I think that investing into ecommerce shares on the ASX could be one of the best ways to become rich with your portfolio.
The economics of ecommerce, platforms and networks are usually very good. A single website (and app) with efficient distribution centres is a much cheaper business model to operate than a national footprint of retail stores.
The more users and sellers it can attract to its platform, the stronger the economies of scale. Once a platform gets ahead of competitors, it’s quite rare that you’ll see competitors able to catch up.
Chinese company Alibaba just held its annual Singles Day sales event. In 85 seconds it generated sales of US$1 billion and US$10 billion in the first hour. Overall, US$30.8 billion was spent, a 27% increase compared to last year. Quite amazing, right? It shows that the Chinese public isn’t stopping spending despite the trade ‘war’ with the US.
The Alibaba share price is up 91% over the past three years, despite the recent pull-back. We can buy an indirect slice of Alibaba through funds. Alibaba is 9.1% of the UBS IQ MSCI Asia APEX 50 Ethical ETF (ASX: UBP) portfolio and it’s 9.9% of the BetaShares Asia Technology Tigers ETF (ASX: ASIA) portfolio.
Amazon is another ecommerce giant that can point to growing economies of scale and huge disruption of bricks and mortar retailers as well. In the last year alone the Amazon share price is up over 50%. BetaShares NASDAQ 100 ETF (ASX: NDQ) is one of the most popular ways to get exposure to Amazon on the ASX.
The bigger these giants become the harder it is for a competitor to make a dent – similar to how Google is now such a dominant player of search.
Over the next 10 years I imagine Amazon and Alibaba will be some of the best-performing blue chips in any share markets.
There some ASX shares that also operate ecommerce platforms such as Kogan.Com Ltd (ASX: KGN) and Paragon Care Ltd (ASX: PGC) which are fairly new to the ASX so they don’t have strong economic moats yet.
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Motley Fool contributor Tristan Harrison owns shares of BetaShares Asia Technology Tigers ETF and Paragon Care Limited. The Motley Fool Australia owns shares of and has recommended BETANASDAQ ETF UNITS. The Motley Fool Australia owns shares of BetaShares Asia Technology Tigers ETF. The Motley Fool Australia has recommended carsales.com Limited, Kogan.com ltd, Paragon Care Limited, and REA Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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