With Shopify and Amazon accounting for around 10% and 40% of total U.S. e-commerce sales, unique online sellers that dominate particular niches often get overlooked.
From pet products to car parts and anything else brands can sell globally, hundreds of niche e-commerce specialists are intent on conquering their markets.
Three Fool.com contributors think Chewy (CHWY 0.60%), O'Reilly Automotive (ORLY 0.03%), and Global-E Online (GLBE 3.64%) are e-commerce stocks worth buying today.
Making pet care convenient
Jeff Santoro (Chewy): After taking care of their own basic needs, many pet owners put their non-human companions next on the priority list when it comes to spending for their well-being. Chewy is looking to be the go-to e-commerce site for all things pets. Despite lots of online competition, the company has posted impressive results and is growing a loyal customer base.
Chewy recently reported its first-quarter 2022 results, which featured revenue growth of 14% year over year and continued a streak of quarterly sequential growth that dates back to the company's initial public offering in 2019. The company also posted net income of $18.5 million, returning to profitability after posting a net loss in each of the previous three quarters.
Most importantly for Chewy's future success and its ability to continue to take market share are its customer metrics. Active customers grew 4% to 20.6 million, and net sales per active customer (NSPAC) increased 15% to $446.
Because many pet expenses are for recurring purchases like food, Chewy's autoship service is worth keeping an eye on. Autoship customer sales grew 19% in Q1 and now account for over 72% of overall sales, up from 69% one year ago. It's clear customers are happy to have Chewy take care of these recurring purchases and have items shipped on a regular cadence.
Customers of Chewy also tend to spend more over time. The average customer spends less than $200 in their first year, but that metric doubles to over $400 by their second year and jumps to approximately $700 in their third year. The oldest cohorts spend nearly $1,000 per year. Considering that two-thirds of active customers have been acquired in the last three years, there's still lots of growth ahead for Chewy just within the existing customer base.
This quarter will see the launch of Chewy's pet insurance offering, CarePlus. Made possible through a partnership with Trupanion, this pet insurance program offers an opportunity for Chewy to improve its offerings to existing members while also giving prospective customers a reason to join. Chewy's management estimates that the pet insurance market size is approximately $2.5 billion. Even a small share of this market would be accretive to Chewy's business and should further its value proposition for customers.
This company benefits from skyrocketing vehicle costs
Bradley Guichard (O'Reilly Automotive): New and used vehicle prices have gone through the roof since the pandemic. This was first driven by automakers' decisions to curtail semiconductor orders early in the pandemic, leading to a shortage of new vehicles. Used vehicle demand ballooned without enough new vehicles to meet consumers' needs. This led to frenzied price increases in both markets, as shown below.
US Consumer Price Index: New and Used Motor Vehicles data by YCharts
Many Americans will struggle to purchase a vehicle at these prices. Add rising interest rates to the mix, and folks will likely stick with their current cars for as long as possible.
This is where O'Reilly can make hay. O'Reilly is an automotive parts supplier serving DIYers and professional service providers.
The company recognizes that digital sales will be a giant part of its future. The company's "Omnichannel Growth Strategy" offers tailored e-commerce solutions for its professional and DIY customers. For example, First Call Online is the company's trademarked digital catalog for service providers. Aside from the comprehensive catalog, it details availability, vehicle specs, and alternative parts, and enables direct electronic ordering.
O'Reilly has posted tremendous results recently. Diluted earnings per share (EPS) increased 41% in 2021 on 14.5% growth in comparable-store sales. In the first quarter of 2022, comparable sales grew 4.8% on top of the Q1 2021 growth of 24.8%.
The company is not immune to inflation pressures of its own. Shipping, parts, and labor will likely grow more expensive and could eat into profits. It will be critical for management to manage costs effectively. Q1 2022 saw the operating margin fall to 20% from 22% in Q1 2021.
When the market moves broadly lower, even quality stocks like O'Reilly are not spared. But the company does have an ace in the hole for its shareholders. O'Reilly has a tremendously generous share buyback program. In 2021 alone, the company returned $2.48 billion, or a whopping 6% of the current market cap, to shareholders through stock buybacks. Since 2011, the company has repurchased over $17 billion in stock, and there are no signs of this slowing.
For shareholders, this means that when the stock price dips, the company can take more shares off the table for the same amount of money. When the market inevitably turns positive, stockholders will have leveraged returns.
No company is unaffected by the challenges of the current market, but O'Reilly has an opportunity to thrive and come out the other side stronger than ever.
Direct-to-consumer sales across the globe
Josh Kohn-Lindquist (Global-E Online): If you love Shopify, you might like one of its key partners, Global-E Online, and its goal to enable direct-to-consumer (DTC) sales worldwide. Not only did Shopify partner with the 2021 initial public offering, but it took a 9% stake in the company's shares.
Considering Shopify has traditionally grown most of its e-commerce products in house, it seems like a vote of confidence in Global-E's suite of offerings to take a stake in the young company. Moreover, this decision speaks to the robust moat Global-E developed through the power of its unique platform -- as Shopify would partner with the young DTC enabler rather than try to replicate its complex platform.
Supporting over 25 languages, 100 currencies, and 150 methods of payment, Global-E's platform is a one-stop shop that enables companies and brands of all sizes to launch their international DTC operations. Due to the intricacies of cross-border trade, the company's ability to adjust to local customs is nearly impossible to replicate.
Whether it is local taxes, shipping, import duties, returns, fraud prevention, or improved insight into local markets through its data, Global-E offers a compelling proposition to brands -- even recently landing Adidas and LVMH as customers.
Growing revenue and non-GAAP (adjusted) gross profit by 65% and 94%, respectively, from the first quarter of 2021 to this year, Global-E is demonstrating the power of its budding platform as it continues to build an improving margin profile.
GLBE Revenue (TTM) data by YCharts
As these margins continue to improve compared to its top-line growth, the company could position itself for significant profitability and cash-generating potential years from now.
So why is now the time to buy Global-E?
Going back to its partnership with Shopify, the two companies completed the pilot phase of their integration in April -- meaning that Global-E's platform is now available for Shopify Advanced and Shopify Plus merchants. As these new sales begin to flow in during the second quarter and beyond, look for Global-E to continue posting blistering revenue growth and developing strong relationships with many new brands, courtesy of the Shopify network.
