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New Online Retail ETF is on the Block

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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).

Inside EBIZ

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?).

Competition

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).

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