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Why to Buy Online Retail ETFs Now?

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On Oct 17, the Department of Commerce reported that retail sales in September increased 0.7% month over month, significantly beating the consensus estimate of 0.3%. Moreover, the metric for August was revised upward to an increase of 0.8% from 0.6% reported earlier. Within overall retail sales, online sales grew 1.1% in September, second only to a 3% jump in miscellaneous store retailers.

The online retail industry has been growing steadily over the past two decades. The COVID-19 pandemic accelerated this trend as many consumers shifted to online shopping due to lockdowns and social distancing measures. Modern consumers are increasingly valuing convenience, variety, and personalization—all attributes of online shopping.

E-commerce is continually transforming as underlying technologies progress. On one end, we have ever-evolving and more potent user devices, while on the opposite end, advanced AI-driven software platforms enhance transaction capabilities, ensuring greater user contentment.

New technologies, including augmented reality (AR), virtual reality (VR), and machine learning algorithms, are enhancing the online shopping experience. As these technologies become more prevalent, they could drive further growth in the sector.

Within the Retail sector, the Zacks-defined Internet-Commerce industry is currently in the top 37% of the Zacks Industry Rank. Year to date, the industry has provided 30% returns. Since it is ranked in the top half of Zacks Ranked Industries, we expect the e-commerce industry to outperform the market over the next 3 to 6 months.

Holiday Shopping Season About to Start?

Online retail sales typically see a significant spike during the holiday season. The weeks leading up to major holidays, especially Black Friday, Cyber Monday, and Christmas, see a surge in online shopping activity. Nearly 46% of buyers began their holiday shopping prior to November last year, an increase from 39% in 2019. It appears this year will see a similar pattern.

According to a recent NRF survey, 39% of consumers indicated they intend to commence their holiday shopping sooner than their usual routine this year. Based on a holiday report by Ipsos, commissioned by Google, 85% of online shoppers usually keep tabs open in anticipation of sale starting. Flurry of deals are expected to be received on the online platforms.

Against this backdrop, below we highlight a few online retail ETFs that could be bought currently.

ETFs in Focus

Amplify Online Retail ETF (IBUY - Free Report)

The EQM Online Retail Index utilizes a rules based methodology to select a globally diverse group of companies with 70% or more of revenue from online and virtual sales. The fund charges 65 bps in fees.

ProShares Online Retail ETF (ONLN - Free Report)

The ProShares Online Retail Index is a specialized retail index that tracks retailers that principally sell online or through other non-store channels. The fund charges 58 bps in fees.

ProShares Decline of the Retail Store ETF (EMTY - Free Report)

The underlying Solactive-ProShares Bricks and Mortar Retail Store Index is the first comprehensive, public securities index composed solely of traditional retailers, and is positioned to potentially become an industry standard for measuring the health of bricks and mortar retailers. The fund charges 65 bps in fees.

First Trust S-Network E-Commerce ETF (ISHP - Free Report)

The underlying S-Network Global E-Commerce Index provides exposure to companies with securities listed on recognized global securities exchanges that are principally engaged in the global e-commerce industry, including the online retail, online marketplace, content navigation and e-commerce infrastructure business segments. The fund charges 60 bps in fees.

(Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.)

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