When it comes to growth industries, it’s hard to ignore e-commerce. Over the last five years, global online retail sales have grown from around $1.5trn to around $4.3trn. By 2027, e-sales are expected to reach a whopping $10trn.
For investors, this extraordinary industry growth is creating many lucrative opportunities. With that in mind, here’s a look at my top UK e-commerce stocks for 2021 and beyond.
UK e-commerce stocks: online retailers
Let’s start with e-tailers. In this sub-sector of the online shopping market, my preferred plays are fashion retailers ASOS and Boohoo. These are pureplay online retailers. In other words, they’ve no physical stores.
Both of these businesses are growing at a rapid rate. ASOS, for example, has registered five-year annualised sales growth of 23%. Boohoo has done even better, generating five-year annualised revenue growth of about 55%. Going forward, both companies look set for continued growth. That said, e-commerce is a competitive industry and these companies face intense competition from the likes of Zalando and Amazon.
Another UK online retailer I think is worth mentioning here is Ocado. It’s the leader in the grocery market. It’s growing at a fast pace but losing money currently due to the investments it’s making in its warehouse automation division.
There are also some companies that generate a proportion of their sales online such as JD Sports Fashion. I think JD is well-placed to benefit from the ‘casualisation’ trend and the increasing demand for premium athletic footwear. Like ASOS and Boohoo though, it faces plenty of competition.
Another area of the e-commerce value chain that can provide investors with opportunities is warehousing and logistics.
My preferred plays here are Tritax Big Box REIT, Urban Logistics, and Clipper Logistics. Tritax and Urban Logistics provide crucial warehousing services to retailers such as Amazon and delivery companies such as DHL. Clipper, meanwhile, provides a range of services to retailers including warehousing, delivery, and returns management. Two other companies worth a mention are Segro and Warehouse REIT, which both manage warehouses.
All of these companies look well-positioned to benefit from the growth of e-commerce, in my view. However, they do face risks. In economic downturns, warehousing companies cannot always collect all their rent.
Packaging companies are also worth checking out when looking at e-commerce stocks. After all, nearly everything we buy online comes in some form of cardboard box or plastic packaging.
My preferred play here is DS Smith. It’s a packaging powerhouse with a focus on sustainable packaging. Three other UK companies in this space worth a mention are Mondi, Smurfit Kappa, and Macfarlane.
I’ll point out that packaging is quite cyclical. These companies can suffer during economic contractions.
Online shopping stocks: I’m investing globally
It’s worth noting that many of the most dominant e-commerce stocks are listed overseas. For example, companies such as Amazon, Shopify, and eBay are all listed in the US.
The US also has plenty of payments companies such as Mastercard, Visa, and PayPal, which are all benefiting from the growth of e-commerce too.
I personally own both UK and US e-commerce stocks in my portfolio. I figure that this is the best approach to get broad, diversified exposure to this high-growth industry.
Edward Sheldon owns shares in ASOS, Boohoo, JD Sports Fashion, Tritax Big Box, Clipper Logistics, DS Smith, Mondi, Amazon, Shopify, Mastercard, and PayPal. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon, Mastercard, PayPal Holdings, Shopify, and Visa. The Motley Fool UK has recommended ASOS, boohoo group, Clipper Logistics, DS Smith, eBay, Tritax Big Box REIT, and Warehouse REIT and recommends the following options: long January 2022 $1920 calls on Amazon, short June 2021 $65 calls on eBay, short January 2022 $1940 calls on Amazon, and long January 2022 $75 calls on PayPal Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.