Many growth stocks have fallen sharply in recent months, pulled down by concerns about the strength of the economy. But macroeconomic headwinds like high inflation won't change the long-term growth trajectory of the e-commerce industry. According to eMarketer, online retail sales will continue to take share from brick-and-mortar sales for many years to come.
Companies like Shopify (SHOP 0.23%) and Global-e Online (GLBE -2.05%) should benefit from that trend, and with both stocks trading more than 70% off their highs, now looks like a good time to buy a few shares.
Here's what you should know.
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1. Shopify
Shopify makes commerce easier. Its software unifies physical and digital storefronts, allowing merchants to manage their businesses across brick-and-mortar locations, custom websites, and online marketplaces. That differentiates Shopify from retail titans like Amazon, giving its merchants the ability to grow their own brand across a variety of sales channels.
To further simplify commerce, Shopify provides a growing number of value-added products like point-of-sale (POS) hardware, payment processing services, and marketing tools. Better yet, the company is currently building a logistics network across the U.S. to democratize fulfillment for its merchants. Once complete, the Shopify Fulfillment Network will allow the company to offer two-day delivery to more than 90% of the country.
Shopify's comprehensive approach to commerce has translated into impressive financial results. Revenue soared 57% to $4.6 billion last year, and free cash flow climbed 18% to $454 million. Even so, Shopify has only captured a fraction of its $160 billion market opportunity, leaving plenty of upside for shareholders.
To capitalize on its addressable market, management is working on a robust growth strategy. In addition to building fulfillment infrastructure, Shopify is making efforts to expand its geographic footprint. Last year it launched POS hardware in Australia and several European countries, and it introduced its shipping service in the U.K. Additionally, the company is investing in the Shop mobile app, a tool designed to drive buyer engagement and repeat purchases through targeted product recommendations.
More broadly, Shopify is the most popular e-commerce software platform, and it outranks all rivals in terms of market presence and customer satisfaction, according to a recent G2 Grid report. That advantage should translate into market-beating returns for shareholders as the e-commerce industry continues to grow.
2. Global-e Online
Growing a business in international markets is difficult. Merchants must contend with language barriers and cultural difference in each new geography. For instance, Ant Group's Alipay is the most popular digital wallet in China, but it's not as common in Europe or the U.S. To make things even more complicated, merchants also need to address foreign taxes and import duties in each geography. That's where Global-e can make a difference.
Global-e's platform optimizes online storefronts for international buyers on a market-by-market basis. That means it localizes languages, currencies, and payment methods across 200 geographies to boost international conversion rates for its merchants, often by more than 60%. In doing so, Global-e captures a tremendous amount of market-specific data, creating a flywheel effect that makes its cross-border commerce tools better at driving sales over time.
Global-e also works with over 20 shipping carriers to provide fulfillment services for its merchants, and it handles the calculation and remittance of local taxes and import duties to help ensure packages clear customs. In short, Global-e makes it easier to run an international business, and that value proposition has the company growing at a rapid clip.
Last year, gross merchandise value soared 87% to $1.4 billion, revenue climbed 80% to $245 million, and while the company is still losing money on a GAAP basis, it generated $12.9 million in free cash flow, evidencing the sustainability of its business model.
Looking ahead, the company is well-positioned to maintain that momentum. Forrester Research values the cross-border e-commerce market at $736 billion by 2023, meaning Global-e has captured a fraction of its market opportunity. But management believes the its platform is the only cross-border solution on the market with "truly global scale." Additionally, the company has formed a partnership with Shopify, whereby it serves as the exclusive third-party provider of cross-border solutions to Shopify's 2 million merchants. That puts Global-e in front of a significant growth opportunity.
