The e-commerce industry isn't a bad starting place if you're hunting for long-term growth investments. According to the International Trade Administration, retail e-commerce made up 18% of global retail sales in 2020. By 2024, it's anticipated to have a 22% share, and it's not a stretch to imagine that it will continue to gain share after that.
Therefore, investing in the e-commerce space is a smart move. Both Coupang (CPNG -0.23%) and Global-E Online (GLBE -1.41%) thrive in this market, yet most investors are unfamiliar with them. Here's why you should consider investing in these under-the-radar companies.
With 17.9 million active customers, Coupang dominates South Korean e-commerce. Coupang prides itself on its customer service, putting Amazon's two-day delivery to shame. Coupang offers next-day delivery or faster for nearly 100% of its orders at no charge and even offers same-day or dawn delivery to millions of shoppers.
One of the short-term concerns with the e-commerce industry is the rising inflation that countries worldwide are seeing. South Korea is no exception as it logs its highest inflation rates in a decade. In theory, rising inflation would cause consumers to buy fewer discretionary goods from e-commerce businesses, resulting in a slowdown. However, Coupang seems to be unfazed. Second-quarter revenue jumped 27% year over year on a constant-currency basis to $5 billion, while revenue per customer increased 7% over the same period.
Coupang isn't sacrificing profitability right now to achieve this growth. Gross profit soared 75% year over year, and it now boasts a 23% gross margin -- a sharp rise from 15% in the year-ago quarter. Additionally, Coupang's profitability is on the rise: The company posted second-quarter adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $66 million -- a complete reversal from the company's $122 million loss last year. Coupang expects to achieve adjusted EBITDA profitability for the full year too.
What's really attractive about Coupang is its valuation. The company trades at just 1.5 times sales -- far lower than other international e-commerce companies like Sea Limited or MercadoLibre.
Coupang's brand is powerful in Korea, and its customer service is second to none. That gives the company a vital advantage over incoming players, making it hard for them to catch up. This could help Coupang become the primary beneficiary of the rise of e-commerce in this region, and at its current price, you can pick up shares of this market leader at an absolute steal.
2. Global-E Online
Global-E might not be a household name, but it does serve businesses that are well known, including Adidas, Netflix, and most recently, Disney. Global-E helps facilitate international e-commerce by removing the complexity and friction. In other words, it takes the complicated parts of cross-border e-commerce -- like differing languages, payment methods, shipping, and returns -- and eases them by creating a localized shopper experience for consumers that is easy to manage for businesses.
The company has become a valuable resource for its customers: Global-E had a churn rate under 2% in 2021 with a net dollar retention rate of 152%.
More importantly, customers aren't dropping Global-E's services during this challenging economic time. In the second quarter, the company processed $534 million of gross merchandise volume, which jumped 64% year over year and helped revenue soar 52% year over year to $87 million.
What took the spotlight in the second quarter was a new customer: Disney. The media giant will use Global-E's services to support its direct-to-consumer e-commerce efforts, and it launched in several markets in the Asia-Pacific region. This is only the first phase, so Disney could broaden its usage of Global-E outside of that region in the future. The partnership leaves a considerable opportunity available for this global e-commerce player.
Landing customers like Disney shows how difficult handling these in-house operations is. It also indicates that Global-E is seen as an industry leader by these large enterprises. A massive operation like Disney is unlikely to choose a second-rate player to handle its cross-border commerce efforts. Global-E generated $30 million in free cash flow in the second quarter as well.
Despite all this success, shares of Global-E are still down more than 58% from their all-time high. With the stock at this level, investors should buy in before it takes off.