MarketsOct 24, 2022
Online marketplace stocks look cheap as many search for alternate options
Ecommerce Slump
Victor Lei
Discover
Yes, we know, they’re down bad. E-commerce has been one of the hardest-hit sectors of the year. Stocks that were up many multiples during COVID have lost over 50% of their value. But, we also like a good bargain at the flea market.
Online marketplaces bring sellers and buyers together. Furniture (Wayfair), luxury goods (Farfetch), handcrafted items (Etsy)… name a category, and we’ll find you an online marketplace.
They’ve fallen out of favor among investors this year.
It’s expensive to build out these platforms. Internet marketplaces often have high marketing expenses to attract buyers and sellers.
Many are losing money — and the sight of profitability is getting further away. Raising fresh capital has become more difficult and expensive.
Cash is a concern, losses are growing and sales are slowing. Depending on which company you look at, their run rate (how many months of cash remaining) can range from years to months.
In the current environment, it’s uncertain how far online marketplaces will go. Here’s how they’re ensuring their survival:
Still, the success of major marketplaces like Amazon, eBay and Etsy continues to attract investors.
The OG marketplaces, eBay and Amazon, have survived several recessions and topped the S&P 500. But not all marketplaces are built the same. Other marketplaces shut down or were acquired.
Today, we’re seeing similar dynamics, and there may be more consolidation on the way. Let’s hone in on one online marketplace and take a look below.
