The coronavirus pandemic is crippling some sectors and industries, but the opposite is true of e-commerce. Thursday’s price action confirms as much. Yesterday, 20 ETFs hit record highs. Six of those funds, including the Global X E-commerce ETF (NasdaqGM: EBIZ), are e-commerce funds.
EBIZ reflects the performance of the Solactive E-commerce Index and looks to invest in companies positioned to benefit from the increased adoption of E-commerce as a distribution model, including companies whose principal business is in operating E-commerce platforms, providing E-commerce software and services, and/or selling goods and services online.
A variety of examples confirm e-commerce and online retail are having a moment due to COVID-19.
“Companies could seize this moment — when they must invest more in e-commerce and we’re thinking about our shopping habits — to retrain us,” reports the New York Times. “We might be forced to consider the cost and consequence of that heavy bottle of laundry detergent arriving at our door from thousands of miles away.”
EBIZ Economics
Some market observers believe changes in consumers’ behavior, which were apparent before the virus, are merely being hastened by the COVID-19 pandemic and that online is where it’s at for retailers – a theme that’s expected to be sticky for years to come. However, integral to boosting the e-commerce thesis over the long haul are reducing challenges in the industry’s economics and scalability.
“If coronavirus hot spots pop up occasionally, it’s possible isolated product shortages will continue. Or if e-commerce companies permanently decide to keep more products on hand, that could increase costs for the companies — and for us,” according to the Times.
Shopping and consumer trends are changing as more buyers rely on the convenience of online retailers to quickly and easily meet their discretionary needs. As the retail landscape changes, investors can also capitalize on the trend through ETFs that target the e-commerce segment. Demographic trends are driving those shifts.
EBIZ is up nearly 27% over the past month, but that’s not the best reason to buy the fund. Rather, EBIZ offers a more expansive reach into the e-commerce ecosystem compared to many of its rivals, which are heavily reliant on Amazon.com as a driver of returns.
The strategy works. Up almost 9% this year, EBIZ is topping cap-weighted consumer discretionary ETFs, many of which allocate close to a quarter of their weights to Amazon.
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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.