Coronavirus May Change Retail, Making This ETF a Long-Term Winner

It was happening prior to the outbreak of COVID-19, but the coronavirus is hastening seismic shifts in how shoppers shop, a trend that could have long-term positive implications for ETFs such as the Global X E-commerce ETF (NasdaqGM: EBIZ).

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.

As the coronavirus environment proves, more businesses are shifting their focus to online sales in a bid to adapt to the changing environment and consumer trends. For example, car dealerships are even switching to a fully online system to help customers select cars at the touch of a button.

“Retailers across the world have adapted their delivery and returns propositions to ensure customer and staff safety during the COVID-19 crisis, and these changes will transform consumer expectations of online delivery and returns,” according to GlobalData.

Evaluating EBIZ

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.

In the current environment, it’s clear COVID-19 is having deep, likely long-lasting effects on retail is conducted.

“The impacts of COVID-19 have the potential to decrease the popularity of click & collect beyond the outbreak as more people are expected to work from home in the long term, so will be able to accept home deliveries,” said GlobalData Retail Analyst Emily Salter. “Additionally, when stores re-open many consumers will be reluctant to visit busy locations due to lingering concerns around their health. Consumers may switch to third-party pickup options instead, especially lockers as this fulfillment method has no contact with others, as long as shoppers are reassured about the cleanliness of the facilities.”

This year, online sales are projected to surpass $4 trillion, with the biggest players in the field largely expected to capture a major share of the growing pie. For example, Amazon is estimated to account for half of all online sales by 2023.

Amazon is the largest holding in EBIZ at 5.73% of the fund’s weight, which is solid exposure but also says that Global X is diversified throughout the e-commerce ecosystem.

For more on thematic ETFs, please visit our Thematic Investing Channel.

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.