The coronavirus crisis has forced many Americans to look to online shopping for their necessities more than ever before. The trend toward online shopping was already well under way before COVID-19, with 11% of all retail sales occurring online in 2019, compared to 9% in 2017. But the virus is accelerating this trend, and many consumers who may have been resistant to online shopping before are now doing it out of necessity.
Even after Americans are able to get back to shopping at stores in person, don't expect e-commerce sales to slow down. eMarketer estimates that e-commerce sales will reach 16% of all U.S. retail sales by 2023, and Amazon.com (AMZN -2.78%), Shopify (SHOP -3.12%), and PayPal (PYPL -2.24%) are already well on their way to benefit from this trend.
Amazon has created a massive online marketplace that its rivals have had a tough time replicating. Out of all online sales in the U.S., an estimated 39% of them will happen on Amazon's website this year. That percentage becomes even more impressive when you consider that the company with the next biggest e-commerce business, Walmart, has just 5% of the market.
Part of Amazon's success has come from its ability to build a huge subscriber base of 112 million Prime members in the U.S., who enjoy free shipping on most products and receive other benefits like Amazon Prime Video content and Amazon Music. While the company hasn't been able to fulfill orders as fast as usual due to demand for essential items during the current pandemic, Amazon still has a substantial lead over its biggest competitors when it comes to the number of products it offers.
But Amazon isn't satisfied with just building its online marketplace. The company is also making huge gains with its online grocery delivery business, which doubled its orders in the most recent quarter. Additionally, Amazon bought PillPack in 2018, to expand into prescription drug delivery.
The massive head start the company has in e-commerce, along with its focus on entering new online markets, means that the company will continue to dominate the online shopping market for years to come.
Shopify is much smaller than Amazon, but don't overlook this fast-growing e-commerce player. The company has created an e-commerce platform that can be used by small businesses to get their online shops up and running, or by large corporations to run extensive online retail stores.
Shopify offers website design, shipping, payment processing, and a host of other services that give businesses a one-stop shop for all of their e-commerce needs. The company's services, along with its healthy customer retention rate, have helped Shopify earn more than one million customers and counting. As a result, Shopify's sales popped 47% last year.
Shopify is still in growth mode, which means there will be some volatility with the company's stock (particularly right now, as there's lots of uncertainty in the market). But over the long term, Shopify has the potential to build on its already massive customer base and bring even more e-commerce businesses into the fold.
PayPal, a payment processing company, is a different kind of e-commerce play. However, it still has the same potential to benefit from this fast-growing trend just as much as the companies that are creating online marketplaces. That's because PayPal's payment processing platform is miles ahead of many of its competitors, and the company continues to find new ways to benefit from the rise of e-commerce.
For example, aside from being one of the go-to companies for online payments, PayPal expanded its reach recently with its purchase of Honey Science, which finds coupons for users so they can save money on online purchases. Additionally, PayPal is one of the only non-Chinese companies that's allowed to operate as a payment processor in China, through its majority stake in the Chinese company GoPay.
If all that weren't enough, PayPal is also leading the peer-to-peer payment market through its popular Venmo app. Venmo allows users to electronically pay each other just as easily as reaching into a physical wallet and pulling out cash. In the fourth quarter, Venmo processed $29 billion in total payment volume, which was a 56% increase year over year.
Investors who are looking for a great way to benefit from the e-commerce boom would be wise to consider the companies listed above. E-commerce is in full swing, and there's no stopping this trend now. As more companies, both large and small, look for new ways to reach customers, you can bet they'll be looking to online shops to conduct a lot of their business. All of this is great news for Amazon's massive e-commerce marketplace, Shopify's growing e-commerce platform, and PayPal's large payment processing business.