The ecommerce trend is booming right now. Australia was slowly moving towards online shopping due to convenience but now COVID-19 restrictions (and consumer habits) are causing a rapid rise in ecommerce. Some ASX shares are profiting.
There are a few different ways you can try to play this.
There are some ASX share retailers that are seeing a huge amount of online sales growth such as Premier Investments Limited (ASX: PMV) and Adairs Ltd (ASX: ADH). However, some of that ecommerce trend may reverse once stores are open nationally again, leading to more sales being done in-store. But these are good options to consider for ecommerce growth.
It could be better to think about getting exposure to ecommerce through one of these ASX shares:
Temple & Webster Group Ltd (ASX: TPW)
Temple & Webster is an online furniture and homewares retailer. The company has seen a huge amount of growth over the past six months.
The ASX share said that in FY20 it grew revenue by 74%, in the second half of FY20 revenue increased by 96% and in the fourth quarter revenue rose by 130%. Active customers increased by 70% year on year.
The company’s earnings before interest, tax, depreciation and amortisation (EBITDA) jumped by 467% to $8.5 million during FY20.
Temple & Webster is clearly growing at an impressive rate. But the Temple & Webster share price has also rocketed – since 23 March 2020 the share price has gone up 400%.
In July the company said its revenue growth rate was in line with the fourth quarter of FY20 (where it was up 130%).
The ASX share will need to keep up strong growth to justify the current share price, but it if it does it could become pleasingly profitable because of the cheaper online model.
Brickworks Limited (ASX: BKW) and Centuria Industrial Reit (ASX: CIP)
Centuria Industrial Reit is the largest real estate investment trust (REIT). Logistics is an important part of the ecommerce trend and this REIT could be one of the better ways to gain exposure to the underlying trend. It also announced the purchase of a Telstra Corporation Ltd (ASX: TLS) data centre in Melbourne for $416.7 million. The REIT is shifting towards the new industries in Australia.
The older divisions of Brickworks are the building products and the stock holding of ASX share Washington H. Soul Pattinson and Co. Ltd (ASX: SOL). But it also has an exciting 50% stake of an industrial property trust. This trust is building two large, high-tech warehouses for Amazon and Coles Group Limited (ASX: COL). This should dramatically increase the value and rental earnings of the property trust.
I think both of the above ASX shares are defensive ways to play the rise of ecommerce in Australia.
Kogan.com Ltd (ASX: KGN)
Kogan.com is another ASX share which is an online-only business. It sells a wide variety of different products and items like phones, appliances, office supplies, garden supplies and so on. It also offers services like insurance and superannuation.
The Kogan.com share price has risen by 323% over the past six months. It was growing at a decent rate before COVID-19 but the current conditions have really accelerated its growth.
FY20 revealed an exciting amount of growth and July 2020 has seen that trend continue. Last month gross sales rose by over 110%, gross profit increased by more than 160% and adjusted EBITDA was more than $10 million.
Customers may have made a permanent shift to using Kogan.com as a place they shop with. Active customers have grown to 2.31 million, which is a large customer base for Kogan.com to sell to. It has pretty good network effects – if it can sell more services to the same customer then its profit margins can increase.
Kogan.com would need to keep up the current growth rate for a while to justify the current price, but it may be able to do it.
I think all four of these ASX shares are good ecommerce options. Kogan.com and Temple & Webster are flying high and could keep going up. But I believe that Brickworks is the best value out of the four options with its various divisions with diversified earnings.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of February 15th 2021
Tristan Harrison owns shares of Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd and Temple & Webster Group Ltd. The Motley Fool Australia owns shares of and has recommended Brickworks, Premier Investments Limited, Telstra Limited, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Kogan.com ltd and Temple & Webster Group Ltd. 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.