E-commerce is the COVID-19 success story. These businesses are the clear winners.

Australia Post says online sales increased by 80% within 8 weeks of the WHO declaring the pandemic. These companies are the clear leaders.

kogan share price

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

E-commerce business has been the great success story of the pandemic. The lockdown has accelerated the trend towards online sales. In fact, Australia Post data shows that e-commerce growth rose by 80% in the 8 weeks following the World Health Organization's (WHO) announcement. They believe that this year online sales will reach 15% of all retail sales. That is 3–5 years ahead of previous forecasts.

Furthermore, we saw evidence of this among many of the revenue reports companies have posted throughout the pandemic. 

Traditional e-commerce business

It sounds strange to be talking about traditional e-commerce. However, Kogan.com Ltd (ASX: KGN) definitely fits that mould.  Kogan is an online marketplace similar to that of Amazon.com (NASDAQ: AMZN) and started out selling home electronics. Since Kogan listed on the ASX in 2016, it has purchased the old Dick Smith electronics business and recently purchased furniture retailer, Matt Blatt.

In a recent business report, Kogan announced an increase in online sales by 100% in 4Q FY20 to date. The company's profit for the same period also grew by 130%. Kogan currently sells at a price to earnings (P/E) ratio of 73.83. 

A surprise entrant in this space is the online marketplace purchased by Wesfarmers Ltd (ASX: WES). Catch is a general marketplace the same as Kogan. Wesfarmers recruited former Amazon executive, Peter Sauerborn to run the company. Catch reported growth in gross transaction value of 68.7% for 2H FY20 to date, compared to 21.4% for H1 FY20. 

Wesfarmers also owns other retailers like Bunnings, Kmart and Officeworks. Financial year to date, total online sales across the Group increased by 60% to $1.4 billion or $1.9 billion.

Wesfarmers current holds a P/E ratio of 22.55. 

Store-specific sales

City Chic Collective Ltd (ASX: CCX) is a multi-branded women's fashion apparel retailer. I think this is a red hot small-cap share to keep an eye on with its P/E ratio currently sitting at 33.91. The company prides itself on being an omnichannel retailer with online retail contributing two-thirds of the company's global sales.

During the period of store closures during the lockdown, the company saw an increase in sales of 57%. City Chic states they achieved this increase by quickly adjusting their product offering to cater to customer demand during the lockdown. The company is looking to maintain high online sales revenues as stores begin to open after the pandemic. 

Temple & Webster Group Ltd (ASX: TPW) is a furniture company that has an e-commerce business with a 'drop-shipping' operations model. For the uninitiated, this means that products are shipped directly to customers from the providers. Temple & Webster also have their own branded products.

For 2H FY20 up to the end of May, the company reported a 68% increase in revenue and a 68% increase in active customers. In addition, the company reported a +100% increase in June revenue thus far verse the previous corresponding period. This all plays into the company's current P/E ratio which sits at 199.93.

Foolish takeaway

This shortlist is just some of the e-commerce highlights across the market right now. I haven't included the impressive sales increases by other recognised brands such as JB Hi-Fi Limited (ASX: JBH) or Harvey Norman Holdings Limited (ASX: HVN). However, the overall online shopping trend is clear. 

With e-commerce business rapidly racing towards 15% of total retail sales, it has become an essential element of retail. Of the companies listed here, the high P/E ratios show that the market thinks there is a big future in these sales channels. 

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Temple & Webster Group Ltd and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool Australia has recommended Amazon 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.

More on Share Market News

Ten happy friends leaping in the air outdoors.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a strong start to the trading week for the ASX 200 this Monday.

Read more »

Three happy office workers cheer as they read about good financial news on a laptop.
Broker Notes

Morgans says these ASX shares can rise 20% to 45%

Let's see why the broker is bullish on these shares.

Read more »

Workers inspecting a gas pipeline.
Broker Notes

What's Macquarie's price target for Origin Energy shares?

Could Origin be primed for a turnaround?

Read more »

a man in a business suite throws his arms open wide above his head and raises his face with his mouth open in celebration in front of a background of an illuminated board tracking stock market movements.
Broker Notes

Leading brokers name 3 ASX shares to buy today

Here's why brokers believe that now could be the time to snap up these shares.

Read more »

A happy couple looking at an iPad feeling great as they watch the Challenger share price rise
Share Market News

Good news for Aussie super funds: US to abandon 'revenge tax'

Australian investors might dodge this tax bullet after all.

Read more »

Shot of a young businesswoman looking stressed out while working in an office.
Share Fallers

Why BHP, Lynas, Newmont, and Virgin Australia shares are falling today

These shares are starting the week in the red. But why?

Read more »

Bank building in a financial district.
Bank Shares

Which is the only ASX 200 bank stock Macquarie expects to outperform in FY 2026?

Macquarie forecasts a tough year ahead for the ASX 200 banks, with only one expected to outperform.

Read more »

Woman with an amazed expression has her hands and arms out with a laptop in front of her.
Share Gainers

Why GenusPlus, NIB, Superloop, and Titomic shares are racing higher today

These shares are starting the week on a positive note. But why?

Read more »