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Explore Online Retailing Internationally With This New ETF

Sanghamitra Saha

A vivid change has been taking place in the retail shopping scenario globally, from brick-and-mortar stores to the digital format. While developed markets adopted this change quite earlier, emerging markets have been witnessing fast penetration of late. The rapid adoption of smartphones has also been making the transition fast. 

There have been double-digit increases in business-to-consumer e-Commerce sales in the emerging markets of Asia, Latin America, the Middle East and Africa. So, to tap this momentum, Amplify, issuer of the successful Online Retail ETF IBUY, took a step forward and launched a fund targeting purely international online retailing. The new fund is Amplify International Online Retail ETF XBUY.

Inside XBUY

The fund looks to focus on foreign companies that generate 90% or more of their revenues from online sales. The underlying index’s selection universe considers all non-U.S. securities listed on exchanges.

The fund is heavy on China (26.5%) followed by Japan (23.3%), United Kingdom (15.7%) and Germany (9.6%). The fund holds 45 stocks in total. No stock accounts for more than 3.04% of the portfolio. Traditional Retail makes up about 52% of the fund, followed by Marketplace (33%).  It charges 69 bps in fees.

How Does It Fit In a Portfolio?

The ETF could be intriguing for investors seeking to benefit from the uptick in international online retailing. Some of the biggest opportunity lie outside the United States, per the issuer. Notably, country with the highest online shopping penetration rate as of second-quarter 2017 was China.

It is expected that 50% of the world population will have Internet access in 2019, per amplifyetfs. Per Statista, e-commerce share of global retail sales will likely go up to 17.5% in 2021 from 10.2% in 2017 (read: Is Macy's Spooking You? 3 Retail ETFs & Stocks for 2019).

Over the past decade, worldwide e-commerce has been growing at an average rate of 20% a year, according to Economist. Still, per a report by Deloitte, about 10% of global retail sales are now made online. Even in South Korea, one of the countries with maximum retail sales online on the global level, share of ecommerce to total is still under 15%, per statista.com. So, there is huge room for growth globally (read: Profit from Retail Disruption with These ETFs).

Will It See Success?

The fund should see uninterrupted success like IBUY. Though there aren't many online retail ETFs focused solely on international online retail companies, XBUY may face competition from the likes of Global X E-commerce ETF EBIZ, ProShares Long Online/Short Stores ETF CLIX, ProShares Online Retail ETF ONLN as well as IBUY. Emerging Markets Internet & Ecommerce ETF EMQQ can also pose threats to the fund.

Notably, half of EBIZ is exposed to international markets with China taking 25% of the fund. ONLN and CLIX each has 25% exposure to emerging markets (mainly China), per xtf.com. IBUY has about 22% exposure to international markets where China, United Kingdom, Germany and Japan are leading.

EBIZ and CLIX charge 68 bps and 65 bps in fees, respectively, while ONLN and EMQQ charge 58 bps and 86 bps. CLIX has accumulated $46.5 million in AUM since its debut in November 2017, while ONLN has amassed about $32.8 million since making an entry last July. Amplify’s own fund IBUY has gathered about $287.1 million in assets in less than three years. EMQQ generated about $361.1 million in assets in about five years.

So, it is clear that almost all online retail ETFs are being noticed by investors. The new fund should also make a killing. This is especially true as the fund has been presented to investors with a tweak, i.e., pure international online retailing. This uniqueness should make it see more success. The expense ratio of the new fund is also not too high.

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ProShares Online Retail ETF (ONLN): ETF Research Reports
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