Make no mistake about it. 2020 will go down as e-commerce’s “seminal moment.”
The novel coronavirus pandemic forced the physical economy across the globe to shut down in early 2020. Commerce rapidly pivoted online — and although the physical economy has gradually reopened since, commerce has remained heavily in the online channel, with U.S. e-commerce sales soaring a record 45% in the second quarter of 2020.
Spoiler alert: This shift is not temporary. It’s permanent. Commerce is going to stay in the online channel.
Why? Superior convenience. Going digital means getting more convenient, and history shows that once things go digital and become infinitely more convenient, there’s no going back (think movies, games, dating, etc).
Of course, astute investors will point out that the e-commerce revolution was already underway well before COVID-19 ever showed up. Globally, e-commerce sales have risen by more than 500% since 2010.
But the e-commerce wave that swept through retail in the 2010s was “uneven”.
It was led by giants — like Amazon, Walmart, and Target — and in high-traffic and easily “shippable” shopping categories — like apparel (30% e-commerce penetration) and consumer electronics (43% e-commerce penetration).
Meanwhile, certain companies and shopping categories were left behind. For example, only 60% of small businesses even had a website before COVID-19.
For those lagging companies and categories, COVID-19 is a wake-up call: digitize or die.
Consequently, over the next few years, the shopping segments which lagged in the e-commerce revolution of the 2010s, will play catch-up… and in a big way.
This “catch-up” dynamic will power a second e-commerce wave throughout the 2020s which will — like the first wave of the 2010s — unlock trillions of dollars in value.
Today, we will show you to how play this second e-commerce boom. It’s by buying a small online retail stock that might represent the market’s best turnaround story.
The Market’s Best Turnaround Story with 1,000% Upside
Prior to the COVID-19 pandemic, the home goods market was stuck in the stone age.
While most other major retail verticals had advanced into the modern digital era, the home goods market remained a stubbornly, physical-first shopping experience, with just 13% e-retail penetration.
Then the pandemic struck.
Consumers looking to buy new furniture and home decor were forced into the online channel. E-commerce penetration in this under-penetrated category soared… and it’s continued to soar, even as physical stores have reopened, because consumers have come to learn that the e-home shopping experience is actually pretty robust.
And so… the mass digitization of the home goods market has begun.
That’s great news for a once-forgotten, now-resurgent online home goods retailer by the name of Overstock.com (NASDAQ:OSTK).
Once upon a time, Overstock.com was a formidable player in the home goods market. But, mismanagement of the brand and the platform over the past few years left the company on its deathbed in early 2019.
Then… late last year… Overstock.com did some house cleaning. The company got a new CEO, who brought in a new management team, and implemented a multi-faceted turnaround plan centered on:
- Improving the platform’s search relevancy.
- Enhancing the mobile web experience.
- Expanding product selection and content on the site.
- Leveraging data to improve pricing strategies.
- Optimizing logistics for shorter delivery times.
- Introducing free shipping on everything.
These turnaround efforts have started to materialize in the form of a better, more value-driven and more relevant e-commerce platform in 2020… at the same time that the online home goods market has surged.
The result? Breakneck growth on all fronts.
In both the second and third quarters of 2020, Overstock.com reported 100%-plus new customer growth, 100%-plus revenue growth, 300-plus basis points of gross margin expansion, ~500 basis points of positive operating leverage, and $50-plus million boosts in adjusted EBITDA dollars.
In other words, Overstock.com has gone from a shrinking and money-losing company with bleak growth prospects in 2019, to a surging and money-making company with promising growth prospects in 2020.
It’s the best turnaround story in the market.
This “new” Overstock.com is the one that will hang around for the 2020s, as the home goods category continues to rapidly digitize and Overstock’s new management team continues to guide this company into the future.
As that happens, Overstock.com will turn into an affordable, off-price version of Wayfair.
Wayfair’s market cap today? Almost $30 billion.
Overstock.com’s market cap? Just $2.6 billion.
That enormous gap is Overstock.com’s enormous long-term opportunity — and it’s compelling enough that you should consider buying Overstock.com stock today.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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