ARKW Has Right Angles on Emerging Social Commerce | ETF Trends

While many shoppers view e-commerce as a mainstay of the retail industry, and it is, the truth is that it’s still in the early innings.

However, online retail isn’t so young as to prevent new, innovative derivatives from emerging. That’s happening today with the emergence of social commerce. Among the various internet and retail exchange traded funds on the market today, the venerable ARK Next Generation Internet ETF (NYSEArca: ARKW) is perhaps the best-levered to the social commerce trend. That’s something for investors to consider because social commerce is likely still in its first inning of growth opportunities.

“Now that both e-commerce and social media occupy an increasing share of consumer waking hours, platforms are experimenting with blends of the two: social commerce, or transactions with social features on social media,” says ARK Invest analyst Nicolas Grous in a recent note.

The underlying premise of social commerce is easy for investors to understand. Social commerce leverages networking sites, such as Facebook and Twitter, to sell products to consumers. Success is measured not only by sales, but also by how often consumers use social media to post pictures of the items purchased.

“Implemented correctly, social commerce combines the convenience of online shopping with the network effects of social media, resulting in a powerful growth driver. As a consequence, many social media platforms are likely to adopt e-commerce solutions at the same time that traditional e-commerce sites embrace social features,” adds Grous.

Social commerce is already growing. Today, it’s a nearly $400 billion market. Predictably, it offers compelling demographic traits, as it’s particularly popular with millennials and even more so with Gen Z. Additionally, social commerce isn’t a theme monopolized by U.S. companies and consumers, which is relevant because ARKW features some exposure to ex-U.S. equities. Predictably, China is at the epicenter of international social commerce growth.

“To understand the potential of social commerce, the behavior of early adopters in China is instructive. Home to the largest e-commerce market in the world, China generated $1.5 trillion in online shopping sales last year, 25% of total retail sales and well ahead of the 14% share in the US,” notes Grous.

Yes, China is a source of controversy these days, particularly for investors considering internet equities. However, both China and the U.S. will play pivotal roles in fostering social commerce growth as the market could ascend to almost $3 trillion by 2025.

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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.