Market Overview

Evaluating The Epicenters Of E-Commerce Trends

Evaluating The Epicenters Of E-Commerce Trends

Retail sales rose for a fourth consecutive month in June, according data released by the government Tuesday. Not surprisingly, internet retailers were significant contributors to that monthly growth. Adding to the retail bullishness is that those June sales do not include the stellar numbers posted by Amazon (NASDAQ: AMZN) during the recent Prime Day event.

What Happened

The Global X E-commerce ETF (NASDAQ: EBIZ) is one of the new exchange traded funds to the e-commerce fund fray. EBIZ is a credible member of this group because it can act as a diversifier away from the some of the Amazon single-stock risk posed by competing funds.

In fact, EBIZ does not feature shares of Amazon among its top 10 holdings. EBIZ has not been derailed by its modest Amazon exposure. Up 34.27% year to date, EBIZ is actually slightly outperforming Amazon stock.

Why It's Important

“While there is a perception that online shopping has become virtually ubiquitous, in Q1 2019, penetration rates were still low, with e-commerce sales representing just 10.2% of the $1.34 trillion of total retail sales in the US,” said Global X in a recent note. “Of course, online sales are closing the gap, growing much more rapidly than traditional brick and mortar purchases. In the first quarter of 2019, e-commerce sales increased 12.4% year-on-year, while total retail sales increased just 2.7% during the same period.”

Importantly, the e-commerce boom is not confined to the U.S. and EBIZ taps into that theme. Nine countries are represented in the fund with the U.S. accounting for 46.49%.

“Outside of the US, e-commerce has shown even faster growth in certain areas,” according to Global X. “China, for example, has become the world’s largest e-commerce market representing more than 40% of the world’s online transactions.  Nearly a quarter of total retail sales in China are made online as Chinese consumers benefit from rising wages, urbanization, and greater internet connectivity.”

China is the second-largest country weight in EBIZ at 26.70%.

What's Next

Expect more growth for online retail sales with that growth likely benefiting EBIZ investors.

“Today, having a solid online presence is often the difference between successful retailers and those who are failing,” said Global X. “While traditional retail sales grow at around the inflation rate, companies that are online first, or have well developed online capabilities, have the potential to experience strong growth fueled by the increasing adoption of online ordering by consumers around the world.”

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