E-commerce surged in 2020 as the coronavirus pandemic closed up brick-and-mortar shops and kept people at home. While e-commerce will continue to grow in 2021, just a few companies have been able to capitalize on the acceleration from last year and keep up the momentum in 2021.
Etsy (ETSY -0.22%), Amazon (AMZN -1.14%), and Costco Wholesale (COST -0.55%) will see faster online sales growth in 2021 than they saw in 2019. All other top online retailers will see sales slow from pre-pandemic levels, according to estimates from eMarketer.
Let's take a closer look at these three e-commerce stocks.
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1. Etsy
Etsy grew its gross merchandise sales by 26.5% in 2019, and it could grow another 26.9% in 2021. That's particularly impressive considering gross merchandise volume (GMV) grew 106.7% in 2020 amid the pandemic.
Etsy benefits from the network effect. Last year brought a lot of sellers onto its platform, growing seller accounts 61.7% in 2020. Meanwhile, it saw an even bigger increase in the number of buyers, up 76.7%. "Habitual buyers," those making six or more purchases totaling more than $200 over the year, grew more than twice as fast.
Etsy's gross merchandise sales grew another 132.3% year over year in the first quarter, but it faces tougher comparables in the last three quarters of the year. Management is using the extra cash flow from last year's surging sales to help fund its acquisitions of Depop and Elo7, which can help boost its global sales volume.
Management is successfully growing the buyer-seller network and customer lifetime value. It's expanding its reach both organically and via acquisition. It's spending more on marketing to keep growing, and it's executing at a high level. Etsy is still emerging as a big e-commerce winner after the pandemic sales spike.
2. Amazon
Amazon doesn't report its GMV directly, but it grew an estimated 20.9% in 2019, according to Marketplace Pulse. eMarketer expects sales volume to grow 24.9% in 2021.
Amazon was seeing an acceleration in sales in the back half of 2019 as it started rolling out one-day shipping for Prime members on millions of items. The surge in demand last year disrupted Amazon's ability to execute on its one-day promise, but it meant a huge investment in its fulfillment network. Amazon expanded its network footprint by 50%.
What's more, Amazon saw global Prime membership growth accelerate in 2020 while engagement with Prime's digital benefits improved. As a result, Amazon should see strong retention of Prime members, translating into faster sales growth on its marketplace.
Despite its dominant position in online retail, Amazon is poised to take an even greater share of the market in 2021.
3. Costco
Costco's e-commerce operations gained steam in 2020, increasing sales by more than 100% in some months. Growth has slowed since lapping the easy comparables in April, but it's still gaining nearly 20% each month. eMarketer expects Costco online sales to climb 21.7% for the full year.
Bolstering Costco's growth is its acquisition of Innovel, which it rebranded as Costco Logistics, allowing it to deliver more bulky items to customers' doors. Management is still acquiring more vendors to take advantage of the capacity of Costco Logistics. The shift to Costco Logistics has facilitated faster delivery times for those items, and online sales for big and bulky items have grown faster than overall e-commerce.
On top of that, Costco's been able to capitalize on the growth of online grocery shopping through a partnership with Instacart, which could account for an additional 5 to 8 percentage points of "online sales" growth this year, according to CFO Richard Galanti.
There's still a lot of room for Costco to improve its e-commerce sales. Less than half of members have bought something from Costco online, according to Galanti. Increasing online product selection and delivery times should help improve that number.
Investing in the future of e-commerce
All three of these companies present investment opportunities for those looking for e-commerce growth. Etsy and Amazon are practically pure plays in e-commerce with different business models, while Costco has the advantage of omnichannel sales.
The growth in internet retail will slow in 2021 after the anomaly of 2020, but companies that took advantage of the increased traffic and executed well last year should see sustained sales growth for years to follow.
