There's little doubt that the trend toward e-commerce had taken hold long before COVID-19 reared its ugly head, but there's overwhelming evidence that the trend has experienced significant acceleration as the result of the pandemic. Digital sales reached unprecedented levels as a host of shoppers opted for the ease and convenience of making purchases with the click of a mouse.
Amazon.com (AMZN 1.30%) has been the most obvious beneficiary of the trend, hiring hundreds of thousands of additional workers and prioritizing shipments to meet the demand. Yet e-commerce adoption is accelerating around the world -- not just in the U.S. -- giving investors the opportunity to generate even more upside than they could potentially get from Amazon, by simply looking a little further afield.
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MercadoLibre: A market twice the size of the U.S.
Investors given the opportunity to go back in time and pick up shares of Amazon a decade ago would no doubt avail themselves of the chance. With the market in Latin America about a decade behind its U.S. counterpart, that potential exists in e-commerce leader MercadoLibre (MELI 1.96%).
Online sales represent about 4% of total retail in the region, similar to the level of e-commerce penetration in the U.S. 10 years ago, effectively giving investors a second chance to play the online shopping revolution. And Latin America has a population of about 650 million people, nearly twice that of the U.S., making the market potentially more lucrative.
MercadoLibre not only provides merchants with a platform to peddle their wares, but developed MercadoPago -- a payment system modeled after PayPal (PYPL 1.96%) -- which has made the transition to brick-and-mortar retail. PayPal was so intrigued by the opportunity, it made a $750 million equity investment in MercadoLibre early last year.
The company's recent results illustrate the potential. During the first quarter, revenue grew to $652 million, up 70% year over year in local currency, while gross merchandise volume (GMV) of $3.4 billion jumped 34%.
The payment business represents an even bigger opportunity. Total payment volume (TPV) soared to $8.1 billion, up 82% in local currencies, but off-platform payments grew 140%. Overall, the number of payment transactions clocked in at 291 million, up 102%.
With growth of that magnitude, the coming decade looks bright for investors in MercadoLibre.
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Shopify: A chance to tap a worldwide opportunity
Rather than sell products itself, Canadian company Shopify (SHOP 4.90%) provides merchants with all the tools they need to become digital sellers. The e-commerce provider has dozens of ready-to-use templates and hundreds of apps to customize the experience for each business -- but website building is just the beginning.
Shopify integrates with each of the major payment processors, as well as the third-party shipping companies, helping merchants handle all aspects of the checkout and delivery procedure. The company also has monthly subscription plans to meet any budget, from small mom-and-pop shops all the way to formidable enterprise-level businesses. Merchants have access to email, digital advertising, point-of-sale hardware, and even working capital loans, nearly everything they might need to succeed.
For the first quarter, Shopify's revenue grew to $470 million, up 47% year over year, while subscription revenue grew 34% to $188 million. Monthly recurring revenue, which helps level out some of the peaks and valleys of its business, grew 25% and now accounts for about 12% of the company's total revenue.
Shopify now empowers more than one million merchants in 175 countries worldwide to manage their online sales platforms, and its platform is now available in 20 languages. The majority of its business, however, still comes from North America, giving the company a long runway for international expansion. The number of sellers on Shopify's platform could double or even triple in the years to come.
E-commerce adoption has accelerated as the result of the pandemic, and Shopify is perfectly positioned to help even more merchants make the move and become digital retailers.
Image source: Sea Limited.
Sea Limited: E-commerce in Southeast Asia is just getting started
Sea Limited (SE 4.34%) isn't a household name in the U.S., but you'd be hard-pressed to find consumers in Southeast Asia who aren't using at least one of its services. The company began as a gaming platform and has evolved into a multi-faceted digital services company, driving its stock up more than 400% since its IPO in late 2017, but that could be just the beginning.
Its online sales portal -- Shopee -- is the leading e-commerce platform in the region (in terms of gross merchandise volume), serving a population of more than 585 million consumers in Indonesia, Taiwan, Vietnam, Thailand, the Philippines, Malaysia, and Singapore, amounting to 315 million internet users. Following a model that will be familiar to MercadoLibre investors, Sea developed its own payment system -- SeaMoney -- to serve a region where 300 million consumers don't have a bank account and fewer than 20% have a credit card.
Even in the face of the pandemic, Sea continued to gain converts, with first-quarter revenue jumping 58% year over year to $914 million, but generating a net loss of $281, as it continues to expand its ecosystem. GMV for items sold on its e-commerce platform climbed 74% to $6.2 billion. Adjusted revenue for its digital entertainment business increased 30% to $512 million -- accounting for half the company's revenue -- while quarterly active users grew to 402 million, up 48%, and paying subscribers jumped 73% to 36 million.
This one-stop ecosystem for e-commerce, digital payments, online gaming, and esports continues to attract and engage users, which gives Sea Limited a solid foundation to continue its stellar growth.
