- Small businesses around the world are making increasing efforts to create e-commerce websites.
- However, most of them do not yet have a dedicated online shopping page.
- Shopify (NYSE 🙂 helps with that, and their services are in great demand.
For 92% of US consumers, it is Amazon (NASDAQ:). com (WKN: 906866) The first choice for online shopping. Digital Commerce 360 estimates that Amazon alone is responsible for about a third of e-commerce in the United States. Outside the US, Amazon numbers shouldn’t be sniffed either.
However, the company’s dominant position in this area has faltered. Online sellers are tired of Amazon’s restrictions – and the competition – finding other ways to sell their wares. They even find ways to build their own online store from scratch. Many turn to a company called Shopify (NASDAQ: CCN: A14TJP), which provides a variety of online sales services to more than 1.7 million companies.
And Shopify is just getting started.
What is Shopify?
Of course, Amazon.com is still the king of e-commerce. But since the site is now over 20 years old, it suffers from the expected effects of age and size. However, the sales platform is not completely flexible when it comes to managing the millions of merchants selling billions of products each year. Not to mention the fact that many merchants are not happy that Amazon itself is competing with these sellers by selling similar merchandise that it produces.
Hence the emergence of an alternative to Amazon was inevitable; Shopify just filled the void. Shopify was founded in 2006 and now it’s filling that void in a big way. Third-quarter revenue increased 46% year-over-year to $1.1 billion and $3.2 billion in the first three quarters of the year. And that’s despite a wave of new Shopify sellers who showed up during last year’s closing.
Source: Thomson Reuters, author graphic
Similar growth can be expected in the future – and even longer than you might think. There are two reasons for this.
For one thing, despite the high percentage of online business today, the majority of retail consumption still occurs in retail. Digital Commerce 360 estimates that just under 20% of US retail sales have been online over the past year. This means that a little more than 80% of this can still be obtained. Even if a retailer moves that store from one of their stores to their own e-commerce platform.
Shopify can certainly help established businesses make this transition. In fact, I have already done so. Consumer brands such as Staples (NASDAQ:)And Heinz And Molson Course You’ve already asked Shopify for help creating a website.
The other reason investors can expect sustained above-average growth is that even with 1.7 million sellers already, this is a fraction of the 31.7 million small businesses owned by the US Small Business Administration through the end of 2020, and only within the US – and only For small businesses. Shopify sells its platform in most parts of the world as there are at least 300 million other small businesses. They should also be happy to receive any kind of help.
Of course, not all of these small businesses want or need an e-commerce website. But if a minority of these companies are using Shopify, that still means massive growth.
Expensive but worth it
But be warned: Shopify stock isn’t cheap. The stock is currently trading at nearly 200 times its expected earnings for this year. That’s a lot, but it’s based on the expectation that this company’s platform will have a significant stake in the future of e-commerce.
James Bromley has no position in any of the listed stocks. Motley Fool owns and recommends shares in Amazon and Shopify. This article appeared in 11/25/2021 on Fool.com It has been translated for our German readers.
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