Shopping online is a booming industry. U.S. online retail sales of physical goods are expected to balloon from $501 billion last year to $740 billion by 2023, according to market researcher Statista. The gains will be even stronger overseas, where the migration online is earlier in its growth cycle.
There will be plenty of winning investments along the way, but let's take a closer look at three players from all over the world --Canada's Shopify (NYSE:SHOP), China's Vipshop Holdings (NYSE:VIPS), and U.S.-based Etsy (NASDAQ:ETSY) -- that are positioned well to beat the market.
One of the best things about the internet is that the world is just a click away. If you have a band, there are plenty of sites to introduce your music to the planet. Make videos? Love to write? The world is your audience. The same principle applies to budding entrepreneurs, and that's where Shopify comes in. Founder Tobias Lutke wanted to sell snowboards online. Frustrated by the alternatives he created his own e-commerce platform 15 years ago. Other shop owners wanted to take advantage of the intuitive and scalable hub, and an e-commerce business was born.
There are more than 800,000 merchants leaning on Shopify to sell to the wired world. A whopping $13.8 billion in gross merchandise volume was transacted through its e-commerce platform in its latest quarter, a 51% surge over the past year. Shopify cashes in through subscription revenue, a piece of any subsequent sales, and other merchant services that it's able to provide given its trusted relationship with its members.
Shopify is a stock that's never been cheap, but it's somewhat on sale these days. The stock has shed a quarter of its value since peaking last month. Revenue growth may be decelerating as it matures, but its top line still came through with a 48% advance last time out. The ceiling remains high for Shopify, making it an opportunistic purchase after its recent 25% correction.
Flash sale sites specializing in apparel may seem like a throwback niche, but discounter Vipshop is still a force in China. Revenue climbed 10% to $3.3 billion in its latest quarter, accelerating for the first time in three years. The bottom line is even more exciting here, as adjusted earnings skyrocketed 84% during the period.
Vipshop offers brand-name apparel and accessories at steep discounts, and that value proposition is striking a chord with young Chinese shoppers. There are now 33.1 million active customers who rely on Vipshop for marked-down fashions, a gain of 11% over the past year.
The stock makes the cut because of its cheap valuation. Unlike Shopify commanding lofty multiples even after its recent correction Vipshop hit new highs this month and it's still trading for just 11 times this year's earnings, and 9 times next year's multiple. Chinese stocks have fallen out of favor for various reasons, but Vipshop seems to be in the right place in the world's most populous country, as an economic slowdown forces aspiring fashionistas to seek out clothing bargains.
There aren't too many companies that can stare down the barrel of Amazon.com's (NASDAQ:AMZN) giant gun and come out alive, but Etsy has withstood the challenge of facing off against the world's largest e-commerce player. Etsy's arts, crafts, and vintage marketplace seemed as if would be toast when Amazon Handmade was introduced as a place for artisans to stand out for their mass-market website. Etsy has emerged even stronger, and last year it was even able to aggressively boost its seller rates and it still didn't skip a beat.
Increasing the costs of selling on Etsy in the springtime of last year could've scared away sellers, but business has never been better. Gross merchandise sales rose 21% in its latest quarter. Marketplace revenue soared 47%, largely as the result of the bigger piece of the action that Etsy is now collecting. The year-over-year comparisons will cool now that we've lapped last year's rate hike, but Etsy has established itself as the ultimate source for original creations.
Etsy isn't cheap like Vipshop, but like Shopify it has also corrected by 25% since peaking last summer. Nervous shareholders have been cleared out, setting the stage for the popular platform to recover in the months ahead. If you can hold up against Amazon you're probably built to last.