A surge in digital shopping is threatening brick-and-mortar retailers in recent years, betting to change the landscape of the retail space. In order to capitalize on this trend, ProShares this week launched another retail disruption ETF, namely ProShares Online Retail ETF ONLN designed to focus on retailers that derive significant revenues from online sales.

Here’s an insight into the new ETF:

ONLN in Focus

The new fund looks to tracks the ProShares Online Retail Index, which pinpoints retailers that principally sell online or through other non-store channels such as mobile or app purchases and separates them from those reliant on bricks-and-mortar stores.

The ETF focuses on the largest players in the space described as iconic companies, whose rise is reshaping the retail world. It holds 21 securities in its basket, with Amazon AMZN being the top firm accounting for 24.2% share while Alibaba BABA takes the second spot at 15.5% allocation. Other securities make up for no more than 4.77% of assets. American firms make up three-fourth of the portfolio, while China accounts for 21.5% share. Argentinean companies take the minor share at 3.01% (read: Amazon Tops $900B on Record Prime Day Sales: ETFs to Tap).

The new fund comes with an expense ratio of 0.58% and has gathered $4 million in AUM within a few days of trading.

How do they fit in today’s portfolio?

The ETFs could intrigue investors seeking to benefit from the changing retail shopping, which is increasingly moving away from bricks-and-mortar stores and going digital. This is especially true as e-commerce has been rising rapidly on shoppers’ online binge and will continue to do so. About 10% of global retail sales are now made online, leaving tremendous room for growth. Recent data indicates that figure could double by 2030.

In particular, eMarketer estimates that U.S. ecommerce sales will grow 16% in 2018 to reach $526.09 billion, while business forecaster Kiplinger predicts a 15% increase in web sales this year. Another firm, Forrester, projects U.S. online sales to exceed $506 billion this year and rise beyond $712 billion by 2022 (see: all the Consumer Discretionary ETFs here).

ETF Competition

There is an appetite for this fund despite a few choices already available in the space. Amplify Online Retail ETF IBUY is the first ETF offering a long position to the global online retail space. It has accumulated $509.9 million in AUM and charges 65 bps in annual fees.

ProShares’s two retail disruption ETFs — ProShares Decline of the Retail Store ETF EMTY and ProShares Long Online/Short Stores ETF CLIX — also pose challenges to ONLN. The former is designed to benefit from the decline of bricks-and-mortar retailers, while the latter provide investors opportunities arising from both the potential growth of online companies and the decline of bricks-and-mortar retailers. Both funds have an expense ratio 0.65%. EMTY has amassed $5.6 million in its asset base, while CLIX has accumulated $65.3 million in AUM since their debut last November (read: U.S. Retail Sales Steady in June: ETFs & Stocks to Play).

Bottom Line

It will not be difficult for the new ETF to garner sufficient investor interest in the surging e-commerce retail space and generate decent total returns net of expense ratio. The low cost will serve as an added advantage and makes ONLN attractive and superior to its competitors.

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Amazon.com, Inc. (AMZN): Free Stock Analysis Report

Alibaba Group Holding Limited (BABA): Free Stock Analysis Report

AMPL-ONLN RETL (IBUY): ETF Research Reports

PRO-DEC RET STR (EMTY): ETF Research Reports

PRO-L ONL/S STR (CLIX): ETF Research Reports

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Source: Custom News Article from Zacks Investment Research for ETFHeatMap.com


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