, a spin off from Taobao, while AliExpress.com, the much-loved online retail service connects small Chinese businesses with international buyers, mainly from the U.S., Russia and Brazil.
The Chinese firm reported a 30% increase in quarterly revenue back in November 2020, with revenues reaching 155.1 billion yan ($23.4 billion) for the three months ended September 2020, as the country was slowly recovering from the virus and online shopping demand remained high. Yet, its stock plunged after Chinese regulators suspended its affiliate company Ant Group’s IPO, which was anticipated to be one of the world’s biggest IPO with a share sale of at least $34.5 billion. Consumers appeared unmoved. In its financial results for the quarter and fiscal year ended March 31, 2021, the company posted revenue of RMB187,395 million ($28,602 million), an increase of 64% year-over-year, while its annual active consumers on its China retail marketplaces was 811 million for the twelve months ended March 31, 2021, an increase of 32 million from the twelve months ended December 31, 2020. Meanwhile, for the fiscal year ended March 31, 2021, revenue came in at RMB717,289 million (US$109,480 million), an increase of 41% year-over-year.
Since early October 2021, Alibaba appears to be making a splash on WallStreetBets, the subreddit where participants discuss stocks and option trading, notable for its aggressive trading strategies and for playing a major role in the GameStop short squeeze that caused losses for some U.S. firms and short sellers in early 2021. Alibaba became popular there, after Charlie Munger and the Daily Journal Corporation increased its position in Alibaba by 82%. As a result, the company is now looking particularly tempting to investors who believe that the regulatory tensions will stabilise. Others beg to defer, citing risks are still prevalent. Regardless, there’s no stopping the company in finding novel ways to innovate.
In an effort to overcome what has been dubbed as the last-mile shipping problem, in other words, the part where a parcel actually arrives at your door, which the company claims is plagued by delivery people getting lost or stuck in traffic, Alibaba has deployed autonomous delivery robots. Many saw this as a dig to human delivery workers, but the company insists that autonomous robots are the future of parcel delivery, particularly when considering the enormous number of parcels shipped in the country, the sheer size of the Chinese market itself and the fact that online shopping there is massive. Indeed, its autonomous delivery robots reached a milestone in September of this year, delivering more than a million parcels in China within one year of their launch. More specifically, just 200 of the robots have carried parcels to more than 200,000 consumers in 52 cities across 22 Chinese provinces. The company expects to grow its fleet from 200 robots to 10,000 robots, which will be able to handle an average of 1 million packages a day.
Interested to invest? Click here to buy Alibaba Group Holding (BABA).
Pinduoduo (PDD)
It might not be a familiar name to most Europeans like Alibaba (BABA), however, Pinduodo which was founded in 2015 as a mobile-only marketplace that connects millions of buyers with sellers, controlled 13.2% of China’s eCommerce market in 2021 according to eMarketer, placing it in third place behind JD and Alibaba. It is also considered among the fastest-growing tech companies in the world.
What sets the company apart from its counterparts is its innovative business model which has allowed it to expand its buyer base at a remarkable rate, establishing along the way a strong brand recognition. In effect, its total gross merchandise volume or GMV on its planform has increased from $72.75 billion in 2018 to $255.6 billion in 2020. By integrating social components into the traditional online shopping process, users can share Pinduoduo’s product information on social networks and can invite their contracts to form a so-called shopping team to get a lower price for their purchase. This function together with incentives like cash, coupon, lottery and free products, has had users hooked. Meanwhile, it has pioneered several new trends including social commerce and consumer-to-manufacturer, known as C2M.
On August 24, 2021, the company posted its first quarterly profit, as shoppers stayed online despite the easing of pandemic lockdowns. In effect, in the three months to June 30, it reported net income attributable to ordinary shareholders of 2.41 billion yuan ($372 million) compared with a net loss of 899.3 million yuan a year ago and revenue of 23.05 billion yuan.
More notably, Pinduoduo has tapped into a niche by leveraging its platform and developing the Internet+ Agriculture initiative, which aims to facilitate direct sales between small-scale farmers and consumers. The platform works by recommending products based on consumers’ shopping preferences. In addition, it has announced that it is launching an initiative worth 10 billion yan to address needs in the agricultural sector and rural areas, with profits from the second quarter and future quarters to be allocated to the initiative, until the total 10-billion-yuan commitment is fulfilled.
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Shopify Inc (SHOP)
The Canadian eCommerce company headquartered in Ottawa, Ontario may have today become a household name and the go-to platform for creating online stores, however, Shopify was once an online store itself. Growing from a mere tool to a platform and eventually into an entire eCommerce ecosystem, Shopify powers over 1 million merchants worldwide to start, run and grow their business independently. It has also managed to offer consumers a wider choice for their online shopping, fuelling competition and driving up quality.
At the height of the COVID-19 pandemic when both consumers and merchants pivoted online, Shopify was on a roll. Total revenue for the full year 2020 was $2,929.5 million, an 86% increase over 2019 and within this, Subscription Solutions revenue grew 41% to $908.8 million, while Merchant Solutions revenue grew 116% to $2,020.7 million. Following a blowout 2020, 2021 offers similar promise as the company continues to stake its claim as a global eCommerce software leader. Indeed, for the second quarter of 2021, the company’s earnings came in at an adjusted $2.24 per share, including gains on equity investments, up 113% from a year earlier, while revenue jumped 57% to $1.12 billion. As for revenue from subscriptions, this leaped 70% to $334.2 million. Gross merchandise volume or the total value of all goods sold on the Shopify platform, increased 40% to $42.2 billion.
As for its stock, throughout most of the month of September 2021, Shopify has been on a winning streak, while towards the middle of the month, it grabbed the number 2 spot on the Toronto Stock Exchange’s list of its 30 top-performing stocks over the past three years as its share price has risen 846% in this span.
Building on its spade of acquisitions and investments, Shopify made a strategic investment in Israeli eCommerce marketing startup Yotpo after penning a new partnership, which will help the latter accelerate its growth and product development, while the former already uses five of Yotpo’s products. Shopify has also recently launched Shopify Markets, what it calls a centralised hub with all the tools needed for merchants to manage global commerce. Enabling merchants easier penetration of cross-border markets, this new system will also allow them to manage global customers via a central dashboard, facilitate customisable payment methods, as well as pricing and product rollouts in each region.
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Wayfair (W)
Originally known as CSN Stores, a mashup of founders’ Niraj Shah and Steve Conine’s name, the company began with the website racksandstands.com, selling media stands and storage furniture. In 2003, it added patio and garden goods suppliers, while over the span of two years it expanded its catalogue to include all sorts of home-related products and items, such as home decor for homes and offices, kitchen and dining furniture and materials, home improvement goods, bed and bath materials, as well as lighting. Today, Wayfair offers more than 18 million items that hail from its home furnishings, decor, home improvement and other categories, while aside from its main website, it also operates the sites Joss & Main, AllModern, Birch Lane, DwellStuido and Perigold, with the latter serving as a push towards higher-end goods, which typically carry higher margins.
Before the pandemic, Amazon (AMZN) and Wayfair captured the bulk of online furniture sales, with Walmart (WMT) and Target (TGT) close on their heels. Then with the onset of COVID-19, Wayfair soared as people high on the nesting trend went on sprucing up their homes. From desks and chairs that helped to make telecommuters work more comfortable at home, to play sets for home-schooled children in need to burn off excess energy and seasonal decor to inject further cheer, Wayfair had become their go-to place. And it came up with an ingenious way to make shopping for users even more fun by using 3D models and imagery to help prospective clients see what a product would look like in their space.
As a result, it finished 2020 with an adjusted full-year profit of $5.04 a share, a markedly improvement from 2019’s loss of $8.03 a share and marking its first full year of profitability. Meanwhile, sales were up 55%, topping $14.1 billion in sales.
The question now remains whether Wayfair can keep its momentum post pandemic as restrictions are easing and shoppers are returning to physical stores. There is also the issue that the market for online home goods and furniture is very competitive, fragmented and rapidly changing, while the company competes across all segments of the home goods market. But according to the company’s management, while initially customers flocked to the site out of necessity, many are returning because they simply liked what they saw. And the numbers appear to corroborate this. Active customers reached 31.1 million as of June 30, 2021, an increase of 19.6% year-over-year, whereas the average order value grew to $278 for the second quarter of 2021, compared to $227 in the year-ago quarter.
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Zalando (ZAL)
The German multinational ecommerce company based in the German capital Berlin was established in 2008 after its founders were inspired by U.S. online retailer Zappos.com and just like it, Zalando too initially specialised in the sale of footwear. Since then, it has expanded, branching out into several other European countries including Austria, France, Belgium, Switzerland, Italy, Spain, Finland, Slovenia, the UK and many others. In Germany, the company is among the most popular online stores. Influenced by major tech companies from the East, particularly China, by 2013 it changed into a European digital platform, eventually transforming itself into an online shopping mall that featured fashion houses and retailers who could make sales via its Partner Program, often with limited input from Zalando itself.
One of Europe’s largest online retailers saw double-digit increases across the board in 2020. The company generated nearly €8 billion of revenue last year, a notable increase from the €6.5 billion it generated in 2019. Then back in March, the fashion retailer stated that its revenue expectations for 2021 were significantly above market projections, following a strong start to the year. GMW or sales made on its site by itself or by its parners is expected to increase 27% to 32% and to between €13.6 billion and €14.1 billion in 2021, above average analyst expectations of 25% growth. The gain in GMV was approximately 50% in the first quarter.
As for its stock, following the initial dip during the March 2020 lows when it was trading at €32.09, it has since recovered fairly well, currently trading at €79 on October 15, 2021. And more recently, Zalando was assigned a €107.00 price objective by JP Morgan Chase (JPM), which suggests a potential upside of 38.46% from the company’s current price. Other analysts and financial houses have also followed suit, with the Royal Bank of Canada setting a price of €119.00, while back in August, UBS Group set a €122.00 price objective.
In the cut-throat industry that is eCommerce, Zalando has found novel ways to innovate and set itself apart from the competition. For instance, as part of the retailer’s goal to increase its circularity throughout its product life cycles, the retailer is adopting new business models, following the launch of its do.MORE sustainability strategy. Part of its goals is to extend the life of 50 million fashion items by 2023. In this manner, the retailer hopes that these new initiatives will take it one step closer to a circular system, through the redesign of the product lifecycle.
To invest in Zalando (ZAL), click here.
Etsy Inc (ETSY)
Etsy founder Rob Kalin was once a small-time furniture maker who found it difficult to market his products. Believing that that a group of sellers would generate more buzz from potential buyers than lone individuals scrambling to sell their handmade creations on their own, together with Chris Maguire and Haim Schoppik, Kalin established Etsy as a peer-to-peer (P2P) eCommerce platform, where users could buy and sell handmade and unique products ranging from jewellery, clothing, home decor and furniture, toys, art and craft supplies, as well as tools. And although it works similarly to Amazon (AMZN) and eBay (EBAY), what sets Etsy apart is the fact that it has steadily become the home of one-of-a-kind products, whose creators include both hobbyists and professionals.
Then, when in April 2020, consumers far and wide were looking for face masks to protect themselves from COVID, Shopify saw this as a moment of opportunity and issued a call to all its sellers to start crafting masks to meet demand. Attracting millions of new buyers, Etsy sold over $346 million worth of face masks, about $12 million of them during the month of April alone, while the move thrust the brand front-and-centre for consumers who were avoiding typical brick-and-mortar stores. The surge in sales continued beyond masks, with Etsy reporting a 93% increase in sales in its second-quarter earnings of 2020. In effect, sales were up at least 128% year-on-year in each of the second, third and fourth quarters of 2020.
As for 2021, it appears to be a somewhat different story. In August of 2021, Etsy reported its second-quarter results that topped consensus estimates. Revenue came in at $528.9 million versus $525.8 million expected and $428.7 million year-over-year. However, the company's forecast for current-quarter sales missed Wall Street's expectations, signalling a bigger-than-expected slowdown in eCommerce growth. Accordingly, shares plunged by 12% in late trading on the day.
Still, many analysts swear by eCommerce’s growth which is expected to continue, while the company has also brought on a considerable number of new buyers and sellers to its platform over the past year. As long as Etsy can retain these new users and carry on increasing its active sellers, the company will continue dominating.
Head over to Moneybase Invest to add Etsy (ETSY) to your portfolio.
Rakuten Inc (4755)
Often hailed the Amazon of Japan, just like its U.S. counterpart, Rakuten, which in Japanese means optimism, was founded during the late 1990s when the internet began to be commercialised. Established by Harvard-educated Hiroshi Mikitani, the former banker wanted to create a site that would serve as an online shopping mall, empowering merchants rather than tightly controlling the virtual storefront as large companies at the time were doing. So Rakuten offered its services for a smaller fee than its competitors and gave sellers more control over their stores. For many years, it held the top eCommerce spot in Japan as the largest online retailer, offering more than 70 services which it operates through its Internet Services, FinTech and Mobile segments and since then.
When COVID-19 reached its pandemic status, Rakuten’s stock was trading at 672 JPY on March 13, 2020, however, since then its price has increased, trading at one point at a high of 1,488 JPY on March 19, 2021. Meanwhile, for fiscal year 2020, the annual revenue of the group reached around 1.46 trillion yen, up from about 1.26 trillion yen in the previous fiscal year. According to the company’s CEO, Rakuten managed to maintain its healthy growth throughout 2020 thanks to its ecosystem and the diversity of its business model. As a result, its global gross transaction value represented more than 22 trillion yen ($209 billion), whereas global membership reached around 1.5 billion members. Its fintech services were also robust, with the number of Rakuten cardholders topping 20 million, Rakuten Bank accounts surpassing 9 million and Rakuten Securities accounts reaching over 5 million.
Q1 of 2021 has also brought in some impressive numbers. The company recorded revenue of 391,513 million yen for the quarter, up 18.1% year-on-year and growth is accelerating. This also marks the highest revenue ever recorded by Rakuten in the first quarter of a fiscal year. At the same time, due to planned investment in future growth, such as the accelerated rollout of base station installations in the Mobile segment, the company recorded non-GAAP operating losses of 31,585 million yen, compared to non-GAAP operating losses of 18,136 million yen in the same period of the previous fiscal year.
But more notably, eCommerce is regarded as one of the fastest developing markets in Japan, with the business-to-consumer (B2C) eCommerce market more than doubling in size in the last decade according to Statista. Bearing in mind that Rakuten is the leading mail-order and eCommerce retailer in the country, the potential for further growth is certainly there.
To invest in Rakuten (4755), click here.
How to invest in eCommerce stocks with Moneybase Invest
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- Once you’ve onboarded successfully and have funded your account, head over to the search bar at the top of your screen and input either the company name or ticker symbol.
- Select the instrument of your choice from the list and then click on the Buy button on the window located at the bottom of your screen.
- On the New Order page, input the number of shares you would like to purchase and hit the Place Buy Order. The stock has been added to your portfolio.
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