Holiday Shopping Shifts to E-Commerce: ETFs to Tap

Sweta Killa

With retailers having perked up their online deals early in October, the holiday season saw a gala start on an e-commerce bonanza. This is especially true, as the pandemic has pushed the holiday shopping season online this year, as large number of consumers want to avoid gatherings and maintain social distancing to contain the infection. Thanksgiving weekend, Black Friday and Cyber Monday demonstrate the growing popularity of online shopping and changing consumer habits.

Further, the positive developments on COVID-19 vaccine provided strong support to the holiday season.

Recap of Thanksgiving Weekend

Per the latest data from National Retail Federation (“NRF”), an estimated 186.4 million Americans shopped in-store and online during the Thanksgiving weekend (from Thanksgiving through Cyber Monday). Though it was down from $189.6 million last year, the figure was still significantly higher than the 165.8 million in 2018.

Online-only shoppers increased 44% during the weekend to 95.7 million. Black Friday and Saturday saw tremendous growth in online activity. For the first time, the number of online Black Friday shoppers passed the 100 million mark, up 8% from last year. The number of online Saturday shoppers grew 17% year over year. Over the five-day period, shoppers spent an average of $311.75 on holiday-related purchases such as gifts or decorations, down from last year’s $361.90 but comparable with 2018’s $313.29 (read: ETFs, Stocks to Click on for the Best Cyber Monday Deals).

Top gift purchases over the weekend included clothing (bought by 52% of those surveyed), toys (32%), books/music/movies/video games (29%), gift cards/certificates (29%) and electronics (27%). Shopping destinations included department stores (visited by 40% of those surveyed), grocery stores (39%), clothing stores (33%) and electronics stores (31%).

According to Adobe Digital Insights, overall e-commerce sales during the Thanksgiving weekend rose to $34.4 billion. Thanksgiving online shopping hit a record $5.1 billion, up 21.5% from last year while Black Friday online sales soared 22% to a record $9 billion. Small business Saturday and Super Sunday saw an increase of 30% and 23%, respectively, to $4.7 billion each. Cyber Monday brought in a record $10.8 billion in online spending, making it the biggest online shopping day in U.S. history.

Current Economic Trends

Though the coronavirus cases are rising globally, markets are betting on economic recovery given the potential for distribution of vaccine anytime soon. A slew of encouraging trial data from AstraZeneca AZN, Moderna MRNA and Pfizer PFE has raised the prospect of vaccination as early as this month, once the regulatory approvals are in place. Pfizer and Germany’s BioNTech SE sought emergency approval of their vaccine candidate from the European regulator while Moderna is seeking emergency use authorization from the FDA for its candidate and conditional approval from the European Medicines Agency.

A vaccine is being viewed as an end to the pandemic crisis that could lead to a swift recovery of the economy and boost stocks. Further, the potential for a divided Congress, which will lead to favorable economic policies with reduced chances of major tax increases and tighter regulations, has been driving the stocks higher (read: ETF Sectors to Bet on Positive Vaccine News).

The current economic conditions bode well for the holiday shopping season. NRF expects holiday sales to grow 3.6-5.2% in November and December to $755.3-$766.7 billion. This is higher than last year’s growth of 4% and the five-year average of 3.5%. Of these, online and other non-store sales are likely to increase 20-30% to $202.5-$218.4 billion, up from $168.7 billion last year. eMarketer forecasts holiday e-commerce sales to surge 35.8% year over year to $190.47 billion offsetting in-store sales decline of 4.7%. Meanwhile, Adobe sees holiday online sales to grow 30% from the last year to $184 billion.

What’s Hot?

Given the digital shopping boom, stocks in the Internet and ecommerce retail space look poised for solid gains this month. Investors could tap this opportunity in a diversified way with the help of the following ETFs and make the most of the annual shopping event:

Amplify Online Retail ETF IBUY

This ETF has attracted $1.2 billion to its asset base and offers global exposure to companies that derive 70% or more revenues from online and virtual retail by tracking the EQM Online Retail Index. The fund is home to 58 stocks and charges 65 basis points (bps) in annual fees (read: After a Historic November, What Awaits ETFs in December?).

ProShares Online Retail ETF ONLN

This ETF focuses on global retailers that derive significant revenues from online sales. It tracks the ProShares Online Retail Index, holding 26 stocks in its basket. ONLN has accumulated $811.5 million in its asset base and charges 58 bps in annual fees.

ProShares Long Online/Short Stores ETF CLIX

This fund seeks to benefit from both outperforming online and underperforming physical retailers through the long/short strategy. It combines the 100% long position in retailers that primarily sell online or through other non-store channels with a 50% short position in those that rely principally on physical stores by tracking the performance of the ProShares Long Online/Short Stores Index. With long positions in 26 stocks and short positions in 45 stocks, the ETF has accumulated $245 million in its asset base and has 0.65% in expense ratio.

ProShares Decline of the Retail Store ETF EMTY

This ETF seeks to benefit from the decline of brick-and-mortar retailers through short exposure to the Solactive-ProShares Bricks and Mortar Retail Store Index. The benchmark holds 45 securities in its basket. EMTY charges 65 bps in annual fees and has accumulated $21.9 million in its asset base.

Global X E-commerce ETF EBIZ

This fund invests in 40 companies positioned to benefit from increased adoption of e-commerce as a distribution model, including companies with their principal business in operating e-commerce platforms, providing related software and services, and/or selling goods and services online. It has accumulated $123 million in its asset base and charges 50 bps in annual fees (read: COVID-19 Cases on the Rise: ETFs to Bet On).
    
ARK Next Generation Internet ETF ARKW

It is an actively managed fund focusing on companies that are expected to benefit from the shift in technology infrastructure to cloud, enabling mobile, new and local services. The fund holds 50 stocks in its basket with AUM of $4.2 billion. It charges 76 bps in annual fees from investors.

First Trust Dow Jones Internet Index Fund FDN

This fund follows the Dow Jones Internet Composite Index, giving investors exposure to the broad Internet industry. It holds about 40 stocks in its basket with AUM of $10.9 billion. The ETF charges 52 bps in fees per year and has a Zacks ETF Rank #1 (Strong Buy).

Invesco NASDAQ Internet ETF PNQI

With AUM of $988.2 million, this fund offers exposure to the largest and most-liquid companies that are engaged in Internet-related businesses by tracking the Nasdaq Internet Index. Holding 88 stocks in its basket, it charges 60 bps in fees per year and has a Zacks ETF Rank #2.

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AstraZeneca PLC (AZN) : Free Stock Analysis Report
 
Pfizer Inc. (PFE) : Free Stock Analysis Report
 
Moderna, Inc. (MRNA) : Free Stock Analysis Report
 
Invesco NASDAQ Internet ETF (PNQI): ETF Research Reports
 
ARK Next Generation Internet ETF (ARKW): ETF Research Reports
 
Amplify Online Retail ETF (IBUY): ETF Research Reports
 
First Trust Dow Jones Internet ETF (FDN): ETF Research Reports
 
ProShares Long OnlineShort Stores ETF (CLIX): ETF Research Reports
 
ProShares Decline of the Retail Store ETF (EMTY): ETF Research Reports
 
ProShares Online Retail ETF (ONLN): ETF Research Reports
 
Global X Ecommerce ETF (EBIZ): ETF Research Reports
 
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