Investing in Top E-Commerce Companies

Less than a generation ago, e-commerce was only in its infancy, born on the World Wide Web as a vision of entrepreneurs such as Jeff Bezos.

Today, e-commerce accounts for almost $1.2 trillion in annual retail sales in the U.S., or 16% of the total retail industry, and it's returned to growth after a lull following the pandemic. Globally, it's worth more than $5 trillion, led by companies such as Amazon (AMZN 0.19%) and China’s Alibaba Group (BABA 1.46%), plus brick-and-mortar retailers such as Home Depot (HD 1.49%).

The tremendous growth in e-commerce has propelled a number of big winners on the stock market, but there's still plenty of opportunity left in online retail. Annual e-commerce sales grew about 15% in the 2010s, and the adoption of online shopping accelerated during the COVID-19 pandemic.

After the pandemic surge, the share of e-commerce sales actually fell through the beginning of 2022, but it has steadily rebounded since then. Growth has slowed as spending patterns normalize following a shift back to brick-and-mortar stores and services such as travel and restaurants. Still, there's plenty of long-term growth left in e-commerce. If you're looking for a list of the top e-commerce companies in the world, keep reading below.

Top e-commerce stocks to buy right now

Top e-commerce stocks to buy right now

1. Amazon

1. Amazon

For most American investors and consumers, Amazon is the first and last name in e-commerce. The company has essentially defined the space, launching in 1995 as an online bookseller before expanding into myriad other categories over the years. Its marketplace now has a whopping 350 million stock keeping units (SKUs), or unique items, for sale.

Without a direct e-commerce competitor in the U.S., Amazon has grown rapidly throughout its history, and innovations, such as its third-party marketplace (Fulfillment by Amazon) and Amazon Prime, have been key to its growth. The company has also built competitive advantages through real estate, opening a network of more than 100 fulfillment centers in the U.S.

Today, Amazon is by far the largest e-commerce company in the world in terms of revenue. It's even challenging Walmart (WMT -0.19%) to be the biggest company in the world in terms of revenue and will likely soon pass the retail giant in that category. Amazon finished 2023 with $575 billion in revenue, which was behind Walmart at $611 billion -- but Amazon has historically grown faster.

Thanks to its third-party marketplace, which now makes up the majority of sales on its site, Amazon has a larger gross merchandise volume (GMV) than Walmart, but it trails Chinese e-commerce giant Alibaba in that category.

Amazon has also built one of the world's largest cloud infrastructure services, which has become the primary profit engine for the company. Together, the e-commerce and cloud computing businesses create a massive set of competitive advantages for the company and should lead to continued outperformance for a stock that is up more than 100,000% since its 1997 initial public offering (IPO).

While Amazon's growth has slowed from its pre-pandemic days, it's still steadily growing and its competitive advantage will make it difficult to slow down.

2. Shopify

2. Shopify

Shopify has emerged in the past few years as Amazon's greatest competitor. The software-as-a-service (SaaS) company didn't do it by challenging Amazon directly in online retail or even by building an e-commerce marketplace. Instead, it's established itself as the tech infrastructure supporting more than 2 million merchants around the world, operations that range from mom-and-pop businesses to global brand giants such as Kraft Heinz (KHC 0.21%).

Shopify provides all the tools that any company needs to run an e-commerce business, including everything from website building and a mobile app to services such as marketing, payment processing, financial tracking, and even loans.

The company is the clear leader in e-commerce software; Amazon pulled the plug on its competitor product, Amazon Webstore, after recognizing that it couldn't catch Shopify. More recently, Amazon launched "Buy with Prime," allowing independent e-commerce sites, including Shopify sellers, to ship through Amazon Prime. However, Shopify has since integrated with Buy with Prime, showing that the new platform can work for both companies.

The Amazon rivalry has helped define Shopify. CEO Tobi Lutke likes to call the company's strategy "arming the rebels," and that's helped drive exponential growth for Shopify from $389 million in revenue in 2016 to $7.1 billion in 2023. Profitability has also improved as the business has scaled up, just as it should with a SaaS business.

Shopify stock crashed in 2022 along with other high-priced tech stocks, but its recouped much of those losses as the business continues to grow and the company is now steadily profitable again.

3. Coupang

3. Coupang

Coupang is South Korea's leading e-commerce company, and operating in South Korea comes with a number of advantages.

First, South Korea is one of the most densely populated countries in the developed world, which creates efficiencies for e-commerce providers like Coupang as delivery distances from distribution centers are much shorter, making it easier to achieve fast delivery. Additionally, South Korea's smaller size has helped give it one of the fastest internet networks in the world since it needs to cover much less ground than it would in the U.S.

Coupang has grown steadily by following a similar strategy to Amazon, selling goods both directly and through a third-party marketplace.

It's also launched a membership program similar to Amazon Prime called Rocket WOW. Additionally, Coupang has smaller growth businesses under its developing offerings segment, like food delivery, digital payments, mobile games, and Farfetch, the online fashion luxury platform it acquired in early 2024.

Coupang reported 18% revenue growth in 2023 to $24.4 billion, but its margins are improving, and its investments in complementary online businesses connected through its Rocket Wow membership should pay off over the long run.

4. MercadoLibre

4. MercadoLibre

E-commerce isn’t just a domestic phenomenon. Online shopping has taken off internationally as well, and in Latin America, the clear leader is MercadoLibre (MELI 0.14%), which operates in 18 countries in Latin America but makes about half of its revenue in Brazil.

MercadoLibre’s primary businesses include an e-commerce marketplace for both third and first-party sales, shipping services through Mercado Envios, and a suite of financial services under the Mercado Pago umbrella, which includes mobile point-of-sale devices, digital wallets for consumers, and loans through Mercado Credito.

In some ways, MercadoLibre resembles a hybrid of Amazon and Shopify, with some of the functions of a fintech company such as PayPal (PYPL 0.82%). The formula has been just as successful in Latin America as in the U.S. For example, Mercado Pago was originally conceived as a tool to help MercadoLibre’s marketplace, but it grew so fast that most payments processed through the service now come from off the MercadoLibre platform, with Mercado Pago essentially functioning as a standalone business.

In 2023, the total payment volume on Mercado Pago topped $180 billion, while GMV on the marketplace was about $50 billion. MercadoLibre is growing rapidly, with profitability increasing and revenue up almost 40% to $14.5 billion in 2023. The company has continued to deliver brisk growth in 2024, outperforming its peers in the U.S.

Considering that e-commerce in Latin America remains underpenetrated, and the middle class is expanding quickly, MercadoLibre still has a large addressable market ahead that should offer the company many more years of high growth.

Related investing topics

Should you invest?

Are e-commerce stocks right for you?

E-commerce stocks offer a lot of upside potential for investors, but they come with risks. Many e-commerce companies aren’t profitable, and even the ones that are profitable generally have only minimal profits. The hangover in the sector from the pandemic recovery has abated, but the sector is unlikely to return to its pre-pandemic growth rate as a whole.

Investors should be aware that e-commerce is riskier than most stock market sectors, but the track record of these stocks shows that just one successful e-commerce stock can deliver life-changing returns.