Data Confirm It's a Good Time to Embrace Online Retail ETFs

It’s prime time for last-minute holiday shopping and data confirm that consumers that already got their shopping done and did plenty of it online, propping up exchange traded funds such as the Amplify Online Retail ETF (NYSEARCA: IBUY) in the process.

IBUY has been a popular thematic play that targets global companies that generate at least 70% of revenue from online or virtual sales. As the market environment shifts and changes, investors may also have the opportunity to capitalize on the growth potential of the e-commerce segment.

“According to the latest data from Deloitte, consumer spending increased 1% in November. Consumers tended to do more of their shopping earlier in the month, amid an extended promotional season, which retailers chose over-focusing just on the long Black Friday weekend. As Barron’s predicted, Black Friday—while still important—wasn’t as crucial this year,” reports Teresa Rivas for Barron’s.

The case for IBUY is twofold. First, it’s getting a big assist from the coronavirus pandemic. Second, online retail was booming longer before COVID-19 arrived.

Some market observers believe changes in consumers’ behavior, which were apparent before the virus, are merely being hastened by the COVID-19 pandemic and that online is where it’s at for retailers – a theme that’s expected to be sticky for years to come.

Interest in IBUY

With the holiday shopping season essentially here, IBUY has another catalyst. Some holiday shoppers may just be late in getting to it. Given how spending is highest in November and December, with estimates at three-quarters of a trillion dollars, the prevalence of online shopping means a lot of companies can profit.

“The good news is that when people to complete a transaction, it tends to be a more expensive one. Transactions overall fell 6% in November from 2019 levels, but the average value of transactions rose 7%,” according to Barron’s.

The Big Four accounting firm Deloitte and market research firm Forrester both expect this to be the year that online shopping explodes. Online sales for retailers in popular gifting categories will get a boost this season, with health and beauty up 23%, consumer electronics rising 20%, fashion up 19%, and home furnishings growing 16% by year’s end. Deloitte predicts eCommerce holiday retail sales to grow between 25% to 35% from November through January, reaching $182 billion to $196 billion in total.

IBUY has an international counterpart, the Amplify International Online Retail ETF (NYSEArca: XBUY). XBUY is an index-based ETF that takes on foreign companies or those outside the U.S. that are expected to benefit from the increased adoption of e-commerce around the world.

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.