eCommerce is almost 40 years old, however surprising that might sound. In 1979, English inventor Michael Aldrich came up with the idea of connecting a television set to a transaction processing computer with a telephone line. However, business-to-consumer online shopping didn’t take off until 1991, when World Wide Web became open to public. Over the following two decades, thousands of companies emerged in the eCommerce space, most notable of which were Amazon.com, Inc. (NASDAQ:AMZN) and eBay Inc (NASDAQ:EBAY). In 2005, Amazon.com, Inc. (NASDAQ:AMZN) took the eCommerce space a step further by launching Prime, a service that would allow people to get two-day free shipping for an annual payment of $79. The launch of Prime revolutionized online shopping by incentivizing consumers to buy everyday stuff like shampoo or detergent.
So, even though eCommerce as we know it is around two decades old and the times when it was viewed as a disruptor to retail are over, the industry’s growth days are far from over. In fact, even though online shopping is viewed by many as the main reason for the record number of closings among brick-and-mortar stores and the bankruptcy of many once-top retail brands like Toys R Us, Rue 21, or RadioShack, eCommerce still represents a small portion of the total retail sales.
In the US, eCommerce sales represented just 9.1% of total retail sales in the fourth quarter of 2017, according to the US Census Bureau. Overall, total e-Commerce sales in the US for 2017 were estimated at $453.5 billion, up by 16% on the year, and accounted for 8% of total sales. Worldwide, eCommerce sales amounted to around $1.50 trillion last year and are expected to grow to $1.71 trillion in 2018 and to reach $2.13 trillion by 2010, as it is aided by emerging technology like blockchain or Internet of Things. Moreover, even with this growth rate, eCommerce will still represent less than 10% of the global retail sales in the foreseeable future.
Stokkete/Shutterstock.com
So, it seems like eCommerce is a good industry to invest in, given its strong outlook. However, the optimism regarding the industry is widespread, which is why many stocks seem overvalued. One way to approach the research is to see which eCommerce stocks smart money is buying. At Insider Monkey, we follow over 600 hedge funds and other institutional investors, because our research has shown that their consensus picks can help retail investors outperform the market. Our own strategy that focuses on stocks that 100 best-performing hedge funds are collectively bullish on has returned 74.4% since May 2014 and outperformed the S&P 500 ETF (SPY) by more than 20 percentage points. You can access the latest picks from our strategy by accessing our newsletters free of charge for 14 days.
When it comes to eCommerce stocks, we see that several stocks have seen a continuous decline in popularity among hedge funds in the last couple of years. For example, eBay Inc (NASDAQ:EBAY) though it still ranks among hedge funds’ top eCommerce picks, has seen the number of bullish investors decline to 48 at the end of 2017 from 72 at the end of 2015. On the other hand, other eCommerce stocks saw an inflow of hedge fund capital in the last two years. On the next page, we will discuss the top eCommerce stocks among hedge funds in our database, focusing on those that saw an increase in popularity at least during 2017.
