Stocks That Could Be the Next Amazon: If you’ve ever attended a trade show, you’ve heard at least 100 companies call themselves the next Amazon.com, Inc. (NASDAQ:AMZN).
It’s an easy thing to say but not so easy to do. Amazon’s market cap of $1.5 trillion makes it one of the most valuable companies in the world.
It has a global footprint that serves over 150 million paying Amazon Prime members worldwide in 2020. The company is such an unstoppable juggernaut that CEO Jeff Bezos became the first person in human history worth $200 billion.
His ex-wife MacKenzie Scott is the richest woman in the world just off her divorce settlement. The company doubled its profits from the previous year at $5.2 billion during the coronavirus pandemic that ravaged the economy during the second quarter of 2020.
Besides being the number one retail marketplace online with a steady stream of paying members, Amazon generates revenue through web services too. Companies like Netflix, Facebook, LinkedIn, ESPN, Baidu, BBC, and Turner Broadcasting depend on Amazon Web Services to run.
Any company can claim it, but let’s take a look at four stocks that could be the next Amazon. Since it has such a strong foothold in the United States, we’ll take our search abroad to examine the companies serving markets Amazon may not reach as effectively.
Mercadolibre – The Amazon of Latin America
Mercadolibre Inc (NASDAQ:MELI) launched in 1999 as an eCommerce marketplace serving Spanish- and Portuguese-speaking markets.
Like Amazon, the company soon became an ecosystem and is expanding into other offerings, including a financial arm that could serve a greatly unbanked and underbanked population.
As much as 70 percent of Latin America is either unbanked or underbanked, and that means there’s an estimated $50 billion in potentially untapped revenue in the region.
In fact, Mercado Pago, the company’s financial arm, is responsible for generating 65 percent of the company’s annual revenue. The need to transfer money and make payments remotely turned out to be a key ingredient in the company’s 2020 growth.
It saw a rise in both total payment volume and transactions to record numbers during the year. This includes is mobile wallet, point-of-sale, and other payments solutions. Online payments are quickly becoming the norm across Latin America.
And it’s still branching out into more industries. Mercado Envios is the company’s logistics arm, and Mercado Fondo handles assets under management (AUM) of $500 million on the back of its 11.4 million users.
While the company hasn’t seen the explosive growth of Amazon, it’s still generating close to $1 billion in annual revenues and that’s only going to continue growing.
When the coronavirus pandemic hit, Mercadolibre revenues skyrocketed, sending the stock price skyward along with it. Heading into the end of 2020, MELI stock is hovering around the $1000 mark, about a third of Amazon’s, although its market cap of just over $50 billion pairs in comparison to one of the world’s only trillion-dollar companies.
Still, operations risks caused by the region’s political and economic climate make penetrating this market difficult, even for MercadoLibre.
It does, however, have access to a deep pool of talented financial technology professionals that can build a solid project.
It has huge growth potential and all the resources necessary to stand strong in tough conditions. In fact, it’s thriving in 2020, and expansion plans could make it a more venerable Amazon competitor sooner rather than later.
Alibaba – The Amazon of China
Alibaba Group Holding Ltd (NYSE:BABA) was founded in 1999 by Jack Ma and friends as a B2B marketplace. By the end of that year, it received a $25 million investment from Goldman Sachs and SoftBank and became a key ingredient in China’s mass export of bulk goods.
The company successfully fought both eBay and Amazon to ensure it dominates the region of Southeast Asia. It wasn’t long before it expanded beyond its primary ecommerce business to get into cloud computing, artificial intelligence, fintech, entertainment, and more.
The comparisons between Alibaba and Amazon extend far beyond this article, as they’ve long been seen as global competitors.
Alibaba lacks much of Amazon’s infrastructure, which includes warehouses and distribution. Instead, it connects the vast manufacturing and warehousing industries of Shenzhen to other regions around the world.
This leaves little control for Alibaba to exert over fulfillment, and means that it has a long way to go toward competing with Amazon on fronts like free two-day shipping (if that’s something the company even cares about).
Like Amazon, Alibaba emerged from the coronavirus pandemic as a clear winner by expanding its business while operating at the heart of the early outbreak.
Of course, it’s not the first time it had to deal with such a thing – it also emerged unscathed (and growing) from the 2003 SARS outbreak. This time the company was ready with the liquidity to greatly expand the reach of its financial arm, mimicking the moves made by MercadoLibre, but bigger. In fact, it’s lending $282 to small businesses in 2020 alone.
Of course, it’s not the only major technology player on the Asian block. Rivals Tencent Holdings, JD.com Inc and Pinduoduo Inc. force Alibaba to compete harder to maintain its status in the region, much less expand globally.
Still, the company continues beating expectations and benchmarks throughout 2020, and it’s only going to pick up more vendors as the economy starts to pick back up.
This puts Alibaba in a similar position to Amazon where it’s poised to continue growing even larger based on the momentum of explosive growth during the pandemic.
Otto – The Amazon of Germany
Otto GmbH & Co KG began as a mail order company in 1949 Hamburg, Germany. As the years went on, the company’s catalog expanded from shows to a wide range of consumer products, and it soon became the Sears and Roebuck of Europe.
Telephone orders were introduced in the 1960s, and the 1990s saw the launch of the brand’s ecommerce website. Its owned brands include Crate and Barrel, Eddie Bauer Japan, and Hermes Fulfilment.
Like Amazon, Otto has an efficient product shipment and distribution network at the foundation of its primary multichannel retail business, although financial and other services are also core to the company’s revenues.
It also continues branching into other technologies, like blockchain, cloud computing, and artificial intelligence. Like other shipping companies, Otto made a killing during the coronavirus outbreak, as people sheltered in place and leaned on delivery services.
The company currently doesn’t trade in the United States, but it can easily run an initial public offering (IPO) at any time. Founder Werner Otto’s family also holds a substantial stake in Paramount Group Inc (NYSE:PGRE), a real estate investment trust (REIT) based in the United States. This isn’t a part of the Otto holdings, but it’s a great way to invest in the same movement.
Rakuten – The Amazon of Japan
Rakuten Inc (OTCMKTS:RKUNY) takes a similar approach to combatting Amazon by focusing on developing technologies – like payment gateways, affiliate programs, and other ecommerce essentials – without the hassle of managing and distributing inventory.
In fact, Rakuten customers handle customer service, logistics, inventory, and other operations themselves, leading to a much freer marketplace than Amazon.
It also offers benefits you’ve never seen on Amazon Prime, like rewards points (you can get 3x rewards points during some sales). The company continues going back and forth on entering financial services too, which is putting Japanese banks on notice. While it withdrew its bank charter application in August 2020, it could reapply anytime.
Think of Rakuten as a mall that hosts stores versus Amazon being a retailer that carries products. In this way, it competes with Shopify and other platforms too. And Rakuten’s technology also goes deeper than retail, with analytics into global trends and markets.
When the coronavirus pandemic hit, Rakuten partnered with the World Health Organization to combat misinformation, something Bezos often fails at through The Washington Post.
Stocks That Could Be the Next Amazon: The Bottom Line
Amazon is a juggernaut that competes in retail, finance, tech, logistics, and more. Some of the world’s biggest companies depend on its infrastructure to survive, and it only got bigger when the rest of the world was ravaged by the COVID-19 outbreak. However, it’s not standing alone in this world.
These four companies are mimicking many of Amazon’s moves and doing it successfully in markets it hasn’t fully penetrated. Should one succeed, it can easily become the next Amazon.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.