The Global X E-commerce ETF (NasdaqGM: EBIZ) is up 45.55% year-to-date, underscoring the strength in e-commerce assets. However, that stout showing by EBIZ isn’t a ceiling. It’s a floor and perhaps the beginning of more substantial, long-term gains.
EBIZ reflects the performance of the Solactive eCommerce Index and looks to invest in companies positioned to benefit from the increased adoption of E-commerce as a distribution model, including companies whose principal business is in operating eCommerce platforms, providing eCommerce software and services, and/or selling goods and services online.
“Yet despite decades of growth, we believe e-commerce still has ample opportunities to expand, and 2020 is giving us a glimpse of that growth potential,” said Global X analyst Pedro Palandrani in a recent note. “E-commerce has become the de facto shopping solution for many consumers amid the COVID-19 pandemic. Approximately 16% of retail sales in the second quarter happened online, a robust 44.5% increase from Q2 last year.”
Adding to the case for EBIZ, 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. However, it’s clear e-commerce growth facilitated by the pandemic is growth that would have occurred anyway. The pandemic merely sped it along.
With a marked shift towards online retail, it will be survival of the fittest for retailers maintaining their brick-and-mortar presence. Demographics are also relevant to the long-term EBIZ thesis.
“Unsurprisingly, e-commerce is particularly routine among younger generations,” notes Palandrani. “Many Millennials, born between 1980 and 2000, and Gen Xers, born between 1965 and 1980, favor digital marketplaces for the transparency, convenience, pre-ordering, and the ability to set recurring deliveries.”
Shopping and consumer trends are changing as more buyers rely on the convenience of online retailers to quickly and easily meet their discretionary needs. As the retail landscape changes, investors can also capitalize on the trend through ETFs that target the e-commerce segment. Demographic trends are driving those shifts.
“Before the pandemic, the e-commerce story seemed clear: It was geared towards younger, tech-savvy generations and focused on specific, delivery-friendly categories, like electronics and clothing,” writes Palandrini. “But for many consumers, COVID-19 changed that paradigm. The pandemic accelerated broader e-commerce adoption, particularly in categories that historically lagged in online sales, with groceries and health care items moving increasingly online.”
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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.