By Michael Brush
Given its huge presence in cloud services with AWS, Amazon.com /zigman2/quotes/210331248/composite AMZN +4.11% is no online shopping pure play. But it is so good at this, it now has 41% of U.S. ecommerce, says Bank of America. So it’s a must-own in your online shopping ETF. Increasing product reach and even faster shipping times should boost growth next year, says Bank of America analyst Justin Post.
Online shopping is super popular in Korea, and this company is the way to play the trend. Coupang /zigman2/quotes/225253473/composite CPNG +4.28% is the largest ecommerce company there. It is also growing quickly in Japan. Korean ecommerce grew 19% a year from 2017-2020, and it is not slowing down. Ecommerce will account for 56% retail sales in 2025, up from 34% last year, says Bank of America analyst Susie Lee.
Farfetch /zigman2/quotes/203824836/composite FTCH +2.84% is the biggest global player in online luxury goods, a hot sector. The sector will grow 15%-20% a year through 2025, believes Bank of America analyst Geoffroy de Mendez. Farfetch is well-positioned with its marketplace model, which means more products and limited inventory risk. These advantages have helped Farfetch grow twice as fast as its sector in the past five years. Bank of America projects 30%-35% annual sales growth over the next several years. Partnerships with Alibaba /zigman2/quotes/201948298/composite BABA +6.37% and Compagnie Financiere Richemont Unsponsored Switzerland /zigman2/quotes/206960176/composite CFRUY +3.10% open doors to China.
The largest retailer in China by revenue, JD.com /zigman2/quotes/205122565/composite JD +4.15% has nearly a half a billion active customer accounts. It benefits from a partnership with Tencent /zigman2/quotes/207908563/composite TCEHY +3.61% . This gives the retailer access to Tencent’s huge user base in online games and mobile apps Weixin and WeChat. JD.com also has a partnership with Walmart. The company will post above-average growth because it continues to win over so many users and merchants, says Bank of America analyst Eddie Leung.
In Latin America, ecommerce penetration is low. The region has plenty of room to catch up. There is no reason it won’t. The growth in distribution centers, last-mile hubs and better shipping dock facilities supports the trend. MercadoLibre /zigman2/quotes/200678442/composite MELI +5.97% , the largest online commerce platform in Latin America, continues to build out third-party drop-off and pick-up points to improve delivery. Same-day and next-day delivery has increased dramatically, says Bank of America analyst Robert Ford.
Sea /zigman2/quotes/202797958/composite SE +14.05% offers its ecommerce platform Shopee throughout much of Asia, and in Brazil and in Mexico. It also operates Garena, a global game developer and publisher, and digital financial services under the SeaMoney brand. It has a dominant position in much of Asia, which suggests continued growth.
Amazon.com dominates U.S. ecommerce, but the big brick-and-mortar retailers are investing heavily and catching up. Unlike Amazon.com, Walmart can leverage its national store footprint to support fulfilment. Its store base of nearly 5,000 locations gives it an edge in online grocery sales and delivery. About 90% of the U.S. population is within 10 miles of a Walmart, and 70% of Walmart stores offer same-day grocery delivery. This helps explain why Walmart is the top choice for online groceries. Because of its size, Walmart has an edge in the port congestion battle, and it can offer competitive prices.
Target’s /zigman2/quotes/207799045/composite TGT -1.41% ecommerce presence is small. But it has been working hard to build an online business, so now it’s growing at about 20% a year, says Bank of America analyst Robby Ohmes. Like Walmart, it can use its stores as fulfillment centers, and it’s making strides in same-day delivery. Target should fare relatively well this holiday season because its heft gives it better port access than competitors.
Michael Brush is a columnist for MarketWatch. At the time of publication, he owned HOOD, AMZN, CPNG, FTCH, BABA, MELI and SE. Brush has suggested HOOD, AMZN and BABA in his stock newsletter, Brush Up on Stocks. Follow him on Twitter @mbrushstocks.