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Online Retail ETFs Riding the Coronavirus-Led Shopping Trend

Sweta Jaiswal, FRM

The brick-and-mortar retail stores are paying a heavy price for the imposition of lockdowns by governments in the wake of the coronavirus outbreak. In order to avoid the human-to-human contact, people are staying indoors and shopping online for all essentials, especially food items. In fact, non-store retail sales in March increased 3.1% sequentially and 9.7% year over year. Going by Signifyd’s Ecommerce Pulse data, there has been a 46% surge in overall e-commerce expenditures since late February. Notably, e-commerce sales rose by the highest rate (since late February) of nearly 25% last week, per the report. As consumers started receiving their stimulus money, an uptick in sales of categories like apparels, electronics and auto parts was observed in the last week, per Ecommerce Pulse data.

Online Shopping Trend Boosts E-commerce Sales

Backed by surging stay-at-home mandates, Amazon AMZN, one of the largest e-commerce providers, has been seeing a flurry of new home delivery orders. The company has announced its latest plans to hire more 75,000 workers in addition to the recent hiring of 100,000 warehouse and delivery employees. Notably, these people will be employed in positions varying from warehouse workers to delivery drivers. Moreover, Amazon has collaborated with ride-hailing company, Lyft, where Lyft’s drivers have been asked to consider job opportunities at Amazon for extra income by working as delivery drivers, at warehouses and carrying out shopper jobs.

Wayfair W has increased pay and introduced other incentives for hourly employees in fulfilment centers to keep them motivated. Despite the coronavirus impact, the company expects to meet or exceed its guidance for the fiscal first quarter. The company continues to witness strong demand across most home goods categories, in both U.S. and International segments. 

Moreover, San Francisco-based the grocery delivery startup, Instacart is looking to appoint another 250,000 contract "shoppers" to meet surging demand during the lockdown measures, per an article on ETRetail.com. According to the company, its volumes have risen 500% year over year along with a 35% increase in average customer orders. Walmart WMT is also gaining from the trend with Walmart Grocery application witnessing a 460% surge in average daily downloads from January 2020, per a TechCrunch article.

It is believed that the online shopping trend will stay even after the pandemic subsides. In this regard, eMarketer’s Andrew Lipsman, has said that, “I do think that online grocery ordering, both for click-and-collect and for delivery, is a permanent change that will come out of this. Once they have learned how to do it, habituated to the behavior, that will form a habit going forward that will ultimately represent a profound shift in a massive consumer category” (per a Total Retail article). Going by a USA Today article, nearly 100,000 retail stores could be shut down by 2025.

ETFs to Ride the Tide

According to a Total Retail article, e-commerce sales are expected to grow more than 20% in the ongoing year as there is an increasing number of first-time online shoppers.

Against this backdrop let’s look at some ETFs that can benefit from the new shopping trend:

Amplify Online Retail ETF IBUY

The fund provides a cost-efficient way for investors to own a basket of companies with significant revenues from online and virtual retail sales. With AUM of $242.2 million, the fund has an expense ratio of 65 bps (read: 5 Best Sector ETFs Halfway Through April).

ProShares Long Online/Short Stores ETF CLIX

The fund seeks investment results, before fees and expenses, that correspond to the performance of the ProShares Long Online/Short Stores Index. With AUM of $110.7 million, the fund has an expense ratio of 65 bps.

ProShares Online Retail ETF ONLN

The fund seeks investment results, before fees and expenses, that track the performance of the ProShares Online Retail Index. With AUM of $74.4 million, the fund has an expense ratio of 58 bps (read: What's in Store for Work-From-Home ETF & Stock Earnings?).

Global X E-commerce ETF EBIZ

The fund seeks to invest in companies positioned to benefit from the increased adoption of e-commerce as a distribution model, including companies whose principal business is operating e-commerce platforms, providing e-commerce software and services, and/or selling goods and services online. With AUM of $8.9 million, the fund has an expense ratio of 50 basis points (bps) (read: 5 Best Sector ETFs Halfway Through April).