E-commerce is an industry that is almost certain to expand over the next five years. That’s because, despite appearances, online retail isn’t killing the traditional shopping experience, or even over it. In the United States, for example, e-commerce sales accounted for 16% of total retail sales in the third quarter. As this number grows, leaders in the space can ride the wave and deliver outstanding returns over the next five years (and beyond).
Here are two e-commerce companies that may have what it takes to make this happen: free market (NASDAQ: MELI) and Shopping (NASDAQ: STORE).
MercadoLibre is Latin America’s leading e-commerce company. Its operations span several countries in the region and adapt to the terrain. It succeeded despite political and economic instability in much of Latin America. One secret behind MercadoLibre’s success is the breadth of its offering, which creates high switching costs and network effects. The company not only operates an e-commerce platform; It also provides payment solutions and many other financial services (digital wallets, loans, BNPL, etc.) to consumers and businesses, as well as a logistics and fulfillment network.
MercadoLibre has faced increasing competition in recent years, especially from Shopee, of which the company is owned. Shipping Co., Ltd.. However, MercadoLibre should remain highly competitive given its strong market position and efforts to attract customers through initiatives such as expanding its free shipping service. Furthermore, e-commerce has grown rapidly in Latin America in recent years, and this trend should continue for the foreseeable future. For these reasons, MercadoLibre should deliver excellent financial performance and market returns over the next five years.
Shopify has made significant progress over the past two years. The company’s revenue growth is strong; it regularly turns a net profit, and free cash flow is growing rapidly. Here’s why the stock has crushed the market recently. Shopify should also capitalize on the growth of e-commerce over the next five years. The company remains a leader in its market segment, providing merchants with relatively simple, highly customizable templates to launch online storefronts. It also offers a range of other services to simplify merchants’ tasks, including inventory management and marketing.
