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4 companies ready to profit from the future of online retailing

The shifting trend towards online shopping continued to grow in December, with over $14.7 billion being dished out for online retail purchases.

According to the National Australia Bank Ltd’s (ASX: NAB) latest online retail sales monthly index which was released yesterday, Australian online retail sales grew 12.6% for December year-on-year, an acceleration on the 11.2% growth in November and 10.7% in October.

These levels of growth are expected to continue into 2014 with market research firm IBIS World forecasting online sales to increase by 11.3%. This kind of growth can represent a big opportunity for investors, but it can be difficult to find retailers willing to turn against their traditional bricks-and-mortar business models and invest aggressively in a new online retail model.

NAB highlighted several particular high-growth areas in its report for December, including the Electronic Games and Toys category which was up a huge 32% and the Groceries and Liquor category which was up 24%.

The huge lift in Electronic Games and Toys was put down to the release of the new X-box and Playstation game consoles which were snapped up by shoppers trying to fill Christmas stockings. Since either console is the same wherever it comes from, electronic goods retailers like Dick Smith Holdings (ASX: DSH), Harvey Norman Holdings Limited (ASX: HVN) and JB Hi-Fi Limited (ASX: JBH) were likely beneficiaries.

Indeed, JB Hi-Fi had a standout half-year performance for FY14 to 31 December, with revenue up 6.8% and net-profit up 10%. The company’s online sales grew 15.4% and represented approximately 2.2% of total sales, up from 2% in the half-year for 2013. However JB Hi-Fi clearly still has massive room for growth in online sales which are set to remain a focus.

The two supermarket giants Woolworths Limited  (ASX: WOW) and Coles, owned by Wesfarmers Ltd (ASX: WES), were likely beneficiaries of the surprise 24% increase in Groceries and Liquor spending. Both companies have online supermarket shopping platforms and can be great time savers for busy professionals and households.

Foolish takeaway

The continuing growth towards online sales offers retailers opportunities to capture market share while cutting considerable cost out of their business models. JB Hi-Fi has achieved strong growth in this area, while the two big supermarket operators are also positioned to benefit as we move into 2014.

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Motley Fool contributor Regan Pearson does not own shares in any of the companies mentioned in this article.

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