More Big Things Await Hot Online Retail ETF | ETF Trends

Up nearly 93% this year, the ProShares Online Retail ETF (NYSEArca: ONLN) is already one of the most impress stories among thematic exchange traded funds, but this product is done penning positive chapters for investors.

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 pandemic is amplifying growth of e-commerce and online retail.

“For many consumers, pandemic life has probably included a steady stream of deliveries as many bricks-and-mortar stores were forced to temporarily close or set capacity restrictions, or as shoppers opted for online shopping over in-person interactions,” according to ProShares.

Online Retail: Beyond the Pandemic

Underscoring the long-term case is that online retail is here to stay and it doesn’t need a pandemic to thrive.

“However, the shift from bricks-and-mortar retail to online shopping was taking place long before COVID-19, and for investors, it’s a transformation that may represent a compelling investment opportunity,” notes ProShares.

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.

With the holiday shopping season essentially here, ONLN has another catalyst. Some holiday shoppers may just be late in getting to it. Given how spending is highest in November and December, with estimates at three-quarters of a trillion dollars, the prevalence of online shopping means a lot of companies can profit.

Importantly, data confirm online retail has plenty of room for growth and can steal plenty of market share from brick-and-mortar retailers.

“Online retail’s march has, however, been incessant and accelerating, with its penetration increasing nearly three times as fast in the second half of the 2010s compared to the first half, yet still accounted for only 11% of total retail sales in the U.S. at the end of 2019. The pandemic lockdown further accelerated this trend, as the second quarter of 2020 found e-commerce rising to about 16% of total U.S. retail sales,” according to ProShares.

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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.