Ecommerce stock has gained over 150,000% since its IPO in 1997, and the company is so powerful that it has created its own shopping, Amazon Prime Day, which big retailers love. Walmart and Target, have imitated, making it one of the biggest shopping days of the year in the United States. For Amazon, it’s even bigger than Black Friday and Cyber Monday.
However, you might be surprised to learn that Singles Day in China, the November 11 shopping holiday celebrating singles and singles in the country, is eclipsing its American counterparts.
While Amazon grossed around $ 10 billion in gross merchandise volume (GMV) during the two-day Amazon Prime Day deal in October, https://www.digitalcommerce360.com/article/amazon-prime-day -sales / Alibaba (NYSE: BABA), China’s largest e-commerce market, reported $ 74.1 billion from GMV during the 11-day shopping festival, and JD.com (NASDAQ: JD), the country’s largest direct online seller, had $ 41.1 billion in transactions, the equivalent of what Amazon could see in a month.
Ecommerce stocks have almost universally risen during the pandemic, as consumers have avoided stores and instead shop online, but US investors, focused on home e-commerce thrills like Amazon, Etsy, and Wayfair, may miss the even greater growth potential in China, as the Singles Day numbers show.
east meets west
China is by far the world’s largest e-commerce market. Online sales are expected to reach $ 1.9 trillion in 2019, compared to just $ 600 billion in online sales in the United States. China’s online sales are also growing much faster than in the United States, with a rate of 27% in 2019 compared to a pre-pandemic growth rate of around 15% in the United States.
China has even overtaken the United States as the world’s largest retail market, and this gap will only widen as the Chinese economy is growing faster than that of the United States, and it has recovered a lot. faster from the coronavirus pandemic, thereby improving its economic position to grow over the next few quarters.
Compared to Amazon’s domestic market, in other words, Alibaba and JD.com have their sights set on even bigger prices. Alibaba’s GMV reached $ 945 billion in its most recent fiscal year, well ahead of estimates from Amazon, which does not report such a figure. Like Amazon with Amazon Web Services, Alibaba also owns a fast-growing cloud computing business that generated $ 5.6 billion last year on 60% revenue growth.
JD.com, meanwhile, has a logistics operation that is arguably more advanced than Amazon as it was able to deliver 93% of first-party orders in one day during the Singles Day festival, and the company is rolling out 100 autonomous robots to manage deliveries to Changshu. These investments in automation help the company build a long-term competitive advantage.
Both Alibaba and JD have historically grown their revenues about as fast as Amazon, or faster in the case of Alibaba, as shown in the graph below.
However, while these are small companies with larger base markets to enter, Alibaba and JD are trading at significant discounts with Amazon based on their price-to-earnings ratios. Alibaba has a P / E of 38, compared to 43 for JD.com and 91 at Amazon, making it essentially less than half the price of Amazon, and barely more expensive than average. S&P 500 stock, which is currently trading at a P / E of 36.
Chinese stocks generally trade at a discount to their US counterparts for a number of reasons. Investors are skeptical of lax regulations in the country, which has seen a number of fraudulent publicly traded companies, such as Café Luckin earlier this year. Likewise, China’s authoritarian government is also unpredictable and may surprise investors as it did earlier in the month by obstructing the IPO of Alibaba’s subsidiary, Ant Group. Finally, the Trump administration’s trade war with China also led some investors to balk at Chinese stocks, which put pressure on the sector for much of 2018 and 2019.
However, the Biden administration is likely to have a more balanced approach to China without the sudden threats from the Trump administration that have sometimes rocked the markets. Additionally, government fraud and crackdown appear to be extremely low risks with Alibaba and JD, as these companies have been around since the early days of e-commerce and are closely tied to American brands and products.
The two stocks also face little competition from Amazon or other foreign companies, despite being an upstart social commerce champion. Pinduoduo also deserves the attention of investors.
Amazon has been a great stock, and there’s no reason to sell it today, but investors can get more long-term growth by turning to Alibaba and JD.com. Both companies are growing rapidly, increasing their profits, have huge markets to enter and are offered at a reduced price.
The used price may not always be there.