The journey of a beginner investor can be a daunting one, with e-commerce being a good place to start for its future expansion potential.
Jan. 4, 2021
In 2019, global retail e-commerce sales amounted to $3.53 trillion, with this figure expected to be $6.54 trillion by 2022. I believe that these 3 companies are some of the best investments a beginner can make.
Amazon (NASDAQ: AMZN)
Many people think of Amazon as just the go-to place to buy goods online — but that’s not entirely true anymore. The business is now incredibly diversified with multiple reliable revenue streams, including advertising, subscription services, third-party seller services, physical retail, and Amazon Web Services, which makes up 12% of Amazon’s total revenue yet 57% of its total operating profit, with a profit margin of 31%.
Amazon is a great investment to anchor your portfolio with strong and solid growth without exposing yourself to too much risk. Amazon’s revenue has increased at an average rate of 29% year-on-year (YoY) from 2006 to 2019. The company has proven itself to be a leader even in the worst of times, by managing to maintain strong revenue growth of 29% and 28% in 2008 and 2009 respectively, despite the Financial Crisis. The giant benefits from economies of scale to a huge extent, making it next to impossible for any other retailers to come close. I think that this company will continue to see growth for decades to come.
Shopify (NYSE: SHOP)
Amazon.com is loved for buying electronics, everyday items, and mass-produced products. The platform doesn’t cater hugely towards more specialty and boutique types of retail, but Shopify does. Although both in the e-commerce space, they’re very different — Shopify is a subscription-based product that allows regular people to set up shop online with a website, payment process, and shipping logistics. The company allows investors to diversify through geographic growth, more so than Amazon. Third-quarter revenue and gross merchandise value have grown 96% and 109% YoY, respectively.
I believe that Shopify is one of the most innovative companies around, and it’s constantly launching tools to help its merchant’s stores scale. Shopify Capital was released in 2016, offering small- and medium-sized businesses loans that they can pay back with profits from future sales. Entrepreneurs with no credit history or collateral can receive $200 starter loans, in a bid to get more people to become long-term users of Shopify. In 2018, we saw the release of Shopify Ping — allowing merchants to chat with customers over Facebook Messenger, to provide support and information about inventory and shipping. It launched Dynamic Checkout, enabling customers to check out of all Shopify stores with a one-step process. This constant innovation gives me confidence in continuous growth for Shopify. Last month, Shopify expanded its payment options for merchants with a new partnership with China’s popular payments app, Alipay, which has 860 million users.
Sea Limited (NYSE: SE)
Sea Limited has the potential for faster growth than Amazon and Shopify, although this comes with more risk. Sea Limited is a gaming and e-commerce platform popular in Southeast Asia and Latin America. It operates three core businesses: Shopee, Garena, and SeaMoney.
Shopee is a platform for connecting buyers and sellers of products across fashion, home and living, and health & beauty. It provides tools to these buyers and sellers, such as payment, logistics, and fulfillment. The app ranked number one in the shopping category by downloads, average monthly active users, and total time spent in-app on Android in Southeast Asia and Taiwan.
Garena is a leading global online games developer and publisher — with its recent ‘Free Fire’ game reaching 100 million daily active users, making it the most popular title of its kind in the world. Q3 2020 saw a 124% YoY increase in paying users, with $584.5 million in adjusted EBITDA.
SeaMoney provides e-wallet services and digital financial offerings. 40% of Shopee’s gross orders in Indonesia were paid for using these e-wallet services. Over $2.1 billion was processed in mobile wallet payments through SeaMoney in Q3 2020 alone, with 17.8 million users paying for the mobile wallet services.
The growth potential of SeaLimited with its 3 core businesses is unlimited. I think that the usage increase of gaming platforms, e-payment services, and e-commerce worldwide will go in favor of Sea Limited.
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