As consumer spending habits change, ETF investors could focus on the online retail space for a potentially greater growth opportunity.
“We’re looking at the retail space and this is about as good as it’s going to get from a macro perspective – low unemployment, the tax cuts, consumer confidence sky-high, and the numbers are okay but they’re not exactly the same when you split it between the online retail world and the brick-and-mortar world,” Simeon Hyman, Global Investment Strategist and Head of Investment Strategy Group for ProShares, said at the Charles Schwab IMPACT 2018 conference.
Hyman painted a bleak picture for traditional or legacy retailers, with a more sink or swim mentally in the changing consumer landscape. While some legacy retailers have adapted to the changing times, traditional retailers have seen margins decline and have only barely held on.
As a way to capitalize on this shift in the retail sector, investors can look to a number of focused ETF strategies that specifically target the online retail space. For example, the ProShares Online Retail ETF (NYSEArca: ONLN) provides exposure to online retailers or e-commerce. Additionally, the ProShares Decline of the Retail Store ETF (NYSEArca: EMTY) and ProShares Long Online/Short Stores ETF (NYSEArca: CLIX) both take a short position in brick-and-mortar retail stores to capitalize on weakness in traditional stores, whereas the new ONLN solely takes on a long position in online retailers.
The ProShares Online Retail ETF tries to reflect the performance of the ProShares Online Retail Index, which includes companies that principally sell online or through other non-store channels, such as mobile or app purchases, rather than through bricks-and-mortar store locations. Component holdings must be classified as an online retailer, an e-commerce retailer, or an internet or direct marketing retailer, according to standard industry classification systems.
The Decline of the Retail Store ETF provides daily short exposure or -1x to the new Solactive-ProShares Bricks and Mortar Retail Store Index, which is comprised of traditional retailers and equally weights components. The fund holds companies that include department stores, supermarkets and sellers of apparel, consumer electronics and home improvement items, such as retailers like Barnes & Noble, The Gap, Macy’s, Kroger and Best Buy, among others.
Meanwhile, the Long Online/Short Stores ETF is a type of long-short strategy and the first ETF to track the potential growth of online companies while benefiting from the decline of bricks and mortar retailers. Specifically, CLIX reflects the new ProShares Long Online/Short Stores Index, which combines a 100% long portfolio of on-line and non-traditional retailers with a 50% short position in bricks and mortar retailers.
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