ETF Trends CEO Tom Lydon discussed the Amplify Online Retail ETF (IBUY) on this week’s “ETF of the Week” podcast with Chuck Jaffe on the MoneyLife Show.
IBUY seeks to provide investment results that, before fees and expenses, correspond generally to the price performance of the EQM Online Retail Index. The Index is a globally-diverse basket of publicly-traded companies that obtain 70% or more of revenue from online or virtual sales.
ECommerce is a growing trend that investors shouldn’t ignore. The coronavirus has accelerated this trend toward greater online shopping. Covid-19 isn’t going away any time soon, and consumer habits are likely to reflect this new reality. IBUY is +86.4% year-to-date, among best performing non-leveraged ETFs of 2020.
According to the U.S. Department of Commerce, 16.1% of U.S. retail sales were derived from online retail in the second quarter of 2020. This was a 45% increase in online retail as a percentage of overall retail from 2019. To put this in perspective, eCommerce shopping levels during Covid-19 lockdowns from April through May accounted for $153 billion, compared to the 2019 holiday season from November to December of $142 billion.
Q3 Forecasts
The U.S. eCommerce sales will reach $794.50 billion this year, up 32.4% year-over-year. That’s a much higher growth rate than the 18.0% predicted in our Q2 forecast, as consumers continue to avoid stores and opt for online shopping amid the pandemic. Ecommerce sales will reach 14.4% of all US retail spending this year and 19.2% by 2024. When excluding gas and auto sales (categories sold almost exclusively offline), eCommerce penetration jumps to 20.6%.
Traditional brick-and-mortar stores are getting pummeled. While the eCommerce segment enjoyed their new windfall, traditional brick-and-mortar retailers suffered from the sudden plunge in foot traffic. In 2020, 26 retailers have already filed for bankruptcy. Online shopping is so strong that it will more than offset the 3.2% decline in brick-and-mortar spending this year, which will drop to $4.711 trillion. As a result, total retail sales in the U.S. will remain essentially flat.
With this in mind holiday shopping season is right around the corner. The Big Four accounting firm Deloitte and market research firm Forrester firm both expect this will be the year when online shopping explodes. Online sales for retailers in popular gifting categories will get a boost this season, with health and beauty up 23%, consumer electronics rising 20%, fashion up 19% and home furnishings growing 16% by year’s end. Deloitte predicts eCommerce holiday retail sales to grow between 25% to 35% from November through January, reaching $182 billion to $196 billion in total.
With fewer parties to attend and more time spent at home, expect to see more self-purchases directed toward home improvements and decorating. All that time spent at home will bring much more online shopping. eCommerce is a global phenomenon. There is a 25% estimated growth rate of online buyers worldwide from 2019-2023. Global online sales are $3.5 trillion in 2019 and are projected to be $6.5 trillion in 2023.
Listen to the full podcast episode on the IBUY ETF:
For more podcast episodes featuring Tom Lydon, visit our podcasts category.