The holiday shopping season in recent years kicked off with a five-day weekend that began on Thanksgiving and wrapped up on Cyber Monday. According to the National Retail Federation, roughly 197 million shoppers participated in the retail frenzy this year. That number beat expectations. But in the history of the survey, only 2023’s Thanksgiving weekend saw more shoppers. And that number was more than 200 million.
Another factor helping retail sales is that consumers are trying to take advantage of discounts this season ahead of the prospect of tariff-related price increases. However, the most significant change this holiday season has been the acceleration of online spending.
Online Trumps Physical Retail
According to Mastercard SpendingPulse data, online retail sales this year spiked 14.6% on Black Friday. But purchases taking place in stores increased by less than 1%. On Cyber Monday, consumers slightly beat expectations, with $13.2 billion spent. During the most intense hours on that Monday evening, consumers were spending $15.8 million every minute, Adobe Analytics found.
Certainly, some of this online spending is being helped by the shorter shopping season with less time to get presents to loved ones. But here are five other significant trends at work boosting online spending as well.
- Mobile Shopping
According to Adobe Analytics, shoppers used mobile devices to make 57% of online purchases on Cyber Monday. That’s a greater percentage than ever before, translating into $7.6 billion in transactions. That is a 13.3% increase from the prior year. Clearly, consumers feel safe making purchases on their phones. Consider that in 2019, only about one-third of Cyber Monday sales took place via mobile devices.
- Buy Now, Pay Later
Cash-strapped consumers are adopting buy now, pay later (BNPL) services to facilitate online purchases at increasing rates. BNPL saw record levels of implementation on Cyber Monday, approaching $1 billion in spending. More than three-fourths of those transactions took place on mobile devices.
- Artificial Intelligence/Chat Bots
AI-powered chatbots have also been a fixture this holiday season. Cyber Monday featured a remarkable year-over-year 1,950% increase in retail site traffic from chatbots. They are not only helping direct traffic but converting sales.
- Social Influence Marketing
Another big trend this holiday season is the growing impact of social media influencers. They drove 20.3% of purchases on Cyber Monday. Even more important are the conversion rates. According to Adobe, that indicates influencers are 6x more effective at converting shoppers relative to social media as a whole.
- Finding Bargains Online
One of the key benefits of online shopping is the ability to easily compare prices. Prices are also down from their peak inflation levels in many different categories. Steep discount levels from peak prices exist among computers (18%), toys (18%), consumer electronics (17%), TVs (17%), sporting goods (16%), and appliances (14%). With the 10%-20% tariffs planned by Trump expected to drive up prices and reduce spending power, consumers are taking advantage of online holiday discounts while they can.
ETF Plays to Consider
Online Retail/E-commerce
Online retail ETFs have been one way to capture consumer shopping habits YTD. All of them have posted outsized returns for the year.
Payment
BNPL is not the only beneficiary of the continued growth in online spending. Payment processors, transaction platforms, and fintech companies are also benefiting. ETFs with exposure to this theme include the Amplify Digital Payments ETF (IPAY) and the Global X FinTech ETF (FINX). Both of these ETFs are up more than 33% YTD and have around $350 million in assets each. Blockchain ETFs also provide some exposure to digital payments as well.
Industrial REITs
All this online shopping requires online shipping. Some interesting ETF plays providing exposure to supply chain infrastructure, such as warehouses and logistics hubs are the Pacer Industrials and Logistics ETF (SHPP) and the ProShares Supply Chain Logistics ETF (SUPL). These ETFs have not yet gathered much in assets, sitting at $1 million in AUM each. But they seem a logical derivative play of online retail growth.
Reshoring
If the Trump tariffs do get implemented, a few ETFs stand to benefit from a focus on American reshoring. These include the Tema American Reshoring ETF (RSHO) and the iShares U.S. Manufacturing ETF (MADE).
Record online retail holiday sales are expected to drive U.S. e-commerce sales to a record $1.2 trillion in 2024. The maturing of online retail and its return to prepandemic growth levels mean it will continue to capture market share and transform retail as we know it. Clearly, holiday consumers are ready to spend, and the place they spend is online.
On the heels of record online retail holiday sales, U.S. e-commerce sales are expected to reach a record $1.2 trillion this year as online retail matures and returns to a period of “prepandemic” growth that continues to capture market share and transform retail as we know it. Clearly, holiday consumers are ready to spend, and the place they are spending is online.
VettaFi LLC (“VettaFi”) is the index provider for IBUY and ISHP for which it receives an index licensing fee. However, IBUY and ISHP are not issued, sponsored, endorsed or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of IBUY or ISHIP.
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