For many companies, 2020 was a disastrous year. The global pandemic shifted consumer behavior in a way that we have never seen before, leaving many businesses without any choice but to shut up shop and wait for normality to return.
Yet as fate would have it, Covid-19 ended up being the catalyst for one of the most profitable periods in history for some of the more “fortunate” companies out there. You see, even before the pandemic hit, digital transformation was already sweeping the globe, and the events that ensued after Covid became a reality created a perfect storm that online businesses were ready to reap the rewards from.
The Drivers Behind The eCommerce Boom
Esteemed entrepreneur and eCommerce expert Jesse Willms breaks down the benefits that many of these online retail giants enjoy over their brick-and-mortar counterparts, which is one of the main drivers for their huge success in 2020:
“One of the main advantages of an online business is operating without time constraints or geographical boundaries. Essentially, an e-commerce business opens brands up to a worldwide market that can attract revenue around the clock-even while they sleep. Additionally, lower overhead and transactional costs associated with the business means that owners can enjoy higher profit margins,” says Willms.
In other words, predominantly digital companies do not have to worry about the government-imposed restrictions the same way a physical store would. In fact, business went on as normal for the vast majority of online retailers, albeit with a greatly increased demand for their services.
One of the reasons for their huge success is the fact that e-Commerce is all about making the consumer’s life simpler. With most of the online retail platforms, customers can shop at any time of day from the safety of their own homes, meaning they don’t have to worry about spreading or contracting deadly viruses. Customers can sit back and browse whole collections at their convenience, without having to drive long distances or break government lockdown rules.
Additionally, online marketplaces and digital retailers have benefited greatly from their flexible business models. It granted them more easy access to global supply chains, which has resulted in lower costs, shorter shipping times, and higher product quality. All of this value is then passed on to the consumer, creating a thriving business model destined to triumph in a global economy inhibited by physical interaction restrictions. With that said, let’s take a look at two of the best-performing stocks related to the eCommerce industry:
As you might expect, Amazon continues its dominance as the number one online retailer in the world, pulling in over $380 billion of revenue in 2020. This meant that Amazon’s sales grew by around 38.6% last year, which is truly staggering for a business of this size.
Of course, much of this growth can be attributed to the pandemic and the fact that more consumers were turning to online retailers than ever before. However, Amazon’s success is no accident, as they have been carefully positioning themselves as the “go-to one-stop-shop” on the internet for quite some time now.
It’s also worth noting that Amazon Web Services generated $45 billion in sales last year, which means Amazon holds the number one market share for cloud infrastructure services too. When you couple this with the other digital services they offer, such as video streaming, home entertainment, and the enormous profit they drive through advertisement services, it’s safe to say Amazon is one of the very best e-commerce stocks around, and we should expect Amazon to continue marching forward in 2021.
If you want to jump on the e-Commerce bandwagon but you’re not sure which retailer to invest in, putting your money into a digital payments provider is a great way to give yourself some broader exposure to the market.
In 2020, PayPal also had its best-ever year in terms of revenue growth and total payment volume on its platform. Again, this won’t be much of a surprise, considering PayPal is the world’s biggest online payment system with over 380 million active users.
For this reason, PayPal continues to play a pivotal role in the e-Commerce industry, as it remains a valuable partner for many retailers looking to offer a digital payment solution for their business. On top of this, PayPal didn’t just sit back and count their cash in 2020. They continued to innovate in an attempt to push their company forward so they can slingshot out of the pandemic and continue on the current trend of incredible growth.
An example of this is PayPal introducing QR code technology to their checkout processes, further expanding their target market and pre-empting what a post-pandemic world might function like. This one change saw an increase in 19% in payment volume from consumers who use its QR codes, which bodes well looking into 2021 and beyond.
Looking forward, there is a strong chance these stocks (AMZN, PYPL) will keep rising in the near future as the trend for digitization looks set to continue its course. Even though we may see some return to some normality, it’s far more likely that the events that took place in 2020 will lead to a permanent change in consumer buying patterns that will continue to benefit online companies, especially eCommerce stocks.