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Guide to E-commerce ETFs

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Brick-and-mortar retailers have been facing constant threats from digitalization. The surge in web-based shopping is severely affecting sales at departmental stores, resulting in store closures and filings of bankruptcy. Over the past decade, worldwide e-commerce has been growing at an average rate of 20% a year, according to Economist.

As of now, online retail sales make up about one tenth of total retail and about 5% of annual e-commerce revenues in the United States. The space is developing fast, courtesy of increased usage of smartphones and other mobile Internet devices.

Per Statista, in 2016, 58.3% of global Internet users had bought products online; the number is expected to increase to 63% by 2019. More than the United States, the real growth opportunities lay in the under-penetrated emerging markets. With digital buyer penetration likely to exceed 65% of Internet users globally in 2021, the e-commerce industry is set to expand.

Per Statista, e-commerce share of global retail sales will likely go up to 17.5% in 2021 from 10.2% in 2017. Last year, global retail ecommerce sales were $2.304 trillion, marking a 24.8% year-over-year increase, per eMarketer. Mobile was the main driving factor and by 2021, m-commerce is likely to account for about 72.9% of the ecommerce market.

In particular, eMarketer estimates that U.S. ecommerce sales will grow 15.6% in 2018 to reach $526.09 billion, 14.8% in 2019, 14.3% in 2020, 13.9% in 2021 and 13.3% in 2022. While 10% of total retail sales are likely to be done online in 2018, the number is expected to rise to 11.1% in 2019, 12.4% in 2020, 13.7% in 2021 and 13.3% in 2022.

Another firm, Forrester, expects U.S. online sales to cross $506 billion this year and rise beyond $712 billion by 2022. More than half — 53% — of the $3.7 trillion U.S. retail market will be accessed digitally by the end of 2018. More than $1.3 trillion of U.S. retail sales will likely be driven by smartphones in 2018, per the source (see: all the Consumer Discretionary ETFs here).

Surge of E-commerce in Holiday Season

Since we have entered the all-important holiday quarter, magnitude of holiday shipping done online is significant. Forrester estimates online sales growth of 13.5% year over year. EMarketer sees e-commerce growth of 16.2%, while Internet Retailer forecasts 15.5% growth year over year. The most upbeat estimate was delivered by Deloitte, which calls for a 17 to 22% increase in e-commerce sales in 2018 compared with 16.6% in 2017. Deloitte expects e-commerce sales to touch $128-$134 billion this year.

More Growth in Store?

Per a report by Deloitte, about 10% of global retail sales are now made online. Even in South Korea where the maximum retail sales are online, share of online trade to total is just 18%, according to Euromonitor. Thus, there is huge room for global growth (read: Profit from Retail Disruption with These ETFs).

This situation makes it crucial to discuss a few pure-play online ETFs. These ETFs could interest investors seeking to benefit from the changing retail shopping, which is increasingly moving away from brick-and-mortar stores and going digital (read: Amplify Chalks Out International Plans With Online Retail ETF).

Amplify Online Retail ETF (IBUY - Free Report)

Making a debut in April 2016, the fund has amassed about $417.8 million in assets. It charges 65 bps in fees. No stock accounts for more than 5.91% of the fund.

ProShares Online Retail ETF (ONLN - Free Report)

The fund made an entry in July 2018 and has so far hoarded about $28.2 million in assets. It charges 58 bps in fees. Amazon, Alibaba and eBay are the top three holdings of the fund.

ProShares Long Online/Short Stores ETF (CLIX - Free Report)

The fund was launched in November 2017 and has amassed about $52.7 million in assets. The expense ratio of the fund is 0.65%.

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