Size Is King: Online Commerce Set for Midterm Acceleration, Consolidation as Leaders Extend Reach

A dour consumer spending outlook suggests that the e-commerce industry is in for a challenging 2024-25, with top-line growth set to slow again in 2024 before a gradual return to 10%-plus annual growth by 2028. Despite the pressure, we continue to see investable opportunities for long-term investors, with wide-moat Allegro and narrow-moat Chewy representing our top picks. Overall, our thesis regarding online marketplaces remains intact: the largest, competitively advantaged players should continue to consolidate market share, with deeper expansion into advertising, financial services, and fulfillment set to strengthen their competitive edge. Our forecasts call for the average online marketplace in our coverage to expand take rate by 240 basis points between 2023-28, aligning with this view.