Global X Funds has launched a new retail ETF, Global X E-commerce ETF (EBIZ - Free Report) , which seeks to tap into the online retail space. Per the press release, e-commerce only accounts for 9.8% of the total available retail market, with over 90% available for further disruption (see: all the Consumer Discretionary ETFs here).
The fund tracks the Solactive E-commerce Index, which comprises developed and emerging market firms operating in the e-commerce software, analytics or services or sells their goods primarily through online channels. The fund has certain rules regarding selection of companies. The constituent companies should derive at least 50% of their revenues from e-commerce operations to be eligible for inclusion and should have market cap of in excess of $200 million. The average trading volume should also be more than 2 million.
After this, the fund utilizes Solactive’s proprietary Natural Language Processing engine called ARTIS (Algorithmic Theme Identification System). ARTIS analyzed large volumes of company-related data and ranks the company according to a defined system. The final index comprises 40 highest ranked securities.
Country-wise, the United States (48.67%) and China (24.2%) have double-digit allocation each and sector wise, Internet retail (71%) and Interactive Media and Services (10.7%) have double-digit allocation (read: Consumer Confidence Slips From 18-Year High: ETFs in Focus).
Since its inception on Nov 27, the fund has amassed $1.6 million and has an expense ratio of 0.68%.
How Does it Fit in a Portfolio?
Around 96% of Americans have reported that they engage in some form of online shopping. However, there are segments within the retail space that do not show significant e-commerce activity, like grocery shopping where only around 4.3% of sales currently are occurring online.
Also, China has been emerging as the largest e-commerce market in the world. China’s e-com space is expected to touch the $1 trillion mark, making it the world’s first $1 trillion dollar country in this space.
Per a report by Forrester, China’s online retail market is expected to reach $1.8 trillion in 2022, mainly with help of tech kings like Alibaba Group Holding Ltd. (BABA - Free Report) and JD.com (JD - Free Report) . U.S. online retail market is expected to reach $713 billion in 2022 while Japan’s online retail market valuation is forecast around $159 billion. Japan occupies the third spot in terms of country allocation with 8.7% weight (read: Should You Tap Japan ETFs on Strong Retail Sales in October?).
The fund is going to experience strong competition from popular ETFs like Amplify Online Retail ETF (IBUY - Free Report) and ProShares Online Retail ETF (ONLN - Free Report) . IBUY has 80% allocation to the United States and 5% to China, while ONLN targets the United States and Chinese markets with 75.5% and 21.5% allocation each. EBIZ is costlier than its counterparts as IBUY and ONLN charge lower expense ratios of 0.65% and 0.58%, respectively (read: Trump-Jingping Truce to Boost These ETFs).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>