One way investors can achieve outsized gains is by catching an emerging trend and investing in key players as it evolves. To that end, there are very few trends that can match the enormous and growing potential of e-commerce. Online sales in the U.S. amounted to $322 billion in 2016, and that figure is expected to climb to $485 billion by 2021, according to Statista. While the current trend has been over 20 years in the making, it's still far from over and represents a compelling opportunity for investors.
eMarketer recently released data detailing the top online retailers in the U.S., which provides a starting point for those interested in investing in e-commerce. The companies that took the top three spots were Amazon.com, Inc. (NASDAQ:AMZN), Apple Inc. (NASDAQ:AAPL), and Wal-Mart Stores, Inc. (NYSE:WMT).
The Big Kahuna
No discussion of e-commerce is complete without addressing the 800-pound gorilla in the room. The largest player in e-commerce, bar none, is Amazon. Over the trailing-12-month period, Amazon had total revenue of nearly $136 billion, and e-commerce accounted for 70% of that amount, or nearly $95 billion. The company's online sales grew 20% last year, while total revenue grew 27%.
In addition to e-commerce sales, Amazon has several other prosperous businesses, including its cloud-computing segment, Amazon Web Services; its Prime membership service; and a thriving artificial-intelligence segment led by Alexa, the company's virtual personal assistant. Alexa powers a growing number of Amazon products, including its Echo family of smart speakers, as well is the Fire TV, Fire Stick, and Fire Tablets.
An Apple a day
Apple may not immediately come to mind when you think e-commerce, but there are several factors at play. Many of the company's flagship phones and computer products are ordered online. Add to that its signature iTunes, app store and its growing Apple Pay payments business, and it's no wonder Apple took the second spot. Its e-commerce sales grew an estimated 40% to nearly $17 billion, which represents nearly 8% of Apple's total revenue of $218 billion over the trailing 12 months.
CEO Tim Cook revealed in Apple's most recent earnings conference call that the company planned to double revenue from its services segment by the end of 2020, and that development should serve to increase the company's share of e-commerce as well.
Down but not out
With the rise of Amazon, many had discounted Wal-Mart in the realm of e-commerce, but that pronouncement may have been premature. While physical stores still account for 97% of Wal-Mart's revenue, its online sales grew 9% to over $14 billion for the trailing 12 months. The company signaled to investors that it was serious about e-commerce with its recent acquisition of online retailer Jet.com, as well as Modcloth and Moosejaw with their e-commerce sites.
In the company's most recent earnings press release, Wal-Mart's president and CEO, Doug McMillon, stated:
We're moving with speed to become more of a digital enterprise and better serve customers. We had a very solid fourth quarter, with U.S. comp sales growth of 1.8% and U.S. e-commerce GMV [gross merchandise volume] growth of 36%.
It's important to note that of the top 25 retailers eMarketer ranked by online sales, Amazon's total e-commerce contribution exceeded that of the next 24 combined. Data released by Slice Intelligence estimates that 43% of all online retail sales in 2016 happened on Amazon's website, and the e-commerce giant captured more than half of all online sales growth last year.
It's unlikely that Amazon's position at the top will be in jeopardy anytime soon, but there is still plenty of growth for the industry, as online sales account for only 8.3% of total sales for last year.
Danny Vena owns shares of Amazon and Apple. Danny Vena has the following options: short June 2017 $72.5 calls on Wal-Mart Stores, long January 2018 $57.5 calls on Wal-Mart Stores, long January 2018 $55 calls on Wal-Mart Stores, and short June 2017 $72.5 calls on Wal-Mart Stores. The Motley Fool owns shares of and recommends Amazon and Apple. The Motley Fool has a disclosure policy.