To The Moon

There's no letup in online shopping's potential to generate rich returns for investors.

While e-commerce was growing fast before the COVID-19 outbreak, the lockdown phase of the pandemic forced it into hyperdrive. Online sales surged 30% in 2020 compared to the year before and were up another 18% last year, putting e-commerce sales some 54% above where they stood before the global health crisis hit.

Although online sales growth has slowed in 2022 from the breakneck pace that was previously being set, sales are still above pre-pandemic levels. Census Bureau year-to-date data shows that through the end of July, "non-store" sales have grown 11% over last year to $740 billion, or almost as much as online retailers tallied in all of 2019.

IMAGE SOURCE: GETTY IMAGES.

Buying goods and groceries online has become the de facto way many people shop today, and it's only going to keep growing in the future. E-commerce now makes up 14.5% of all retail sales, up from less than 12% before the pandemic.

E-commerce, of course, is not immune from inflation's impact. Adobe's digital price index (DPI) it created in 2019 to track online inflation data actually saw deflation in July after 25 consecutive months of increase, but August's DPI rose 0.4% year over year and was up 2.1% month-to-month. Groceries jumped the most, up over 14%, but things like consumer electronics and consumers were down 10% and 12%, respectively.

Online spending remains resilient, however, as Adobe says it hit $64.6 billion in August, up 6.5% from the year ago period. Year-to-date online spending has grown almost 9% to $590 billion.

That meanse-commerce stocksstill represent an investment opportunity because the stocks of online retailers have been caught in the downdraft that has also crippled the brick-and-mortar space. That seems short-sighted as e-commerce remains critical to consumer shopping and Adobe expects online sales to surpass $1 trillion for the first time this year.

The following e-commerce retailers are ready to enrich patient investors who buy and hold them for the next decade.

1. Amazon

No discussion of e-commerce can really be held that doesn't highlight retail behemoth,Amazon(AMZN0.92%). Shares of the online retailer have been battered this year because of slowing growth, but as mentioned above, that's a short-sighted attitude that misses the long tail of opportunity present and Amazon's preeminent ability to grow with it.

Second-quarter net sales grew 7% compared to the year-ago period, hitting $121 billion; however, Amazon recorded a $2 billion loss due to its investment in electric truck makerRivian. Yet Amazon was able to trim shipping costs, whichremain a massive expense, narrowing the losses suffered on them to 8%. The e-commerce giant has identified $6 billion in excess costs it can cut and has already sliced $1.5 billion in overcapacity costs during the period.

Amazon remains the first place consumers turn when they want to shop online, and during its annual two-day Prime Day sales event this year, over 300 million items were sold as consumers were in a shopping frenzy, buying almost 1,700 items a second.

Amazon, of course, also has itscloud services businessthat underpins its business and remains hugely profitable while growing. The weakness in its stock should be seen as a buying opportunity.

2. JD.com

Chinese online retailerJD.com(JD2.62%)is the international counterpart to Amazon, except on steroids. The company sold $56.5 billion worth of goods and services during its ownPrime Day-like event, called 618, which stretches over multiple weeks when you include the pre-sales period. Looking at it another way, while Amazon was selling about $500,000 worth of goods per day over its three-week pre-sales period, JD was selling almost $2 billion worth of goods per day over four weeks.

JD also participates inAlibaba's annual Singles Day sales extravaganza in November, racking up tens of billions of dollars in additional sales. To put it in perspective, the annual five-day Cyber Week that starts on Thanksgiving Day in the U.S. generated $33.9 billion for all retailers combined.

Now, there are questions surrounding China's economy, which is suffering a dramatic slowdown as the country continues to impose lockdowns on its people. JD could be hurt by this because underChina's zero-COVID policiesthere are no exemptions for online delivery, even of essentials, which is starting to cause food shortages. This will likely only be temporary, though, as people must be allowed to buy food at least.

While this is a short-term concern, longer term Chinese consumers are becoming just as addicted to online shopping as those in the U.S. And as a premier e-commerce site, JD.com will grow with the rising tide.

3. Walmart

Walmart(WMT0.86%)might seem like an unusual choice, but the mighty retail king is an online force that has had Amazon looking over its shoulder for years. In fact, its e-commerce sales grew 12% last quarter, surpassing the growth rate of its rival.

It continues tohold a commanding leadin online grocery sales, where it is expected to generate $38.7 billion this year for a 27.6% share of the market. Amazon and Instacart are battling for second place with about $29 billion in sales each for a 21% share, though Amazon is expected to come out slightly ahead.

Walmart's Prime-like member loyalty program, which at $98 per year could be seen as more attractive in an inflationary environment than Amazon's, which cost $129 annually. Yet it is in need of a boost as subscribers have plateaued between 11 million and 16 million (Walmart doesn't release the data), and members don't spend as much as Prime members do. According to data from a PYMNTS report, Walmart+ members spend only 15% more than non-members do compared to 113% by Prime members.

That's likely why Walmart is bolstering the service with more benefits, such asadding free streaming moviesthroughParamount Global's Paramount+ along with cash back rewards.

Still, as consumers continue to deal with the highest inflation rates in 40 years, loyalty programs are seen increasing loyalty during such times. As Walmart+ becomes a better deal for members, Walmart stock is a good deal for investors as it will be a retail force for decades to come, both online and offline.

$Amazon.com(AMZN)$ $JD.com(JD)$ $Wal-Mart(WMT)$