Must-Know: The World’s Top Online Retailers

Retailing has undergone a tremendous change over the last couple of decades. The brick-and-mortar model is giving way to online retailers.

Rekha Khandelwal, CFA - Author

Oct. 6 2019, Updated 9:21 a.m. ET

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Retailing has undergone a tremendous change over the last couple of decades. Like most other industries, disruptive technological innovation has forever changed the retailing industry. The centuries-old brick-and-mortar model is giving way to online retailers.

E-commerce sales accounted for around 10.7% of the total retail sales in the US in Q2 2019. In comparison, e-commerce accounts for roughly 35% of retail sales in China. So, it’s not surprising that some of the world’s leading online retailers are Chinese companies.

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The above graph shows the rise of e-commerce sales as a percentage of total retail sales in the US. Most traditional retail companies see this trend and have developed their e-commerce infrastructure in response. At the same time, many new retailers opened, which started as online platforms in the first place. Let’s take a look at some of the world’s largest online retailers.

The lines demarcating the retail industry, like for many other industries, have become more blurred. We will discuss retailers that are primarily selling online. Walmart (WMT), despite earning roughly $25 billion from online sales in 2018, is not included. That’s because $25 billion still accounts for less than 5% of its total sales. Similarly, even though Netflix (NFLX) earns the majority of its revenues through online sales, it’s mostly an entertainment company. So, it’s not included.

Amazon leads the online retailer pack

With massive sales of $233 billion for 2018, Amazon (AMZN) leads the pack of online retailers in terms of revenues. As the above table shows, Amazon’s 2018 revenues beat those of (JD), the second-largest online retailer in terms of revenue. Also, Amazon’s annual sales grew by 31% in 2018.

Online stores accounted for 53% of Amazon’s sales. Physical stores accounted for just 7% of its sales. Third-party seller services, subscription services, web services, and others accounted for the remaining 40% of its sales. Amazon’s revenue and net profits have been growing at an impressive rate over the last three years.

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Amazon’s net profits outperform competitors

Amazon’s revenues grew at an average rate of 30% over the last three years. As the above table shows, the growth in its net profits was more uneven, but it was massive. The company generated 61% of its sales from North America and 28% from international sales. Amazon’s international operations have yet to become profitable. AWS (Amazon Web Services) accounted for the remaining 11% of its sales. AWS sells compute, database, storage, and other services.

Also, Amazon’s employee base of 647,500 employees at the end of 2018 beats those of other online retail companies. Its number of employees is more than three times that of JD. So, Amazon has an edge over the others in terms of volumes of transactions. However, the company’s profits for 2018 were less than that of Alibaba Group (BABA).

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Article continues below advertisement the largest online retailer in China’s (JD) roots go back to 2004 when it started as a retail website. The company now resides in the Cayman Islands. JD’s product revenues through online direct sales accounted for 90% of its 2018 revenues. Service revenues, which mainly comprise of commission fees charged to third-party sellers for selling on JD’s online marketplace, accounted for the remaining 10% of its revenues. JD principally operates in and derives most of its revenues from the PRC (People’s Republic of China).

JD’s revenues grew at an average rate of 42% over the last four years. However, the company was recording net losses for the last several years. The above graph shows JD’s revenue and net profits in RMB (Yuan Renminbi). For 2018, JD’s net loss stood at around $377 million. Notably, the company reported net profits of around $1.2 billion for the first half of 2019. Though JD’s revenues exceed those of Alibaba (BABA), JD’s profits pale in comparison to Alibaba.

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Alibaba: the leader in profits for online retailers

In terms of revenues, Alibaba Group (BABA) stands third amongst the global online retailers. However, the company topped the list in terms of net profits for 2018. Alibaba operates the Taobao Marketplace and Tmall.

Taobao focuses on mobile commerce in China whereas Tmall is a global online and mobile commerce retail platform. In fiscal 2019, Alibaba generated about 66% of revenue from the retail commerce business in China. The company generates substantially all of its revenues from the PRC.

The above table shows Alibaba’s revenue and net profit growth for the last four fiscal years. Alibaba’s revenues grew at an average rate of 49% over the last four years. As the table shows, its profit has been rising for the last two fiscal years.

Both Alibaba and JD are seeing solid revenue growth. However, the companies’ operations outside China are very limited.

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eBay: the second-largest US online retailer

Founded in 1995, eBay (EBAY) is the second-largest online retailer in the US. The company faces stiff competition not only from the small retailers but also from giants like Amazon (AMZN). eBay grew its revenues at an average rate of 8% over the last three years.

The US contributed to roughly 40% of eBay’s 2018 revenues while 60% of its revenues came from international operations. Around 7,100 of eBay’s 14,000 employees are in the US. eBay’s employee-base, as well as its revenue, is minuscule compared to that of Amazon, the biggest operator in the US market. Interestingly, the two companies were founded roughly around the same time.

Rakuten: the leader in Japan

Japanese company Rakuten’s (RKUNY) roots go back to 1997. In addition to e-commerce sites, the company provides banking and securities, credit cards, insurance, and other services over the internet. Financial tech services accounted for roughly 34% of the company’s 2018 revenues. For  2018, Rakuten generated 80% of its revenues from Japan and 15% from the US.


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