E-commerce saw a big boost during the pandemic wave. Making investors ask – is it time for e-commerce or e-retail ETFs?
According to UNCTAD, global e-commerce jumped to more than $26.7 trillion! Let’s take a look at some UNCTAD statistics from 2018-2020.
| Economy | Online retail sales ($ billions) | Retail sales ($ billions) | Online share (% of retail sales) | ||||||
| 2018 | 2019 | 2020 | 2018 | 2019 | 2020 | 2018 | 2019 | 2020 | |
| Australia | 13.5 | 14.4 | 22.9 | 239 | 229 | 242 | 5.6 | 6.3 | 9.4 |
| Canada | 13.9 | 16.5 | 28.1 | 467 | 462 | 452 | 3.0 | 3.6 | 6.2 |
| China | 1,060.4 | 1,233.6 | 1,414.3 | 5,755 | 5,957 | 5,681 | 18.4 | 20.7 | 24.9 |
| Korea (Rep.) | 76.8 | 84.3 | 104.4 | 423 | 406 | 403 | 18.2 | 20.8 | 25.9 |
| Singapore | 1.6 | 1.9 | 3.2 | 34 | 32 | 27 | 4.7 | 5.9 | 11.7 |
| United Kingdom | 84.0 | 89.0 | 130.6 | 565 | 564 | 560 | 14.9 | 15.8 | 23.3 |
| United States | 519.6 | 598.0 | 791.7 | 5,269 | 5,452 | 5,638 | 9.9 | 11.0 | 14.0 |
As seen clearly from the above table, e-commerce has seen rapid growth and will continue due to the very structure of e-commerce. The convenience it delivers to the buyers is unparalleled, and hence very rarely will it have a chance to slow down or lose steam.
In other words, while e-commerce growth is slowing in the short term, the industry’s long-term bright growth prospects have not changed.
ETFs, particularly thematic ETFs, offer diversification benefits. Because even if an industry’s growth increases, there will be some champions and some laggards, investors have embraced ETFs related to a long-term theme, such as cloud computing, clean energy, infrastructure, or online retail, in recent years.
E-commerce is a relatively new entrant to this list but has incredible potential. As so many companies are participating in e-commerce, subscribing to an e-commerce exchange-traded fund (ETF) could provide you, the investor, exposure to tech-savvy organizations across a wide range of industries.
Pros & Cons of Investing in e-retail ETFs
Pros
- E-commerce is a massive industry that has only become bigger as technology has progressed. ETFs for e-commerce allow you to participate in this rapidly increasing market.
- If one wishes to invest in e-commerce, businesses in various industries use digital sales and payments, including clothes, food delivery, and general retail. This helps diversify one’s portfolio because the fund will likely include a wide range of businesses.
Cons
- E-commerce is dominated by Amazon, Walmart, and eBay, making it tough to locate opportunities.
- Investing purely in the e-commerce market may be challenging because many of the largest e-commerce companies do more than sell things. For instance, Amazon has an AWS cloud computing arm with its e-commerce portal.
What are Vanguard ETFs?
Few good e-commerce ETFs
The Amplify Online Retail ETF (IBUY) invests in companies that generate at least 70% of their income from online sales. The ETF’s top holdings include well-known clothes, logistics, and food delivery services such as Etsy, DoorDash, and Revolve.
ProShares Online Retail ETF (ONLN) has a lower expense ratio than the Amplify Online Retail ETF and a less diversified portfolio. It invests significant of its assets in major e-commerce companies such as Amazon, Alibaba, and eBay.
The Emerging Markets Internet + Ecommerce ETF (EMQQ) tracks online businesses in countries other than the United States. The fund’s assets are primarily invested in Chinese companies, although it also has stock in South Korea, India, Argentina, South Africa, Brazil, and Singapore.
Suppose you want broader exposure to internet companies than an ETF that focuses primarily on businesses that offer things to clients online. In that case, the Invesco NASDAQ Internet ETF (PNQI) is a solid choice. Including service providers and retailers, such as web hosting and search engines. Adobe, Amazon, and Alphabet are among the top holdings.
Paying people is a significant element of e-commerce. Many software companies have sought to make it as simple as possible for consumers to send and receive money from each other and businesses.
The ETFMG Prime Mobile Payments ETF (IPAY) invests in firms that help people make purchases online, such as American Express, Mastercard, Visa, Square, and PayPal.
Every e-commerce business needs to take payments, this is a one-of-a-kind opportunity for an investor to get exposure to the industry and its primary service providers.
| Parameter | Amplify Online Retail ETF (IBUY) | ProShares Online Retail ETF (ONLN) | Emerging Markets Internet + Ecommerce ETF (EMQQ) | Invesco NASDAQ Internet ETF (PNQI) | ETFMG Prime Mobile Payments ETF (IPAY) |
| Issuer | HANetf, EMQQ Index, and Big Tree Capital, LLC | ProShares | HANetf, EMQQ Index and Big Tree Capital, LLC | Invesco | ETFMG |
| Inception Date | April 20, 2016 | July 13, 2018 | Nov. 12, 2014 | June 12, 2008 | July 15, 2015 |
| Expense ratio | 0.65% | 0.58% | 0.86% | 0.60% | 0.75% |
| AUM (as of 2021) | $906.7 million | $875.6 million | $1.29 billion | $1.06 billion | $1.22 billion |
| 3-year return (as of 2021) | 28.5% | 20.1% | 16.2% | 20.9% | 16.7% |
E-commerce is a growing industry with the potential to develop significantly. Investing in an e-commerce ETF provides exposure to the online sales business and an opportunity to wager on societal trends such as food and apparel delivery and online payments.
FAQs
What is a retail ETF?
A retail ETF is an industry-specific exchange-traded fund (ETF) that invests only in companies that sell retail merchandise to consumers. For example, Amplify Online Retail ETF (IBUY) is a retail ETF and its top 5 holdings are companies like Carvana Co, Affirm Holdings Inc, Netflix Inc, Figs Inc, and Amazon.com Inc.
What are the benefits of investing in retail ETFs?
E-commerce is a massive industry that has only become bigger as technology has progressed. ETFs for e-commerce allow you to participate in this rapidly increasing market.
If one wishes to invest in e-commerce, businesses in various industries use digital sales and payments, including clothes, food delivery, and general retail. This helps diversify one’s portfolio because the fund will likely include a wide range of businesses.
What are some retail ETFs to invest in?
The Amplify Online Retail ETF (IBUY) invests in companies that generate at least 70% of their income from online sales. The ETF’s top holdings include well-known clothes, logistics, and food delivery services such as Etsy, DoorDash, and Revolve.
ProShares Online Retail ETF (ONLN) has a lower expense ratio than the Amplify Online Retail ETF and a less diversified portfolio. It invests significant of its assets in major e-commerce companies such as Amazon, Alibaba, and eBay.
The Emerging Markets Internet + Ecommerce ETF (EMQQ) tracks online businesses in countries other than the United States. The fund’s assets are primarily invested in Chinese companies, although it also has stock in South Korea, India, Argentina, South Africa, Brazil, and Singapore.
