Ecommerce and the disruption of retail is a theme that is not going away, and some of the fastest growing companies and markets are located outside the U.S. ETFs are a nice vehicle to give U.S. investors access to many of these foreign ecommerce companies, not easily accessible on an individual share basis.
One of the biggest beneficiaries of the COVID-19 global pandemic, stay-at-home economy has been online commerce. Online retail was already the fastest-growing segment of retail sales, but as physical stores were shuttered and consumers were forced to shelter in place, online retail became a lifeline.
The performance spread between traditional brick-and-mortar retail and online clicks retail is more than 15% this year, with the S&P Retail Select Index down 0.67% versus a 14.6% gain for the EQM Online Retail Index.
EQM Indexes, the firm I co-founded, launched the EQM Online Retail Index (IBUYXT) back in December 1, 2015. It was our first ETF index and we licensed it to a new player in the ETF industry at the time, Amplify ETFs. Amplify was founded in February of 2016 by ETF industry veteran Christian Magoon who has launched over 50 ETFs at the time. The Amplify Online Retail ETF (IBUY) was the first ETF launched on their now $700 million+ ETF platform.
In a close landmark decision, the Supreme Court just ruled in favor, 5-4, of allowing states to collect sales tax from online retailers regardless if they have a physical presence in the state. The decision arose from a 2016 lawsuit filed by the State of South Dakota, against online retailers Wayfair (NYSE:W), Overstock.com (NASDAQ:OSTK), and Newegg.
This year’s Amazon (AMZN) Prime Day on July 11th set a company sales record, beating out both Black Friday and Cyber Monday. In fact, Prime Day sales were higher than both those shopping days combined in 2016. Prime Day sales, which kicked off 30 hours of deals, were up 60% over last year’s results.
In case you haven't noticed, a massive disruption is occurring on retail. Traditional brick and mortar retailers are struggling not just to compete, but for their very survival. Many retailers have filed for bankruptcy or are on the verge.
Surveying the retail landscape over the last year, it is clear that online retail is rapidly gaining share, while traditional brick-and-mortar retailers continue to struggle.
Wal-Mart (NYSE:WMT), the second largest online retailer, is looking to catch up with competitor Amazon.com (NASDAQ:AMZN), which captured 43% of all U.S. online retail sales in 2016. And to do so, it's getting creative in looking to emerging technologies.
It is clearly evident that an increasing number of consumers are opting to shop online from the comfort of their homes and offices. Convenience, more competitive pricing and better selection-not to mention privacy when making discreet purchases-are touted as just a few of the reasons consumers are spending more time clicking online than physically going to stores.