E-commerce stocks have been Wall Street favorites for many years thanks to their ability to outgrow brick-and-mortar retailing peers. Yet with the digital sales channel still only accounting for about 10% of the wider retailing industry, there's a long runway for growth.With that bright outlook in mind, we asked our specialist Nicholas Marshall for a few e- commerce options that look like attractive stock buys today.
The fix is in
Demitri Kalogeropoulos (Stitch Fix): There's no shortage of smart-sounding reasons to believe Stitch Fix will fail to build an enduring position in the apparel retailing industry. Its push-based selling model, where personal shoppers chose a customer's clothing, is unproven, and most of its target market is still unaware of its brand -- or even how the service works.
But the e-commerce disruptor is making huge strides at solving those core challenges right now. Its last earnings report showed a healthy jump in its active user base and in average spending per order. Better yet, the company's customer satisfaction metric, best reflected in its repeat business trends, has improved in each of the last four quarters.
Looking ahead, CEO Katrina Lake and her team are hoping to build brand awareness through a cross-channel marketing campaign. They're also ramping up their men's and kids' offerings and pushing into key international markets like the U.K. Each of these initiatives carries the risk that Stitch Fix will fail to meet management's targets in these competitive industry niches.
Investors seeking a promising e-commerce stock might be happy accepting those risks, giving the huge returns Stitch Fix would generate if its subscription-shopping model endures.
Simplifying online homebuying
Steve Symington (Zillow Group): The real estate world isn't exactly the first e-commerce category to come to mind for many investors. But Zillow Group has made its name by disrupting the real estate status quo already with its leading group of online brands, which not only includes its namesake site and apps but also Trulia, New York City sites StreetEasy and Naked Apartments, apartment and rental search site HotPads, and RealEstate.com.
But now, Zillow is ramping its efforts to buy and sell properties through its Zillow Home Loans and Zillow Offers programs, providing homeowners and home shoppers a massively simplified and shortened real estate transaction experience in the process.
Shepherding that ramp up will be Zillow co-founder Rich Barton, who enjoys outstanding rapport with the investor community and returned to the helm as CEO four months ago. At the time, Zillow teased that within the next three to five years, it's target is to purchase 5,000 homes per month, which would result in annualized segment revenue of $20 billion. For perspective, last quarter, Zillow bought 898 houses and sold 414, generating just under $129 million in revenue in the process.
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