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E-commerce continues to gain ground the world over, and that's a trend that will only continue. Market research company eMarketer estimates that global business-to-consumer e-commerce spending will come in at roughly $2.84 trillion this year, and rise to $4.88 trillion in 2021, and companies that facilitate that growth could deliver great results for their shareholders. Within that mold, Shopify (NYSE: SHOP) and Baozun (NASDAQ: BZUN) are stocks that are worth considering.
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Shopify
Online retail has grown by leaps and bounds in the U.S., but there's still huge room for it to expand. The U.S. Department of Commerce tracked a 15.2% year-over-year increase for online retail in the second quarter. Even with that growth, it accounted for just 9.6% of total retail sales. This bodes well for Shopify, which makes it easier for businesses to get on board with e-commerce. Shopify's valuation has already increased by nearly 500% since its initial public offering in 2015.
Shopify provides its clients with customizable retail websites as well as portals integrated with major social media sites like Facebook and Instagram. Though it initially catered to small- and medium-size enterprises (SMEs), it's now devoting more resources to moving upmarket and is having success in getting larger businesses on board. It generates revenue from businesses subscribing to its web and payment processing services and by collecting transaction fees for every item sold through its platform.
The company operated 160,000 online stores at the time of its IPO. As of the end of its most recent June quarter, that number has increased to more 600,000 across approximately 175 countries. Yet it's still just scratching the surface of its addressable market.
In the second quarter, Shopify delivered a 62% year-over-year sales increase, and gross merchandise volume on its platform climbed 56% to $9.1 billion. It's delivering rapid, cost-effective revenue growth, which suggests that it could shift to booking regular profits if it wasn't prioritizing expanding its business. The company expects adjusted operating income for the current year of between $0 and $5 million -- roughly in line with the $6 million in adjusted operating income it recorded last year -- but it also expects that sales grow roughly 49% to $1.02 billion at the midpoint of its target range.
The company is also expanding its business footprint; it recently rolled out payment processing services in Japan, bringing the number of countries where that service is available to eight. That still leaves a lot of room for expansion for Shopify Payments, and the company has plans to bring more of its service offerings to new markets in the near future.