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5 stocks set to profit from the online retail boom

Everywhere you look retail stocks are getting smashed. In the past two weeks alone, no less than three retailers have all issued profit downgrades.

One thing you will notice is that most of the retailers issuing downgrades are primarily “bricks-and-mortar” stores. While there are a multitude of reasons these physical store retailers are doing it tough, one of the headwinds they face is from their nimbler and lower fixed-cost online competitors.

Many “bricks-and-mortar” businesses have resisted the online shift and been slow to act from fear of ‘cannibalising’ their sales base – these retailers are now belatedly playing catch-up as they realise there is no stopping the online shopping trend.

Given consumers’ love affair with online shopping, the long term outlook for stocks exposed to this theme would appear good. Here are five stocks which should benefit.

1)      Trade Me Group Ltd (ASX: TME) is often compared to global giant Amazon Inc. Like Amazon, Trade Me operates an online marketplace for both new and used good, however its focus is primarily on servicing New Zealand customers.

2) Holdings Limited (ASX: WTF) and Webjet Limited (ASX: WEB) sell travel and accommodation through their online travel agency websites. While Flight Centre Travel Group Ltd (ASX: FLT) has managed to adjust its business to compete against these online-only competitors, Wotif and Webjet have snared significant market shares which they should be able to capitalise on in the long term.

3)      IBuy Group Ltd (ASX: IBY) listed last year and is the owner of a number of Asia-focussed flash sale websites. IBuy’s exposure to the rapidly growing Asian markets is appealing and makes this a stock worth watching.

4)      Toll Holdings Limited (ASX: TOL) continues to position its freight and logistics business to benefit from the boom in online shopping. The company recently started work on building a custom-designed facility in Melbourne. The facility will be capable of sorting 35,000 parcels per hour and is aimed at positioning Toll as the leading provider of express parcel delivery services.

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The entire retail sector appears to be out-of-favour with investors at the moment, with many online retailer stocks as well as 'bricks and mortar' retailer stocks all trading near 52-week lows. If you've got your concerns about the sector too then The Motley Fool's "BUY" rating on this small but ultra promising ASX company might be just the ticket… get the name and code FREE right now. Click here for your free copy of "The Motley Fool's Top Stock for 2014."

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

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