Investing in top E-Commerce Companies 2022

Top E-commerce companies in 2022

The top 10 ecommerce companies in the world are currently dominated by American firms, with five of the top ten based in the United States. Given that the United States is one of the world's largest ecommerce markets, this should come as no surprise.

E-commerce was in its infancy less than a generation ago, born on the World Wide Web as a vision of entrepreneurs like Jeff Bezos.

E-commerce now accounts for almost $1 trillion in yearly retail sales in the United States, or 13% of total retail sales, and $5 trillion globally, headed by Amazon (NASDAQ: AMZN), China's Alibaba Group (NASDAQ: BABA), and traditional shops like Home Depot (NYSE: HD).

Although the stock market has benefited from the huge rise, there is still plenty of promise in online shopping. In the 2010s, annual e-commerce revenues increased by around 15%, and the popularity of online shopping accelerated during the COVID-19 pandemic. Continue reading if you're looking for a list of the world's top e-commerce companies.

Top e-commerce stocks

• Amazon

Amazon is the first and last name in e-commerce for most American investors and consumers. The company, which began as an online bookshop in 1995 and has now expanded into a variety of other categories, has essentially defined the space. It now has 350 million stock-keeping units (SKUs), or unique items for sale on its marketplace.

Without a direct e-commerce opponent in the United States, Amazon has developed significantly over the years, thanks to innovations like its third-party marketplace (Fulfillment by Amazon) and Amazon Prime. The corporation has also used real estate to gain a competitive advantage, creating a network of more than 100 fulfillment centers around the United States.

Amazon is now the world's largest e-commerce corporation in terms of revenue. It's even pushing Walmart (NYSE: WMT) for the title of the world's largest firm by revenue, and will certainly overtake the brick-and-mortar behemoth soon. Amazon had $470 billion in revenue in 2021, trailing Walmart's $573 billion, although Amazon has generally expanded far faster.

Amazon has a higher gross merchandise volume (GMV) than Walmart, thanks to its third-party marketplace, which now accounts for the bulk of sales on its site, but it trails Chinese e-commerce giant Alibaba (NYSE: BABA) in that area.

Amazon has also established one of the largest cloud infrastructure services in the world, which has become the company's principal profit generator. The company's e-commerce and cloud computing operations, when combined, generate a tremendous set of competitive advantages that should lead to ongoing outperformance for a stock that has risen more than 100,000% since its IPO.

• Shopify

In recent years, Shopify has emerged as Amazon's most serious opponent. The software-as-a-service (SaaS) firm didn't do it by directly competing with Amazon in online retail or even by creating an e-commerce platform. Instead, it's become the technological backbone for more than 2 million merchants around the world, ranging from little mom-and-pop shops to big conglomerates like Kraft Heinz (NYSE: KHC).

Shopify includes all of the tools required to run an e-commerce firm. It covers everything from website development and mobile apps to marketing, payment processing, financial reporting, and even loans.

Shopify is the clear market leader in e-commerce software, and Amazon even shut down its competing product Amazon Webstore several years ago after realizing it couldn't compete with Shopify.

Shopify's strategy, which CEO Tobi Lutke refers to as "arming the rebels," has enabled the company to grow exponentially, from $389 million in revenue in 2016 to $4.6 billion in 2021. Profitability has also improved as the company has grown, as it should with a SaaS company.

Although Shopify stock, like other high-priced tech stocks, collapsed in early 2022, its growth continues strong, with revenue growing 57 percent year over year in 2021.

• Etsy

In general, running an e-commerce marketplace has been more profitable than selling directly online. Scalability and network effects help marketplaces, which means they don't have to invest in costly physical infrastructure like fulfillment centers or worry about shipping costs.

Etsy, which has carved out a niche in handmade and antique products, is perhaps the most successful pure-play e-commerce marketplace. It's particularly popular for jewelry, presents, and stationery such as wedding invites, and it faces little direct competition in the artisan e-commerce area. For some years, Amazon has had its own Amazon Handmade marketplace, but it has struggled to compete with Etsy.

Etsy's sales more than doubled during the epidemic, similar to other e-commerce firms, as customers and would-be entrepreneurs both went to online channels to buy things and create money. Its active seller base increased by 72 percent to 7.5 million in 2021, indicating that it has a rapidly expanding worldwide base of artisan entrepreneurs that help attract additional customers through network effects.

With acquisitions like Reverb, a musical instrument resale marketplace; Depop, a new and used apparel marketplace; and Elo7, a Brazilian artisan-based marketplace identical to Etsy, Etsy has been growing its business beyond its namesake website.

With these initiatives, the firm hopes to apply the same technique that worked so successfully for Etsy to other niche marketplaces, and that approach will greatly extend the company's addressable market over time, giving investors another reason to buy the stock.

• MercadoLibre

E-commerce isn't limited to the United States. Internationally, online shopping has exploded. MercadoLibre (NASDAQ: MELI) is the obvious leader in Latin America, with operations in 18 countries and roughly half of its income generated in Brazil.

The company's main businesses are 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.

MercadoLibre resembles a cross between Amazon and Shopify, with some of the features of a fintech company like Paypal (NASDAQ: PYPL); the recipe has proven to be just as popular in Latin America as it has in the United States. For example, Mercado Pago was created as a tool to assist MercadoLibre's marketplace, but it developed so quickly that the majority of payments processed through the service now come from the MercadoLibre platform, making Mercado Pago basically a stand-alone company.

Total payment volume on Mercado Pago surpassed $75 billion in 2021, with a GMV of around $30 billion. Overall, MercadoLibre is quickly expanding, with profits rising and sales climbing by 74% to $7.1 billion in 2021.

Given that Latin America's e-commerce market is still underserved and the middle class is rapidly growing, MercadoLibre has a big addressable market ahead of it that should provide the company with many more years of strong growth.

Do you want to invest in e-commerce stocks?

E-commerce companies have a lot of upside potential, but they also have a lot of hazards. Many e-commerce businesses fail to make a profit, and those that do make a profit are usually small.

Most e-commerce stocks also dropped precipitously in late 2021 and early 2022, as growth rates halted once the pandemic began, and market sentiment changed away from growth firms in anticipation of higher interest rates. However, because many of these firms are trading at a discount to their historical valuations, now could be a good moment to enter into this industry.

E-commerce is riskier than most stock market sectors, yet the track record of the stocks above shows that just one successful e-commerce firm can bring life-changing profits.

How to buy e-commerce stocks

To invest in one or more of these e-commerce stocks, open an account with an online broker or platform.

1. Platforms for trading stocks should be compared.
2. Create a brokerage account and fund it. You'll need personal and financial information, such as your phone number and bank account number.
3. Look for the stock you're looking for. EBAY or AMZN are examples of stocks that can be found by name or ticker symbol.
4. Make a purchase decision. Some brokers will let you buy fractional shares, while others will only let you buy full shares.
5. Select a type of order. Invest in e-commerce stocks now with a market order, or wait until the stock hits your chosen price with a limit order.
6. The stock should be bought. On your brokerage account, click or tap the Buy button. Once you've made an investment in the online retail industry, keep an eye on how your stock is performing to determine when it's time to sell.

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