Why This Retail ETF Has Immediate Allure | ETF Trends

As the coronavirus situation captures daily headlines around the world, shoppers and investors are becoming aware of the importance of keeping consumption at arm’s length, well at least six feet away.

Obviously, e-commerce and online retailers help with shopping distancing, a theme that makes ETFs, such as the ProShares Online Retail ETF (NYSEArca: ONLN) appealing in the current environment.

ONLN seeks investment results, before fees and expenses, that track the performance of the ProShares Online Retail Index. The index tracks retailers that principally sell online or through other non-store channels. The index uses a modified market-capitalization weighted approach, is rebalanced monthly and is reconstituted annually.

“The coronavirus (COVID-19) will put incredible strain on the world’s economy, which will be effectively halted for three months or more, and many companies will not survive this initial phase,” said GlobalData in a recent note. “However, COVID-19 will have a long-term positive effect on the eCommerce sector, with even skeptical consumers forced to abandon physical stores in response to restrictions on movement, says GlobalData, a leading data, and analytics company.”

ONLN Chart

ONLN data by YCharts

ONLN Long-, Short-Term Potential

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.

Those numbers could move more quickly to the upside because the COVID-19 pandemic is forcing a slew of mall and retail store closures across the world. In the U.S., many non-essential retailers are temporarily closed and while traditional grocery stores remain open, many shoppers are opting to order from home and not risk contracting the coronavirus by venturing outside.

“The impact of COVID-19 will be most noticeable in the food and grocery segment, where online penetration is currently lower than average across the retail sector,” said Ed Thomas, GlobalData research director.

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.

“While food and grocery sales surge, clothing and footwear retailers will suffer as consumers are forced to work from home, events are canceled, and pubs and restaurants closed,” said Thomas.

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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.