It's no secret that e-commerce spending has seen a meteoric rise over the last decade. In fact, according to U.S. Census Bureau data, total e-commerce sales in the U.S. have risen more than fourfold over the last 10 years, and they're expected to surpass $1 trillion this year.
While this shift to online sales is already well underway, there's plenty of growth still ahead. As cross-border sales become more ubiquitous, roughly a quarter of global sales are expected to be happen online by 2025 -- up from 17.8% in 2019. With this trend in mind, here are two e-commerce stocks to keep an eye on for the coming decade.
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Wix.com
When investors hear the name Wix.com (WIX -0.30%), e-commerce probably isn't the first thing that comes to mind. Since its inception, Wix has been best known for its no-code, drag-and-drop platform that allows anyone to quickly and easily build a website. But today, the company offers much more.
Over the last several years, Wix has been expanding its available tools for users and building out the necessary functionality to run a business online. Now, instead of helping users just set up their website, Wix can also act as a digital operating system for entrepreneurs and businesses. Its comprehensive suite of features includes everything from scheduling to shipping, payments, or tax calculations, and plenty more.
This wide array of tools, combined with Wix's easily customizable website design platform, has helped to not only attract six million premium subscriptions but also process roughly $10 billion in gross payment volume in 2021 -- a 78% increase from the year prior.
Additionally, Wix also announced a partnership with Amazon that will allow merchants to easily tap into the e-commerce giant's unparalleled fulfillment capabilities. By leveraging Amazon's more than 200 fulfillment centers located around the globe, Wix can help its merchants deliver their products faster while saving billions on the investments it would require to build out its own logistics network.
This constant push to meet users' needs has helped the company quickly gobble up market share among content management systems (CMS) in recent years. In fact, since 2017, the percentage of websites using Wix as their CMS has jumped from 0.6% to 3.3%, with all signs indicating that trend will continue.
With Wix currently reinvesting the majority of its excess cash back into marketing efforts and expanding its business solutions, it's difficult to value the business based on any current profit or cash flow metrics. Instead, it can be useful to look at Wix's current price-to-sales ratio, which stands at just 4.6, about the lowest it has been in six years. For investors looking to capitalize on the continuous growth of e-commerce, Wix is an easy way to do that without paying a hefty premium.
Coupang
Coupang (CPNG -0.52%) is the largest e-commerce marketplace in South Korea. Similar to Amazon, Coupang offers delivery of a vast selection of items ranging from basic consumer goods like electronic devices to fresh food or groceries. And thanks to several favorable demographic trends, Coupang is able to take customer convenience to new heights.
On top of having the highest smartphone penetration rate of any country in the world, South Korea's population is also quite dense. In fact, despite being just 1% the size of the U.S. geographically, South Korea is home to roughly 52 million people -- 16% of the size of the U.S. population. This results in approximately 70% of the population living within seven miles of a Coupang logistics center.
With this high population density, Coupang is able to deliver nearly all of its orders in one day or less. And with its Dawn Delivery service, customers can actually order select items prior to midnight and have them delivered by 7 a.m. the next morning.
This customer-centric focus has not only helped the company amass an active customer base of roughly 18 million people, but it has also pushed existing customers to spend more. In fact, according to the company's most recent investor presentation, Coupang's 2017 customer cohort spent 4.5 times more in 2021 than they did their first year. This increase in spending helped Coupang reach $18.4 billion in revenue for 2021, up 54%.
Though Coupang is certainly growing fast, the company did spend $674 million on capital expenditures last year to further expand its fulfillment network. These increased investments hurt Coupang's cash flows and left the company with negative free cash flow for the year.
However, even with the current losses in mind, Coupang has shown the ability to generate cash in the past, and management continues to reiterate its belief the company can reach a long-term adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) margin of more than 7%.
Assuming those estimates are correct, Coupang's current price-to-sales ratio of just 1.4 is an attractive price to pay given Coupang's sizable opportunity and unique business model.
