What Lies Ahead For E-Commerce Stocks In 2018?

E-Commerce has been one of the top-performing industries throughout 2017. This is evident from the fact that PowerShares NASDAQ Internet ETF (PNQI) surged almost 41% on a year-to-date basis. The ETF has broad-based exposure to companies that benefit from the Internet including e-commerce websites.

Trends to Positively Impact E-Commerce in 2018

E-Commerce is benefiting from robust online sales growth, which is expected to continue in 2018. Increasing mobile usage for browsing and shopping as well as proliferation of devices like Echo will help in sustaining momentum.

Online retailers’ focus on expanding omni-channel presence is a key catalyst. Better service offerings that include quicker delivery, time scheduling per customer convenience and easy return policies are expected to compel consumers chose online mode of shopping.

Additionally, increasing business-to-business (B2B) e-commerce sales is noteworthy. The segment is projected to hit $1.2 trillion in the United States by 2021, according to Forrester Research.

Further, we believe that the booming e-commerce market in China is positive for investors focusing on this space.

Per market research firm eMarketer, retail e-commerce sales are anticipated to reach $2.774 trillion in 2018 and will comprise 11.6% of total retail sales compared with 10.1% estimated for 2017.

Moreover, Forrester Research expects e-commerce to account for 17.0% of retail sales by 2022, up from a projected 12.9% in 2017.

Number of Mobile Shoppers Increasing

Increasing number of mobile shoppers will boost e-commerce growth in 2018. According to an Invesp report, mobile devices currently account for 19% of all retail e-commerce sales in the United States, which is expected to reach 27% by the end of 2018.

We believe that increasing adoption of smartphones will continue to boost traffic in e-commerce sites. Additionally, rapid adoption of evolving technologies like voice search, chatbots and digital assistants in mobile devices will drive online sales in 2018.

Moreover, the ever-expanding online catalogue has become a major attraction for mobile shoppers. According to latest report from GlobalData, spending via smartphones will account for 51.5% of mobile and tablet market spending in 2018. The research firm noted that most of the spending is anticipated to be on food & grocery and clothing & footwear items.

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Notably, clothing, consumer electronics and computers currently dominate the e-commerce market, accounting for $150 billion in sales. Per Forrester, housewares will replace computers as the third-largest product category by 2022. Almost half of the spending for this product category is expected to occur online.

Chatbots, AR/VR to Attract Consumers

Smart technologies like chatbots are expected to attract consumers to the online mode rapidly in 2018. Chatbots along with AI and tools like machine learning and deep learning are helping retailers offer a personalized user experience.

In 2018, online sellers are likely to depend more on chatbots to provide a smooth experience to shoppers. AI is expected to track and analyse consumers’ behavioural patterns that will not only help in offering relevant recommendations but also improve customer loyalty.

Although still in a nascent stage, we expect rapid adoption of Augmented Reality (AR) and Virtual Reality (VR) devices to offer unique shopping experience to online customers in the near future. Retailers are already moving quickly to develop their own customized systems to attract customers.

China Boom to Continue

China has surpassed the United States to become the world’s largest e-commerce market. Per eMarketer, China’s retail ecommerce sales are expected to surge 29.1% to reach $1.46 trillion in 2018. The figure will account for 52.7% of worldwide retail e-commerce sales, up from an estimated 49.5% in 2017.

Rapid growth in mobile e-commerce is the primary catalyst for China’s booming e-commerce market. According to data available from the China Internet Network Information Center (CNNIC), 95.1% of internet users in the country used a mobile device to access the internet in 2016.

Per eMarketer, more than 75% of e-commerce sales (almost $1 trillion in value) in China are expected be transacted over mobile devices by the end of 2018.

Stocks to Focus

The massive growth projections for the e-commerce industry present significant growth opportunities for investors. Here are a few stocks that we believe are well poised to benefit from the e-commerce boom in 2018.

Amazon.com Inc. (NASDAQ:AMZN) is the undisputed leader and a trendsetter in the e-commerce space. The company offers consumers an unmatched level of convenience, which competitors are finding hard to replicate. Moreover, Amazon’s recent acquisition of Whole Food Market strengthens its foothold in the e-commerce business.

This Zacks Rank #3 (Hold) has outperformed the Zacks Consensus Estimate for earnings in three of the trailing four quarters. Long-term earnings growth rate is currently pegged at 20.87%.