Within the last two decades, e-commerce (short for electronic commerce) has really blossomed into a massive industry. E-commerce stocks are issued by companies that conduct their retail business online, taking orders through a digital platform and shipping goods to consumers directly.
Top E-Commerce Companies in the World
The following companies have emerged as the current leaders of the e-commerce industry.
Amazon (NASDAQ: AMZN)
Amazon (NASDAQ: AMZN) is the undisputed king of e-commerce. What started out as a place to buy used books has become a global marketplace for buying pretty much anything. The Seattle-based company has disrupted a number of markets and technology services in its journey to becoming the largest internet company in the world in terms of revenue. As of 2015, Amazon has already surpassed WalMart as the most valuable world retailer in terms of market capitalization. Its members-only shopping program, Amazon Prime, has over 100 million subscribers worldwide.
eBay (NASDAQ: EBAY)
eBay (NASDAQ: EBAY) was one of the only success stories to emerge from the dot-com bubble. Founded in 1995, this San Jose company is a peer-to-peer selling platform that essentially works like an auction house. In its early years, eBay was a place for individuals to sell used goods. In recent years, it has become another retail marketplace for companies large and small to sell their inventory. eBay has also been involved in creating, buying, and/or selling other tech services such as PayPal, Skype, and Craigslist.
Zappos was an online shoe and fashion retailer, which was sold to Amazon in a 1.2 billion dollar all-stock deal. Founded in 1999 with the un-inspiring name of shoesite.com, the name was changed to a trendier-sounding variant of the Spanish word for shoes. Zappos went from annual earnings of $1.6 million in 1999 to $8.4 million in 2000, and $184 million in 2004. They continued to double their profits year after year, until 2015 when Forbes was reporting annual revenues of $2 billion—but by this time, Amazon had already turned Zappos into a wholly-owned subsidiary.
Home Depot (NYSE: HD)
Home Depot (NYSE: HD) is actually a brick-and-mortar establishment with a huge online presence. It is the largest home improvement retailer in the United States. In addition to its big-box retail locations, Home Depot also sells inventory online. In addition to offering products from other companies, Home Depot also has its own product lines, such as Husky tools, Behr paints, and Glacier Bay plumbing fixtures and sinks. With revenues of $108 billion, Home Depot is generating almost twice the cash flow of its biggest competitor, Lowes (at around $68 billion).
Flipkart is an Indian startup and e-commerce site that bears some similarity to Amazon. Though it’s not yet listed on the New York Stock Exchange, this Bengaluru-based business might become an accessible publicly traded security for American traders in 2022—but in the meantime, it actually is 82% owned by Walmart (NYSE: WMT). Flipkart started out as a venue for selling books, but now sells fashion products and electronics as well, in addition to its Indian payment gateway PhonePe. Its primary competitors are Amazon India and domestic rival Snapdeal, though Flipkart has managed to retain an almost 40% share of India’s online economy.
Alibaba (NYSE: BABA)
Alibaba (NYSE: BABA) is the Chinese version of Amazon. Larger than Amazon, it’s the world’s largest retailer. AliExpress is one of its strongest subsidiaries and a venue where many online retailers source their products before selling them through their own e-commerce stores (or on Amazon).
Alibaba is a veritable trading gateway between the East and West, and it reaps the profit accordingly. Whether you’re looking for customized promotional products or an entire chemical plant, Alibaba is the e-commerce solution for cost-effective goods. During its IPO (which was, incidentally, the largest in history at $25 billion), its market value was $231 billion. Today, it has surpassed $352 billion to become the 59th biggest public company in the world—and one of the 10 most valuable.
Shopify (NYSE: SHOP)
Shopify (NYSE: SHOP) is a Canadian-based, international e-commerce platform and point-of-sale system for more than a million individual retailers and companies. It boasts a collected gross merchandising volume of more than $40 billion. Shopify was actually started by some business partners who had their own online store selling snowboarding equipment but were dissatisfied with existing e-commerce platforms...so they built their own. Today, Shopify is the unrivaled name for individual vendors and companies engaged in every type of e-Commerce. Shopify has also announced plans to develop an entrepreneurial training center in Los Angeles, with an eye toward expanding into the brick-and-mortar space.
Rakuten (TYO: 4755)
Rakuten (TYO: 4755) is a Tokyo-based e-commerce outfit—the largest in Japan and one of the world’s largest in terms of sales. Rakuten also runs Japan’s biggest online bank, and they are the biggest credit card company in terms of transactional value. In 2005, Rakuten started to expand overseas by buying up similar e-commerce companies, like Buy.com (American), PriceMinister (France), and Tradoria (Germany). Rakuten also has sizeable interests in diverse verticals like Pinterest (social media and marketing), Lyft (ride-sharing), and Acorns (retail investments). This diverse range of investments, coupled with its pattern of expansion, shows that Rakuten is piloted by competent management and can hold its own against competitors like Amazon and Alibaba.
Walmart (NYSE: WMT)
Walmart (NYSE: WMT) is the undisputed king of brick-and-mortar retail, ruling the world of commerce with their almost 11,500 stores in more than two dozen countries, operating under 55 different names (including Walmart). Even so, Walmart has made smart moves in the online sphere, buying up competitor Jet.com and outdoor retailer Moosejaw, which brought with it partnerships of major brands like Patagonia and The North Face. Walmart also outbid Amazon for a controlling stake in Flipkart, India’s biggest online retailer.
Walmart is the largest company in the world in terms of revenue, with over $500 billion reported in 2019. Walmart has been highly successful in the United States, starting out as a regional superstore, but expanding coast to coast by the end of the 20th century. Walmart’s operations outside the US have been somewhat of a mixed bag, succeeding in Canada, the UK, China, and South America, but underperforming and even failing in other countries like Korea and Germany.
JD.com (NASDAQ: JD)
JD.com (NASDAQ: JD) is a Beijing-based Chinese e-commerce company focusing mainly on electronics, although it sells other items as well. Also known by its full name, Jingdong, it is one of China’s biggest B2C outlets and a serious competitor to Alibaba.
JD is at the cutting edge of drone delivery, building drone delivery airports and maintaining the largest fleet of delivery drones in the world. Recently they unveiled an autonomous truck and have pioneered other AI-based logistics and fulfillment systems. JD has partnered with Tencent, another Chinese retailer that also owns a 20% stake in JD, to create marketing and fulfillment solutions for over 170 million merchants worldwide.
History of E-commerce
Just a few decades ago, e-commerce wasn’t even a word in the English lexicon. In fact, when the internet first came around, many established businesses were slow to create a web presence—creating the perfect opportunity for startup companies to disrupt the retail industry. As it turns out, the first wave of e-commerce operations was mostly hot air, which in turn led to the dot-com bubble pop.
However, a few companies emerged unscathed—among them eBay—which quickly became a household name. The company provided a new way to shop for goods outside the framework of established brick-and-mortars. This concept would reach full maturity with Amazon, where millions of vendors now sell just about everything.
The e-commerce industry was given a huge boost by the invention of the search engine, which allows consumers to scan the entire internet and locate the product that best meets their needs. Some of the largest internet companies today (such as Google, Bing, and Yahoo) are primarily concerned with optimizing customer search and connecting customers to e-commerce businesses.
There is no doubt that e-commerce has disrupted the retail industry and changed our paradigm of shopping forever. Despite the fact that a select group of behemoths rules the waves, there are still plenty of opportunities for smaller businesses to capitalize on niche markets. The accessibility and earnings potential provided by the internet allows companies with no previous reputation to become some of the best growth stocks. Moreover, the need for solutions and employees in online e-commerce has created a secondary e-commerce market of marketing, fulfillment, and solutions.
What is Drop Shipping?
Drop shipping was popularized by Tim Ferriss’s landmark book Four Hour Work Week, though it had already been in existence and leveraged by savvy entrepreneurs for several years. The basic premise of drop shipping is that a merchant runs an online store, holding no inventory whatsoever. When customers place orders, the merchant in turn orders that item from their suppliers, whether they’re domestic or based in China.
This fulfillment model allows just about anyone to run a business without the hassle of fulfillment or the cost of keeping an inventory. While some merchants have really seen huge profits from dropshipping, others have not found it to be the magic snake oil it’s been painted as. But love it or hate it, dropshipping has allowed many e-commerce outfits to grow and prosper, even turning companies like Amazon into the biggest stock gainers.
Today, e-commerce companies analyze data and statistics in order to increase their share of the online marketplace: bounce rate, cart abandonment, content marketing, customer experience, and customer acquisition cost, to name a few. While maximizing the profit of every shopping experience has always been a concern in business, running a successful e-commerce company requires skillful web development and innovation.
The growth of e-commerce domestically and the rapidly burgeoning global e-commerce scene has led to a saturation of startups in the market. The key to lasting success in online sales is to be able to develop a solid process of customer acquisition and repeat business. An e-commerce store with poor backend management will not be able to compete against a competing e-commerce website like Amazon.
To that end, a secondary market of e-commerce services and internet companies have sprung up, which do not directly compete in the e-commerce marketplace, but rather create business solutions, such as mobile app development. A secondary market business like this could focus on creating a quality e-commerce platform, e-commerce software, or e-commerce fulfillment solutions.
Should I Invest in E-commerce?
Many e-commerce companies are still in phases of expansion, and if they’ve expanded to a point where growth seems impossible, they tend to grow by expanding overseas and swallowing up competitors. This means that rather than pay out dividends, they tend to put profits back into their business, making them somewhat poor choices (at present) for investors wanting to focus on a dividend investing strategy.
Some e-commerce companies are also overvalued, at least according to select pundits. The hype surrounding a new technology or business model may drive the stock price up and up, which in turn brings in more investors—creating an upward spiral that will eventually run out of steam and begin to drop.
However, in the same vein, e-commerce companies can see flurries of activity. The industry is established, but still relatively new. The players are making huge moves, and the tech is changing rapidly—even more so when the companies themselves are changing the tech landscape, for example with AI and drone delivery. This means that certain e-commerce stocks can be attractive options for day traders who like to play around with the most active stocks.
It’s important to consider a number of factors before investing in e-commerce—as you would for any type of security, such as risk tolerance and your own means. For example, with one share of Amazon stock, you may be able to buy 17 shares of Walmart—a company with a longer history, a much better P/E ratio, and one that pays 1.7% dividends. To that end, if you’re building your own portfolio, you will probably want to make e-commerce just one part of it, balanced out by other types of industries. In any case, it’s likely that the e-commerce industry is not going away. Investing in companies with an online presence can be a smart, long-term move.7 Undervalued Stocks in an Overvalued Market
In June 2021 the investment firm, Bespoke Investments made this ominous pronouncement: “Investors simultaneously think the market is overvalued, but likely to keep climbing.”
This statement was meant to be a warning to investors. However, investors have shown that they can be very resilient even as the major indices continue to reach new highs.
So it would seem strange to be looking at a list of undervalued stocks. But looking at undervalued stocks is a form of value investing. And in 2021, investors are shifting between growth and value investing on a monthly, if not weekly basis.
An undervalued stock is one that is considered to be trading below its fair value. However, there’s no singular right way to identify undervalued stocks. Some investors prefer to look at fundamental metrics. Others will look for technical signals.
The one common element of all undervalued stocks is that they are stocks that have room to grow. That’s something that all investors can get behind. And in this special presentation, we’ll take a look at seven stocks that are showing signs of being undervalued at this time.
View the "7 Undervalued Stocks in an Overvalued Market"
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