This year, the ProShares Online Retail ETF (NYSEArca: ONLN) is up more than 24%, meaning the dedicated online retail ETF is beating the largest traditional retail ETF by a 12-to-1 margin.
Shopping and consumer trends are changing as more buyers rely on the convenience of online retailers to quickly and effectively meet their discretionary needs. As the retail landscape changes, investors can also capitalize on the trend through exchange traded funds that target the e-commerce segment.
Looking ahead, analysts expect the growth of online retail to continue. About 10% of global retail sales are currently conducted online, which leaves an e-commerce-centric strategy further room for growth. Recent data also indicated that online sales growth could double by 2030.
“With nearly all of the constituents of the ProShares Online Retail index reporting, sales growth came in at nearly 20% and earnings growth came in at nearly 55%,” according to recent data from ProShares. “In sharp contrast, with roughly two-thirds of the Solactive-ProShares Brick and Mortar Index reporting, sales growth tallied less than 3% and earnings shrank over 0.5 percent.”
Shopping With ONLN ETF
ONLN, which is nearly a year old, tracks the ProShares Online Retail Index. That benchmark includes companies that principally sell online or through other non-store channels, such as mobile or app purchases, rather than through bricks-and-mortar store locations. Component holdings must be classified as an online retailer, an e-commerce retailer, or an internet or direct marketing retailer, according to standard industry classification systems.
For long-term investors considering ONLN, the data bode well for this ETF and the online retail segment at large.
Online retail has been rapidly expanding. Global e-commerce sales doubled between 2014 and 2018 to $2.8 trillion annually from $1.3 trillion. By 2020, an estimated 2 billion people are expected to be digital shoppers, or a 19% jump from 2018 levels, as more people, notably from emerging economies where barely half the population is online, gain access to the internet. Almost one third of consumers are already shopping online at least weekly and 75% at least once a month.
“Some retail observers note the increased online presence of legacy bricks-and-mortar retailers as evidence that the online/brick and mortar bifurcation of the retail universe is becoming less relevant,” said ProShares. “However, this ignores the evidence that expanding the online businesses of legacy bricks-and-mortar players isn’t benefiting their bottom lines. In the first quarter, Walmart’s online sales grew 37%; however, Walmart’s first quarter earnings shrank nearly 1%.”
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