Amazon.com, Inc. (NASDAQ:AMZN). The name itself excites those who own a stake in the company, yet that same name can strike fear into the hearts of owners of rival e-commerce stocks. Amazon gets what Amazon wants, and will roll over anyone or anything that stands in its way.
It’s a situation that gives rise to one overarching (and philosophical) question: Does any competitor really stand a chance of even keeping Amazon.com in check? Or, from an investor’s point of view, are there any other e-commerce stocks that are compelling enough to own in a setting that’s dominated by Amazon.com?
There are, but most come packaged with some footnoted fine print.
Perspective on E-Commerce Stocks
Below you’ll get a closer look at three e-commerce stocks worth a look, despite the overwhelming presence of Amazon.com on that landscape.
None of them are in a position to dethrone Amazon as the North Americans king of e-commerce — at least not right away. But, that’s not the point. The point here is to identify relative opportunities investors may be overlooking. So while none may be an immediate threat to Jeff Bezos, all three e-commerce stocks are arguably undervalued by the market right now, given their particular growth prospects.
But how might any player contend with a giant like Amazon? As you’ll see, the common thread among all three is that they’re doing something Amazon’s sheer size and business model makes it difficult for the behemoth to do.
In no particular order:
Thus far, Alibaba Group Holding Ltd (NYSE:BABA) — the so-called Amazon of China — hasn’t taken serious aim at the North American market. Never say never though. In the meantime, it’s doing something that could force Amazon’s sellers and suppliers to rethink the value of their relationship.
Long story made short, Amazon is the retailer, taking control of much of the merchandise and largely dictating to wholesalers how they’re going to do business via the Amazon.com platform. Alibaba, conversely, seeks to empower wholesalers by letting them run their own stores as they see fit.
There’s been little overlap of the two companies’ primary markets to date, but that could change soon in an unexpected way. Alibaba CEO Jack Ma started recruiting smaller U.S.-based companies last year to start selling goods to China’s growing consumer class.
It’s one less reason domestic companies have to bend over backwards to suit Amazon.
By themselves, neither is a real threat to Amazon. Together though, Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG) and Walmart Inc (NYSE:WMT) could make a fierce competitor. Alphabet’s Google has the online marketing reach, while Walmart has the inventory and means of real-time distribution that Amazon.com could arguably never have.
That’s why the partnership announced in August of last year should concern Bezos. Though the duo has limited its alliance to the use of Google’s smart-speaker as a means of quickly and simply restocking homes with consumer goods, it’s an alliance that could also be cultivated to become much, much more.
On their own though, neither is a problem for Amazon.
Last but not least, though Shopify Inc (NYSE:SHOP) is being named specifically as one of the e-commerce players that pose a legitimate threat to Amazon, it’s more of a proxy for an idea that merits watching closely.
In short, not unlike Jack Ma’s aim to empower companies that want to develop an e-commerce presence, Shopify seeks to enable organizations to build online stores when they might otherwise avoid getting into the business altogether. While no one single store could prove disruptive, the collective of stores Shopify helps create could pose a threat.
The timing is certainly right. While the millennial crowd is now starting to enter their higher-earning years and they’re more than comfortable with internet-driven lives, they’re also wary of big brands. So far they’re still in love with Amazon, but this generation is fickle and also wants a more customized, entertaining shopping experience. Shopify can make that happen, where Amazon can’t.
Bottom Line on ‘Other’ E-Commerce Stocks
Several times over the course of the past several months I’ve warned prospective and would-be owners of AMZN stock that while its size makes it powerful, its size — and increasing complexity — leaves it vulnerable to smaller and more nimble rivals that aren’t overlooking details important to customers.
That theory hasn’t changed in the meantime. In fact, a re-read of the three descriptions above makes it clear that would-be internet players are starting to figure this out, now focusing on quality rather than quantity. It’s this focus that makes these alternatives juicy prospects for investors on the hunt for something else.
Guarantees? No, those don’t exist in this game. It’s rare for a company to hold a wide lead indefinitely though. The time may be right for a handful of different e-commerce to step onto Amazon’s turf and reward investors as a result. The three names above are at least a start in that hunt.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.