These ASX online retail shares prove you don’t need stores to make sales

Online shopping has grown dramatically in Australia over recent years. The onset of the coronavirus pandemic accelerated this trend, with one out of every ten items purchased this year thought to have been bought online. The Australian eCommerce market was valued at $28.6 billion in 2019 and is expected to grow to $35.2 billion by 2021. eCommerce penetration is expected to reach 85.2% next year, meaning 22 million people will be buying online. There are plenty of retailers on the ASX, most of which offer goods both through shopfronts and online channels. But these two ASX online-only retailers have shown you don’t need stores to make sales. 

Temple & Webster Group Ltd (ASX: TPW) 

Temple & Webster is Australia’s largest online-only furniture and homewares retailer. The company offers over 180,000 products on its website from hundreds of suppliers. Temple & Webster runs a drop-shipping model where suppliers ship directly to the end customer. This means Temple & Webster does not need to hold inventory and can provide a larger product range. 

Temple & Webster saw sales accelerate with the onset of coronavirus. People have been spending more time at home so have been looking to upgrade their surroundings. FY20 revenue was up 74% to $176.3 million, with sales accelerating in 4Q FY20 when revenue was up 130% on the prior corresponding period. Active customers increased 77% across the year with EBITDA increasing 483% to $8.5 million. CEO Mark Coulter said “The advantages of being the online market leader are apparent as we continue to grow our market share”. 

Kogan.com Ltd (ASX: KGN)

Kogan is an online retailer offering products across a wide range of categories as well as a suite of private label brands. Kogan has also seen a spike in sales since the onset of lockdowns, with gross sales up 103% in April and May. This drove a 130% increase in gross profit. Sales almost doubled in June, rising 95% to more than $94 million. 

Kogan added 126,000 active customers in May, growing active customer numbers to 2,074,000 at the end of the month. In June, Kogan raised $100 million of capital to increase financial flexibility. This provides the company with the means to act quickly on accretive opportunities, continue expanding its customer base, and enhance its operating model. Founder Ruslan Kogan told the Australian Financial Review, “our business is booming as more customers than ever chose Kogan.com.”

Foolish takeaway

These two ASX online retail shares are proof that you don’t need stores to deliver impressive sales levels. Both have seen sales accelerate since the onset of the pandemic, benefiting from the shift to digital commerce. And if the forecasts are accurate, this shift looks set to continue into the future even after the pandemic has subsided.

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Kate O’Brien has no position in any of the stocks mentioned. 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 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.

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