Online retail outside the U.S. isn't so different from domestic e-commerce. After all, customers everywhere respond to convenience, value, and speed, and technology is improving around the world. Meanwhile, plenty of companies are taking advantage of cross-border commerce and are building out the infrastructure needed for quick delivery.

However, there are still some key differences between e-commerce inside and outside the U.S. Before we look at how international e-commerce differs from the domestic version, we'll define e-commerce, examine some of the international growth trends behind it, and finally dive deeper into the individual e-commerce players that investors need to know about outside the U.S.

What is e-commerce?

E-commerce simply means buying and selling goods through the internet. With the advent of the internet in the mid-1990s, e-commerce started slowly, but it has gained momentum as technology has improved with advances like smartphones and as delivery times have gotten faster. Companies such as Amazon, Alibaba,, and others have driven the transition by ramping up technology and infrastructure spending in order to meet customer demand.

While e-commerce may have been first pioneered by American companies like Amazon and eBay, China is now by far the world's biggest e-commerce market, with online sales of physical goods at $1.03 trillion in 2018, according to the National Bureau of Statistics.

The growth of online retail should remain strong in China and elsewhere around the world, as the advantages over traditional retail shopping are clear: Shopping from home or via a smartphone provides a degree of convenience unmatched by physical stores. E-commerce will also continue to get bigger as new technologies make it even more convenient, speed up delivery, and provide other advantages over shopping in a physical store. In developing parts of the world, e-commerce and related technologies like mobile payments have the ability to leapfrog over older ways of doing business like credit cards and traditional banking. Those forms of payment are common in the U.S. but less so in other parts of the world, making e-commerce an even more valuable proposition in developing countries.

How is e-commerce changing outside the U.S.?

It's no secret who the big winner in American e-commerce has been. Amazon has dominated online retail in the U.S. since its infancy. As of mid-2019, it claimed about half of all e-commerce sales domestically. Through its massive network of fulfillment centers and the strength of both its direct-selling business and its third-party marketplace, it's established significant competitive advantages.

While early investors have reaped huge returns on Amazon stock, the tech giant's value was approaching $1 trillion in early 2019, meaning its days of exponential growth are likely over. Though other U.S. e-commerce stocks have also done well in recent years, including (Canada-based) Shopify, Wayfair, and Etsy, savvy investors may want to look abroad for under-the-radar stocks in the fast-growing sector.

Parts of the world like India, China, Latin America, and Africa are seeing millions of people rise into the middle class, become internet users, buy smartphones, and take advantage of online shopping, which offers an array of benefits over visiting brick-and-mortar stores. In Europe, Amazon is the leading online retailer; in mid-2018, it had about 22% market share in highly developed Western Europe. Investors will therefore want to focus their attention on the developing world, including China, when looking for new e-commerce names to bet on.

Not surprisingly, that massive transition in the developing world is creating a huge opportunity in e-commerce. eMarketer estimates that global e-commerce sales will grow from $2.8 trillion in 2018 to $4.9 trillion in 2021, a compound annual growth rate of 20%.

China's online retail market is projected to reach $1.8 trillion by 2022, according to Forrester, as lower-tier cities expand and modernize. In India, a younger e-commerce market and a country expected to be one of the world's top two economies (along with China) in another generation, e-commerce sales are expected to grow from $38.5 billion in 2017 to $200 billion in 2026, growth of more than five times.

A smiling woman holds up a box and talks on her cell phone.

Image source: Getty Images.

Growth trends and opportunities in international e-commerce

Much of the developing world is seeing faster GDP growth than the U.S. The International Monetary Fund predicts that China's GDP will grow 6.3% in 2019, India's GDP will increase 7.3%, and Africa's will grow 3.6%. That compares to just 2.3% expected growth in the U.S., and those figures should support faster consumer spending growth than in the U.S., including e-commerce.

While internet usage is nearly universal in the U.S., around the world, the story is much different. According to Nielsen, just 56.8% of the world's population used the internet as of May 2019, up from 49.5% at the end of 2016, and in every developing region of the world, that percentage was under 70%.

As smartphone technology improves with innovations like 5G technology, that adoption rate should continue to move higher and approach the levels in the developed world over time.

The middle class in much of the developing world is also growing quickly as more people move to cities, and the internet and globalization have opened up job opportunities that weren't available a generation or two ago. That gives consumers more discretionary income to spend on things like online shopping.

Finally, technology also has the power to accelerate the growth of e-commerce. Driverless cars, for example, could lower the cost of delivery by eliminating the need for drivers. Drones could also remove the need for vehicles for some deliveries, making the process even cheaper and giving e-commerce companies a workaround for parts of the world with poor roads and infrastructure. Artificial intelligence is already helping warehouses become more efficient and speeding up the picking-and-packing process, and cloud computing has helped online retailers easily scale up as they grow.

Such technologies, along with the proliferation of smartphones and better internet connectivity, will spur the growth of e-commerce in the developing world.

How e-commerce abroad differs from the U.S.

Online retailers in developing countries outside the U.S. encounter distinct challenges. Credit cards are not nearly as common, making handling payments online difficult, and in many parts of the developing world, mobile payments appear to be leapfrogging payment with plastic. Infrastructure is often lacking in terms of both internet connectivity and transportation networks. Last-mile delivery poses a particular problem, because roads in poor neighborhoods and rural areas are often in disrepair. According to the U.N., as many as 4 billion people didn't have conventional home addresses as of 2016, adding a considerable obstacle to home delivery.

However, those challenges have presented opportunities to companies that have figured out ways to provide solutions for such problems. MercadoLibre, the leading Latin American e-commerce company, has built a payment platform that is arguably a bigger part of the company's success today than its e-commerce marketplace. A key component of that payments business is MercadoPago Point, an online-to-offline, mobile point-of-sale solution that allows stores and other merchants to accept in-store payments, including in installments, through a mobile app or a prepaid card. This gives customers without bank accounts or credit cards a way to pay other than cash.

Jumia Technologies, the Nigeria-based company building out an e-commerce business across Africa, has also come up with innovative solutions for such challenges. To give customers without internet access a chance to check out its wares, it opened booths where they can browse its websites, which include a hotel-booking app and the Easy Taxi ridesharing service in addition to online retail. The company also developed its own sales force, JForce, which goes door to door with internet-connected tablets, developing customer relationships and taking orders. Since most customers aren't able to pay electronically, drivers take cash on delivery. Those innovative and customized tactics have given the company a head start over other competitors in the huge and emerging market in Africa.

Finally, companies like in China are working on ways to overcome a lack of infrastructure in rural China. Instead of dealing with poor roads, the company has been using drones to deliver to limited parts of rural China since 2016. JD has been working to expand the drone program, with plans to make drone deliveries in Indonesia, where it's already tested them, and in Japan, where it's teamed up with e-commerce powerhouse Rakuten. The company also said in 2017 that it planned to open 150 drone launch sites in Sichuan province by 2020 and that it was developing drones that could carry loads as heavy as one ton. Those investments appear to give it an advantage in an evolving and potentially highly lucrative area of e-commerce.

Top e-commerce stocks outside the U.S.

Below are some of the highest-profile e-commerce stocks and the ones investors should be aware of in places like China, India, and the rest of the developing world.

Company Ticker Description
Alibaba (NYSE:BABA) The leading e-commerce player in China through its marketplaces, Tmall and Taobao, as well as several complementary businesses (NASDAQ:JD)

China's leader in direct online sales and No. 2 e-commerce company overall. Has a formidable network of warehouses and runs its own delivery and logistics services.

Baozun (NASDAQ:BZUN) Chinese e-commerce services provider for multinational companies like Starbucks, Nike, and Microsoft. Handles things like IT, marketing, and distribution.
Vipshop (NYSE:VIPS) Chinese online discount retailer focusing on apparel, accessories, home goods, and cosmetics
MercadoLibre (NASDAQ:MELI) Operates Latin America's largest e-commerce marketplace as well as a fast-growing payments business under MercadoPago
Jumia Technologies (NYSE:JMIA) Recent IPO and Africa's biggest e-commerce player. Also has a logistics service and a payment service.
Amazon (NASDAQ:AMZN) Leading online retailer in India according to some metrics, where it's invested billions, and owner of Middle Eastern e-commerce site Also has smaller operations in other developing countries.
Walmart (NYSE:WMT) Majority owner of Flipkart, India's top native e-commerce business. Also a 5% shareholder in and an e-commerce player in Mexico and other parts of Latin America.

Key parts of the world in international e-commerce

Latin America

Key facts

  • Population: 658.6 million (as of July 17, 2019)
  • GDP: $5.79 trillion
  • Internet penetration rate: 66.5% in 2018, up from 48.4% in 2013
  • Percentage of households in middle class: 25.8% in 2018, up from 22.9% in 2008

Stocks to watch
There are a number of competitors in Latin American e-commerce, but for investors, there's really only one choice for pure-play exposure to an opportunity-rich region with 640 million consumers and counting: MercadoLibre.

As a stock, MercadoLibre's results speak for themselves. Shares of the online marketplace have surged about 2,600% over the last decade as the company has posted strong revenue growth, overcome challenges across the region including currency crises, hyperinflation, recessions, and Venezuela's civil unrest, and built a formidable network of competitive advantages.

Over its history, the company has invested in product development and technology to expand its marketplace and add new businesses like MercadoPago, its payments service, and Mercado Envios, its logistics service.

The company finished 2018 with 10.8 million sellers on its platform and 37.4 million buyers, creating barriers to entry through network effects, since buyers and sellers tend to be attracted to the biggest marketplaces, which give them the most options. Marketplaces themselves tend to be strong business models, because they allow the operator to collect fees and commissions on sales and deliveries, generating high margins once they reach scale.

MercadoLibre's payments business, which benefits from the same network effects and competitive advantages as the marketplace, may be even more powerful. Products like MercadoPago Point, its mobile-point-of-sales solution, have expanded the payments business beyond the reach of its online marketplace; Point accounted for nearly half of off-platform payment volume in 2018. In Brazil, MercadoLibre's biggest country by sales, payments from its mobile point-of-sale devices and apps are already more than double those of its online merchants.

Finally, its Mercado Envios logistics business strengthens its marketplace and its relationship with its sellers and gives the company another way to extract income from the marketplace business. MercadoLibre has been profitable in the past, though it reported a loss in 2018 due to increased investments and efforts to offer free shipping to its customers. As more Latin Americans get internet access, join the middle class, and start online shopping, MercadoLibre should have a long road of growth ahead of it.


Key facts

  • Population: 1.32 billion as of July 17, 2019
  • GDP: $2.2 trillion in 2018
  • Internet penetration rate: 35.9% as of March 31, 2019
  • Percentage of households in middle class: 25% as of 2018

Stocks to watch

The online retail market in Africa is less developed than in much of the rest of the world due to challenges with internet access, regulatory agencies, and transportation infrastructure. Even global e-commerce giants like Alibaba and Amazon have mostly avoided it.

However, that has created an opportunity for Jumia Technologies, which hit the public markets in April 2019. Backed by several high-profile investors including Goldman Sachs and the French insurance company AXA, Jumia has aggressively built an e-commerce business in Nigeria, Africa's most populous country, and elsewhere on the continent.

The company is still small, with a 2018 revenue of 130.6 million euros. But its investments in Africa could pay off handsomely down the road as the continent embraces mobile commerce and as tech and physical infrastructure improve.

Like other e-commerce marketplaces, Jumia's business model explains part of its appeal to investors, especially as the company also operates its own logistics and payments services, like MercadoLibre does. It's also found creative ways to reach new customers, as the details above about its JForce sales representatives show.

However, the stock may be most appealing because of the emerging opportunity in Africa and the fact that competition is relatively thin as of mid-2019, though that could change if the market becomes more appealing. The IMF projects that Africa's GDP will grow at a compound annual rate of 5.9% through 2023, and the number of middle-class Africans is expected to triple to 1.1 billion by 2060, making the stock enticing to investors with a long time horizon.

Jumia is not yet profitable, and it will likely take years for the company to build the scale to turn a profit, but it appears to have a classic first-mover advantage in a potentially huge market.


Key facts

  • Population: 1.37 billion as of July 17, 2019
  • GDP: $2.73 trillion as of 2018
  • Internet penetration rate: 40.9% as of March 31, 2019

Stocks to watch

Of all of the developing world, India offers investors the most familiar names to invest in to get exposure to e-commerce in the fast-growing subcontinent. They are the same two companies that dominate American retail: Amazon and Walmart. The downside here is that there aren't any pure-play stocks available for investors interested in direct exposure to India.

Both companies have turned their attention to the second-most-populous country in the world after arriving late to the e-commerce race in China and losing out to native businesses like Alibaba and

Amazon has built its business from the ground up in India. The company has invested between $5 billion and $7 billion in the market and has operated with its usual strategy of investing for the long term and sacrificing profits for market share gains and revenue growth. For instance, Amazon aggressively priced its Prime membership program, which comes with free two-day shipping and video streaming, charging just $14.50 for a year, cheaper than anywhere else in the world. In an initial promotional offer, the service was half that price for a year when Amazon launched it in 2016.

In many ways, the Indian market seems well suited to the company's strengths. Amazon's video streaming service will be attractive to the more than 100 million Indians who speak English, making it the second-biggest English-speaking country after the U.S., and its experience operating an e-commerce marketplace is an added advantage in a country where foreign companies are blocked from operating as direct brick-and-mortar retailers without a local partner. India is also densely populated, making for shorter delivery distances on average than in the U.S. And the retail industry is highly fragmented, meaning the company mostly doesn't have to contend with any large and entrenched native competitors.

Walmart, on the other hand, has taken a different tack in India. Unwilling to cede the e-commerce market to Amazon, the retail giant acquired a majority stake in Flipkart in May 2018, taking 77% ownership for $16 billion in the leading native-Indian online retailer. At the time of the purchase, Walmart said that Flipkart had generated $4.6 billion in revenue and $7.5 billion in gross merchandise value (GMV), or the total values of both direct sales and third-party sales in its marketplace.

With Flipkart, Walmart seems to be mimicking Amazon's long-term strategy in India, warning about continued losses from the online retailers as it invests in growth. For 2019, Walmart projected that Flipkart's operating losses would be in the range of $1.35 billion.

By taking control of Flipkart, Walmart seems to have learned from its mistake of ignoring e-commerce in the U.S. for too long, which allowed Amazon to grab significant market share. Now the company seems willing to stomach sizable losses as it bets on a huge potential growth market.

Amazon's and Walmart's attention to Indian e-commerce is a clear sign of the market's potential. India is expected to surpass China as the world's most populous country within five years, according to the U.N., and Standard Chartered predicts that India's GDP could top that of the U.S. as soon as 2030, though some have disputed that forecast and India's GDP estimates. Deloitte India sees e-commerce sales in the country ramping up due to the explosive growth of mobile wallet transactions, which jumped 15 times from 2016 to 2018, and as the younger generation is readily embracing e-commerce.

If those forecasts hold true, Amazon and Walmart stand to be huge beneficiaries.


Key facts

  • Population: 1.42 billion as of July 17, 2019
  • GDP: $13.6 trillion in 2018
  • Internet percentage rate: 58.4% as of March 31, 2019
  • Percentage of households in middle class: 28.1% in 2018

Stocks to watch

China is the world's second-biggest economy and is on track to be its biggest in the next 10 to 20 years. The country's retail sales are expected to top those of the U.S. in 2019, according to eMarketer, at $5.6 trillion compared to $5.5 trillion in the U.S. The research firm says that rising incomes, an exploding middle class, and e-commerce are all fueling that growth, and online retail in China makes up close to a third of overall retail sales. That's much greater than in the U.S., where it's just around 10%.

Therefore, it would be wise for any investor looking for exposure to international e-commerce to consider China, and in Chinese e-commerce, the conversation has to start with Alibaba.

Founded in 1999, the tech giant's primary business is e-commerce, led by its Tmall and Taobao marketplaces in China. Tmall functions as more of a high-end mall for foreign brands like Nike, while Taobao is comparable to eBay, allowing a broad range of sellers to operate on its platform. Those two sites contributed $954 billion in GMV in 2018.

Elsewhere, the company counts on e-commerce businesses like Lazada, the leading e-commerce platform in Southeast Asia, and AliExpress, which is available in 17 languages around the world, with particular strength in Russia, the U.S., Brazil, Spain, and France. The company also has wholesale businesses like that supply international retailers and online sellers.

Beyond e-commerce, Alibaba operates a logistics service, Cainiao, and is set to acquire a third of Alipay parent Ant Financial, the world's most valuable mobile payments company. It owns Alibaba Cloud, the world's third-largest and Asia's largest infrastructure-as-a service business, and Youku, China's third-largest online video platform, among other businesses.

The combination of those assets has made Alibaba a powerhouse in China and in e-commerce globally. The company brought in $56.2 billion in revenue in 2018, and its marketplace model has led to a highly profitable business with net income of $13.1 billion in the same year.

Fast on the heels of Alibaba is, China's No. 2 e-commerce company and biggest direct online seller. Unlike Alibaba, which exclusively operates an e-commerce marketplace, JD functions as both a direct seller and a marketplace, similar to Amazon. Also like Amazon, JD's marketplace is growing faster than its first-party retail business: Services revenue from its marketplace increased 50.5% in 2018, while online direct sales revenue rose 25.4%.

Supporting its e-commerce business is a vast network of more than 550 warehouses as well as its own logistics and last-mile delivery services, which the company considers to make up the largest fulfillment infrastructure of any e-commerce company in China. In a country with limited private delivery services, that leadership should give the online retailer a competitive advantage. JD delivers a majority of orders to customers itself and provides same-day or next-day delivery to at least 2,146 counties and districts in China.

JD has also aggressively embraced innovation and new technologies. In June 2018, it opened the world's first fully automated warehouse, a 100,000-square-foot facility in Shanghai that employs just four people but ships more than 200,000 packages daily. The company is also developing its own delivery drones and automatic delivery robots to make fulfillment and delivery more efficient and less expensive.

Because of those investments and its core business as a direct seller, the company is not profitable on a generally accepted accounting principles (GAAP) basis, operating near breakeven. In 2018, it had a net loss of $407 million on revenue of $67.6 million.

A world of choices

Investors looking to bet on e-commerce outside the U.S. have a wide range of options. However, China is by far the richest source of e-commerce stocks internationally, and heavyweights like Alibaba and should continue to see strong growth as more Chinese move into cities and into the middle class and as the country's delivery infrastructure improves.

In the rest of the world, MercadoLibre and Jumia are the best two options for getting direct exposure to overlooked regions like Latin America and Africa. In India, investors won't be able to get hold of pure-play e-commerce stock, but both Amazon and Walmart should see India become a more important part of their business in the years ahead, though it will take time for that to be reflected in the stock prices.

International e-commerce stocks carry more risk compared to their American counterparts, since investors have to worry about issues like tariffs, currency crises, civil unrest, and a lack of infrastructure, but investing abroad also has the potential to deliver bigger returns, as a number of these stocks are still in the small- or mid-cap range. These countries also have more growth ahead of them than the U.S., as the GDP growth figures above reflect. That growth will be driven by consumers getting internet access and joining the middle class and by infrastructure improving, making both online ordering and delivery easier.

Like with e-commerce in the U.S., investors have the greatest chance of success by choosing stocks with strong revenue growth, business models that create competitive advantages, and a path to profitability.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.