In 2020, e-commerce sales made up 18% of total global retail sales, according to Statista, helped by many companies strengthening their e-commerce presence. By 2024, this market share figure is expected to expand to almost 22% of total retail sales globally.
This growth in e-commerce has been and will likely continue to be spurred by India, Spain, and China, where e-commerce is one of the fastest-growing retail markets. With this broad dominance of e-commerce going forward, two companies could reap immense benefits. I think Shopify (SHOP -0.41%) and Sea Limited (SE 1.24%) could prosper from increased e-commerce, which is why these two stocks could set investors up for life.
Image source: Getty Images.
A customer-centric approach
Amazon (AMZN 1.75%) has long been a behemoth in the e-commerce space. In 2020, Amazon controlled 39% of U.S. e-commerce sales. Many Amazon sellers, however, are not fond of the fact that they have to compete with Amazon on the site for sales. And Amazon has been known to replicate ideas that have been successful on its platform, develop them in-house, then promote them aggressively. This could eventually loosen its dominant grip in e-commerce.
For merchants looking to find another easy way to sell products online, Shopify is there to lend a hand. The company helps small and medium-sized businesses (SMBs) create a suite of online shops to make it easy to start, run, and grow their business. This solution has been incredibly popular. Since its launch in 2006, Shopify has accumulated $400 billion in gross merchandise volume (GMV).
Shopify's current goal is to enhance the growth prospects of its customers. The company has eight current initiatives to fuel growth, and it has ambitions to add five more. One of the most recent tools it has released for its customers is Shopify Markets, which makes it easier for businesses to expand their cross-border payment volume.
Efforts like these have propelled its business toward dominance. In terms of total retail sales, Shopify controlled 8.6% of total e-commerce sales in 2020, and while that is a number that is far away from Amazon, Shopify is in second place.
With investments in fast-growing e-commerce players like Global-E (GLBE 0.30%), Shopify has been able to bring in almost $3.3 billion in net income so far in 2021. Additionally, with almost $220 million in free cash flow this year, Shopify will be able to continue investing into expanding its offering and making its solutions more appealing to businesses.
The company has no shortage of potential. It is eyeing a $153 billion SMB addressable market, and it is quickly becoming a common place where over 1.7 million SMBs and entrepreneurs have gone to start their e-commerce businesses. Because of Shopify's focus on customer success, I suspect that Shopify will only become more mainstream as time goes on, and if the company can continue adding products to grow its customers' growth prospects, I think it has the potential to become a trillion-dollar stock over the next decade.
No one-trick pony
Sea Limited might not be well known in North America, but if you live in Southeast Asia or Brazil, you probably know something about this international stock. Sea Limited is a three-headed dragon with thriving e-commerce, gaming, and digital payments businesses. Shopee -- its e-commerce business -- is a monster in Southeast Asia. In the third quarter, the platform had over 1.7 billion orders, and it was the top-ranked app globally in the Shopping category on Alphabet's Google Play by total time spent in the app.
Shopee is the largest part of Sea Limited's business, but its other business segments are equally as impressive. Garena -- Sea's video game segment -- grew its third-quarter revenue 93% year over year thanks to its hit mobile game, Free Fire. Free Fire was the second-largest mobile game by monthly active users on Google Play, and it had 729 million quarterly active users in Q3.
Its payments business -- SeaMoney -- is also thriving, with over $4.5 billion in total payment volume on its mobile wallet and growing 111% year over year in the recent quarter. It also had nearly 40 million quarterly paying users in Q3. All of Sea Limited's business segments are extremely strong, but where investors should be excited is with Shopee.
Shopee is dominating Southeast Asia, but it has plans to expand even further. The company announced plans to grow into Spain, Poland, and France -- its first countries of operation outside of Latin America and Asia. It won't hurt that Spain is one of the fastest-growing e-commerce markets in the world. This expansion clearly indicates that Sea has plans to become a truly global e-commerce player.
With great success comes great competition, including from Amazon in Europe and MercadoLibre (MELI 3.42%) in Latin America, both of which are not to be underestimated. Sea is spending heavily to gain market share in these areas, and it spent over $688 million on marketing in Q3 to build up Shopee's brand name. These expenses have been paying off, especially in Brazil, where Sea overtook MercadoLibre as the largest e-commerce provider in early 2021.
While Sea lost $571 million in Q3, the company's expenses are paying off in the form of Shopee's burgeoning brand name. If the company can continue its winning ways in its new geographies, Sea could achieve global dominance in a decade and be well worth an investment today.
