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Online Sales to Rise During US Holiday Season: 4 ETF Picks

Sweta Jaiswal, FRM
·5 mins read

The pandemic has provided a push to the e-commerce industry as people continue to prefer staying indoors and shopping online for all essentials, especially food items.

Keeping up with the digitization trend, the upcoming U.S. holiday season is expected to see a significant surge in online sales. Going by the latest forecast from software provider Salesforce.com, a 34% year-over-year (nearly triple from the last year’s growth) jump is expected in online holiday sales in the United States (per a Digital Commerce 360 article). Per the same article, digital sales are expected to account for around 30% of seasonal spending.

According to Salesforce, digital revenues are expected at $221 billion whereas total holiday sales are estimated to hit $730 billion in the November-December period, as reported in a Digital Commerce 360 article. Moreover, according to the research firm Deloitte, holiday sales are expected to surge between 25% and 35% for the November-January period (per a Digital Commerce 360 article).

Large Players Riding the Online Shopping Trend

The current wave of digitization is favoring both ecommerce pureplays and traditional retailers, which are stepping into ecommerce to tap the surge in online shopping. Meanwhile, retailers are moving toward a hybrid/omnichannel model so that customers can enjoy quick delivery, or collect items ordered online (BOPIS, curbside pickup), at their convenience, and through apps that arrange personal shoppers.

The trend is a boon for a number of retail players, motivating them to ramp up omni-channel offerings. Notably, Kroger’s (KR) digital business remains a major growth catalyst. Customers are using e-commerce solutions for their grocery and other household essentials. In the current scenario, the company has been focusing on no-contact delivery option, low-contact pickup service and ship-to-home orders. In fact, Kroger has been making prudent investments to bolster omni-channel operations, improve supply chain and increase manpower to ensure swift customer service amid such challenging times.

Macy’s (M) expects its digital business to continue strengthening. During the second quarter of fiscal 2020, digital sales surged 53% from the year-ago quarter, and accounted for 54% of total owned comparable sales. The company plans to keep investing in its digital platform, especially in terms of capacity expansion.

Walmart Inc. (WMT) has been leveraging on capabilities such as home delivery as well as buy online and pick-up in store among others. The company’s U.S. e-commerce sales surged 97% in the second quarter, with strength across all channels. Weekly average digital customer count as well as repeat rates grew significantly and boosted e-commerce sales.

Going on, impressive performance by e-commerce giant Amazon (AMZN) in second-quarter 2020 on solid online grocery sales that tripled year over year and an encouraging outlook are helping the e-commerce space sustain this momentum for the time being.

NIKE Inc. (NKE) is no exception to this trend.  Well, strong digital sales were quite the highlight when this renowned sports and apparels company reported first-quarter fiscal 2021 results on Sep 22. During the first quarter, digital sales for the NIKE brand were up 82% on a reported basis and 83% on a currency-neutral basis. Notably, digital sales for the brand contributed about 30% to total revenues in the reported quarter.

With consumers becoming increasingly digitally grounded, NIKE is focusing on boosting scale by widening assortments available online as well as enhancing distribution centre capacities.

Online Retail ETFs to Keep Shining

According to a Total Retail article, e-commerce sales are expected to grow more than 20% this year as there is an increasing number of first-time online shoppers. Moreover, going by a report from Statista, the e-commerce space is expected to cross revenues of $2.3 trillion in 2020. Further, the report suggests that revenues are projected to see a CAGR of 8.1% between 2020 and 2024 to reach $3.1 trillion by 2024.

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 or virtual retail sales. With AUM of $891.5 million, the fund has an expense ratio of 65 bps (read: ETF Areas That Remained Strong in the First 9 Months of 2020).

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 $236 million, the fund has an expense ratio of 65 bps (read: 5 Sector ETFs That Have Trumped Covid Fear This Year).

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 $303.4 million, the fund has an expense ratio of 58 bps (read: Top 5 ETFs of the Best-Performing S&P 500 Sector in Q3).

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 $82.9 million, the fund has an expense ratio of 50 bps.

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Amplify Online Retail ETF (IBUY): ETF Research Reports
 
ProShares Long OnlineShort Stores ETF (CLIX): ETF Research Reports
 
ProShares Online Retail ETF (ONLN): ETF Research Reports
 
Global X Ecommerce ETF (EBIZ): ETF Research Reports
 
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