Online Retail ETFs to Gain From Holiday Shopping Craze

The coronavirus pandemic has helped the e-commerce industry to gain a strong foothold in the United States and globally as people stayed indoors and shopped online for all essentials. The trend is expected to continue in the upcoming holiday season. According to Mastercard (NYSE:MA) SpendingPulse, U.S. retail sales — excluding automotive and gas — for the “75 Days of Christmas” that runs from Oct 11 to Dec 24 — are anticipated to increase 6.8% year over year.

On par with the digitization trend, the upcoming U.S. holiday season is expected to see a significant surge in online sales. Mastercard SpendingPulse predicts online sales to increase 7.5% during the “75 Days of Christmas” period. In fact, eMarketer predicts revenues for the 2021 holiday season to jump 11.3% year over year to $206.88 billion, per a Whiplash article.

The current wave of digitization is favoring both ecommerce pureplays and traditional retailers, which are stepping into ecommerce to tap the surge in online shopping. Meanwhile, retailers are moving toward a hybrid/omnichannel model so that customers can enjoy quick delivery, or collect items ordered online (BOPIS, curbside pickup), at their convenience, and through apps that arrange personal shoppers. The trend is a boon for a number of retail players, motivating them to ramp up omni-channel offerings.

The retail players are increasingly embracing the “buy now, pay later” model to attract shoppers amid higher retail prices. Per Salesforce (NYSE:CRM), global "buy now, pay later'' service is expected to account for 8% of online orders for this shopping season.

The retailers are prepping for the start of the holiday season (the late October-December period) that is considered a busy season for many industry players and market participants. The quarter is also marked by some popular retail events like Halloween, Thanksgiving, Cyber Monday, Black Friday and Christmas, which increase its significance among retailers. Considering the Sensormatic Solutions data, Black Friday (Nov 26) is estimated to be the busiest shopping day this year.

Going by Shopkick’s 2021 survey, 57% of customers are thinking of opting for the online medium to fulfill their shopping needs (as mentioned in a Whiplash article). The rise in the COVID-19 cases due to the Delta variant might also stimulate the online shopping preference. Consumers might prefer to shop indoors to follow social distancing measures and take precautions. Moreover, this new habit of online shopping has provided consumers with a lot of comfort as all their shopping needs, especially food items, toys, and household electronics can be purchased with just a click.

Online Retail ETFs to Keep Shining

Against this backdrop, let’s look at some ETFs that can benefit from the new shopping trend:

Amplify Online Retail ETF IBUY

The fund provides a cost-efficient way for investors to own a basket of companies with significant revenues from online or virtual retail sales. With AUM of $915.7 million, the fund has an expense ratio of 65 basis points (bps) (read: 5 ETF Areas for Investors to Consider Amid the September Slump).

ProShares Long Online/Short Stores ETF CLIX

The fund seeks investment results, before fees and expenses, that correspond to the performance of the ProShares Long Online/Short Stores Index. With AUM of $71.8 million, the fund has an expense ratio of 65 bps (read: Long/Short ETFs to Fight Likely Market Slump in September).

ProShares Online Retail ETF ONLN

The fund seeks investment results, before fees and expenses, that track the performance of the ProShares Online Retail Index. With AUM of $839.8 million, the fund has an expense ratio of 58 bps (read: Retail ETFs are Looking Good Bets: Let's Explore Why).

Global X E-commerce ETF EBIZ

The fund seeks to invest in companies positioned to benefit from the increased adoption of e-commerce as a distribution model, including companies whose principal business is operating e-commerce platforms, providing e-commerce software and services, and/or selling goods and services online. With AUM of $200.5 million, the fund has an expense ratio of 50 bps.

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