While online shopping has become an everyday occurrence for some, e-commerce is only just getting started. Consumers worldwide spent an estimated $3.46 trillion online in 2019, up nearly 18% year over year, according to Digital Commerce 360. Digital sales are projected to represent more than 16% of total retail for the year, and account for more than three-quarters of retail's total gains.  And those numbers are only expected to grow from here.

It's easy to see the allure of online commerce, which offers a number of benefits compared to brick-and-mortar retail. These include time savings, greater variety and selection, and the ability to locate hard-to-find items. Additionally, free and low-cost shipping are becoming the rule rather than the exception, providing even more of an incentive for consumers to shop from the privacy of their desktops or mobile devices.

Let's look at three companies best positioned to benefit from the ongoing migration to digital sales: commerce platform Shopify (NYSE:SHOP), Latin American e-commerce provider MercadoLibre (NASDAQ:MELI), and the grand-daddy of them all, Amazon.com (NASDAQ:AMZN).

A lighted Shopify logo above a small cafe table.

Image source: Shopify.

A one-stop SHOP

Shopify describes itself as "a commerce platform that allows anyone to set up an online store and sell their products." The company started out simply enough, providing payment processing and shipping that could integrate with all the major payment and third-party logistics providers. Shopify also offered a variety of templates and apps that let the merchants customize the look and feel of their online store and monthly pricing plans to fit any budget. 

As smaller customers began to outgrow its offerings, it introduced more services, including Shopify Plus, which provides increased functionality and is geared toward larger and enterprise-level merchants. The company now offers a fulfillment network, international and cross-border sales, point-of-sale systems, customer engagement tools, merchant credit, and a host of other services designed to help online businesses succeed.

For the first nine months of 2019, Shopify's revenue grew 47% year over year, though the company continues to straddle breakeven on the bottom line as it invests in new areas of growth. Shopify's merchant base grew to more than 1 million businesses worldwide and continues to add new converts. Gross merchandise volume (GMV) -- or the value of the products sold on its platform -- grew to more than $40 billion during the period, up 49% compared to the prior-year period. 

By empowering merchants to succeed, Shopify is securing its place in e-commerce history and enriching investors along the way.

A smiling man on a laptop at the kitchen table, while a woman puts a kettle on the stove in the background.

Image source: Getty Images.

A Latin American e-commerce powerhouse

MercadoLibre also sprang from humble beginnings. The company began life as an online auction site similar to eBay, later offering fixed-price sales, local classified ads, real estate and car sales, and payment processing via Mercado Pago, which was modeled after PayPal (NASDAQ:PYPL). As the business evolved, its bread-and-butter became supplying e-commerce tools, payments, shipping, and fulfillment to merchants large and small. While MercadoLibre still has its roots in e-commerce, its payments business is beginning to steal the spotlight. Even PayPal recognized the compelling opportunity and recently made a $750 million investment in MercadoLibre.

Latin America is largely a cash-based society, as 70% of the population doesn't have a bank account and nearly half don't own a credit card. MercadoLibre has a massive network of locations that accept cash, allowing consumers to "top off" their Mercado Pago accounts, giving the company a hometown edge over the competition. The system became so popular, in fact, that it was adopted by other online merchants and eventually by brick-and-mortar stores in the region -- and business is booming.

During the first nine months of 2019, Mercado Pago processed $19.7 billion in payments, up 50% year over year. In the third quarter, total payment transactions grew 118% to 227 million, the second consecutive quarter of triple-digit growth. More importantly, last quarter, off-platform total payment volume (TPV) exceeded payments on its platform for the first time, climbing to more than $4 billion in transactions, more than half of the $7.6 billion total. 

What began as a value-added service is quickly becoming MercadoLibre's biggest breadwinner and a compelling opportunity for investors.

A woman using a smart phone with dollar signs appearing above the phone.

Image source: Getty Images.

The big Kahuna

When it comes to digital sales, no one is bigger than Amazon, generating more than $193 billion in revenue during the first nine months of 2019, up 20% year over year. E-commerce sales accounted for more than $95 billion, with third-party seller services contributing another $36 billion. However, e-commerce is just the beginning of the story.

Amazon has its fingers in a lot of pies, including cloud computing, physical retail, its Prime loyalty program, streaming video and music, advertising, artificial intelligence, electronics, and logistics and delivery -- to name just a few. Cloud computing is among Amazon's most profitable ventures, with revenue of $25 billion, up 37% year over year through September, and responsible for 79% of the company's operating income. Advertising is another area of impressive growth, albeit forming a much smaller base. Amazon's other revenue, which is primarily sales of advertising services, grew to $9.3 billion of the first nine months of 2019, up 38% year over year.

As a result of the company's massive size, its revenue growth is slowing, giving investors pause. Even more concerning is the bottom line, which grew just 18% compared to the prior-year period. It's important to note, however, that Amazon has sacrificed profitability to build out its one-day shipping initiative, and its international expansion is ongoing.

While Amazon may not be the high growth stock it once was, it still bears watching, as the company is always searching for its next hit. The emergence of cloud computing and Alexa-powered smart speakers are great examples of revenue generators for the company that investors couldn't have even imagined just a few short years ago. While slowing growth in its e-commerce business was inevitable, keep a weather eye on the horizon for Amazon's next big thing.