ProShares: E-Commerce Investment Outlook

November 22, 2021

[This ETF Industry Perspective is sponsored by ProShares.]

Takeaways

  • E-commerce still accounts for less than 15% of retail sales in the U.S.
  • Online shopping is predicted to play a significant role this holiday season.
  • Online grocery shopping gained traction during COVID-19. Will this behavior stick?

From South Carolina to California, fall is in the air; stores are emitting scents of pumpkin spice and leaves are turning. The holiday shopping season is almost here. However, compared with years past when consumers would walk through the Mall of America or across San Francisco’s Union Square to visit department stores filled with inventory and long lines, consumers are now strolling across keyboards. What may be surprising to investors is that despite consistent historical growth, e-commerce may still be in the early innings with plenty of room to grow further.

E-commerce Is Still In The Early Growth Stage
If it seems like the parade of Amazon deliveries has increased over the past few years, it’s because it has. In 2018, Amazon delivered 750 million packages in the United States, roughly 2.05 million a day. By 2020, Amazon had delivered 4.2 billion packages, or 11.5 million a day.1

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Source: Pitney Bowes, released September 2021

(For a larger view, click on the image above)

This increase in Amazon deliveries alone may lead investors to believe that the e-commerce investment opportunity is played out and that as a percentage of retail, e-commerce already accounts for a large share of the pie. However, this is not the case. The U.S. Census Bureau’s latest quarterly report showed that just 13.3% of all retail sales are from online transactions.2 This spiked to almost 16% during the peak of the pandemic, but clearly there is a lot of room for potential growth.

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Source: U.S. Department of Commerce, as of August 2021 report

(For a larger view, click on the image above)

‘Tis The Season For Online Shopping
Given the weak September jobs report and the uncertainty surrounding the delta variant of COVID-19, investors may be wondering about the outlook for the holiday shopping season. A September 2021 report from Deloitte predicted that holiday shopping could reach $1.3 trillion this year—an increase of 7-9% over 2020. The projected increase is a good sign for retailers in general, but even better for online retailers. The same report projected an 11-15% year-over-year increase for e-commerce, which would translate to a 16% market share of sales and outpace e-commerce’s pandemic Q2 2020 high of 15.7%. Deloitte also noted that “e-commerce sales will continue to grow as consumers demonstrate an ongoing and steady movement toward buying online across all categories.”3

 

 

Ordering In A Holiday Feast
No holiday would be complete without a thoughtful meal. I’m sure I’m not the only one who has had to rush to the grocery store to grab last-minute ingredients. While emergency trips may not be a thing of the past, the number of people who are getting grocery staples delivered has increased.

Online food and beverage spending has been steadily increasing. In 2018, $6.1 billion was spent in this category; compare this with 2021, when $6.2 billion was spent in just the second quarter. While this may have been accelerated because of the pandemic, spending in online food and beverage has not yet dropped below the $6.2 billion mark on a per-quarter basis, suggesting sticky consumer habits.4

 

Source: Retail Indicator’s Branch, U.S. Census Bureau, as of August 2021

 

Retail Disruption: Settle In For The Long Haul
Americans may still face long lines at grocery and department stores this holiday season, but increasingly, it appears that holiday shopping may be done from our couches. The growth of e-commerce is a trend that was in place long before stay-at-home orders and is still in the early stages. Investors looking to participate in an ongoing transformative trend may want to consider the long-term opportunity of e-commerce.

Two ETFs To Access Retail Disruption

PROSHARES ONLINE RETAIL ETF (ONLN)
Tracks retailers that principally sell online or through other nonstore channels. The fund seeks investment results, before fees and expenses, that track the performance of the ProShares Online Retail Index.

PROSHARES LONG ONLINE/SHORT STORES ETF (CLIX)
Lets investors potentially benefit from both the potential growth of online companies and the decline of bricks-and-mortar retailers through a long/short construction. The fund seeks investment results, before fees and expenses, that track the performance of the ProShares Long Online/Short Stores Index.

1 Pitney Bowes, Parcel Shipping Index Survey, September 2021
2 U.S. Department of Commerce, August 2021
3 Deloitte, “Holiday Retail Sales Expected to Increase 7-9%” September 2021
4 U.S. Department of Commerce, August 2021


Important Information
This is not intended to be investment advice.

As of 09/30/2021, ONLN included 25.19% allocation to Amazon and CLIX included 25.18% allocation. Holdings are subject to change.

Investing involves risk, including the possible loss of principal. These ProShares ETFs are subject to certain risks, including the risk that the funds may not track the performance of the index and that the funds’ market price may fluctuate, which may decrease performance. Please see their summary and full prospectuses for a more complete description of risks.

Investments in the consumer discretionary and retailing industries are subject to risks such as changes in domestic and international economies, interest rates, competition and consumer confidence; disposable household income; consumer tastes and preferences; intense competition; changing demographics; marketing and public perception; and dependence on third-party suppliers and distribution systems. Investments in smaller companies typically exhibit higher volatility. Smaller company stocks also may trade at greater spreads or lower trading volumes, and may be less liquid than stocks of larger companies.

These funds are nondiversified and concentrate their investments in certain sectors. Nondiversified and narrowly focused investments typically exhibit higher volatility.

Investments in non-U.S. securities may involve risks different from U.S. securities, including risks from geographic concentration, differences in valuation and valuation times, unfavorable fluctuations in currency, differences in generally accepted accounting principles, and from economic or political instability.

Carefully consider the investment objectives, risks, charges and expenses of ProShares before investing. This and other information can be found in their summary and full prospectuses. Read them carefully before investing.

"Solactive AG," a registered trademark of Solactive AG, and the Solactive-ProShares Bricks and Mortar Retail Store Index have been licensed for use by ProShare Advisors LLC. Solactive AG serves as index calculation agent for the ProShares Long Online/Short Stores Index and the ProShares Online Retail Index, and performs routine daily calculations and maintenance (e.g., reconstitution, rebalancing and corporate actions). Solactive AG uses its best efforts to ensure that these indexes are calculated correctly. Solactive AG has no obligation to point out errors in the indexes to third parties, including but not limited to investors and/or financial intermediaries. The ProShares Long Online/Short Stores ETF (CLIX) and ProShares Online Retail ETF (ONLN) is not sponsored, endorsed, sold, or promoted by Solactive AG and they make no representation regarding the legality or suitability of the funds, or the advisability of investing in the funds. SOLACTIVE AG AND ITS AFFILIATES MAKE NO WARRANTIES, EXPRESS OR IMPLIED, AND BEAR NO LIABILITY WITH RESPECT TO THE INDEXES, PROSHARES OR THE FUNDS.

ProShares are distributed by SEI Investments Distribution Co., which is not affiliated with the funds' advisor or sponsor.

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