An Online Holiday Season
Pandemic-driven Acceleration of E-Commerce Continues
U.S. online sales could surge 33% year-over-year to a record $189 billion this November and December, according to a forecast from Adobe Analytics. That’s on par with the recent 37% online year-over-year growth shown in the U.S. Department of Commerce E-Commerce Report for Q3, far outstripping the 7% overall increase in retail sales. Other confirming data: Amazon Prime Day, delayed by the pandemic to the cusp of the holiday season, saw 45% growth year-over-year and Alibaba Singles’ Day registered 93% year-over-year growth.
Strong E-Commerce Growth Continues
The third quarter saw overall e-commerce sales grow 37% year-over-year. E-commerce penetration now stands at 14.3%, a slight decline from the second quarter when much of bricks-and-mortar retail was shut down, but substantially higher than one year ago. It's no surprise that the two notable e-commerce giants delivered: Amazon’s last quarter sales increased 37% year-over-year, and Alibaba’s by 30%. But other e-commerce players have also successfully carved out niches. Online pet retailer Chewy tallied up a 47% year-over-year increase in sales over their most recent quarter, and the company has a large base of sticky, subscription customers. Etsy racked up a 128% year-over-year increase even as mask sales cooled just a bit.
Click to Expand
Growth from Old and New Places
With online retail only accounting for 14.3% of total retail sales, there’s still a substantial growth path ahead across all categories. One of the reasons that pandemic-driven acceleration is likely to persist is that growth has come from both the greatest and least penetrated categories. Apparel and accessories have seen year-over-year growth of 46% in Q2, and 33% in Q3. That’s a trend that was perhaps almost a given, with a very broad range of consumers getting more comfortable with purchasing online. More surprising: The Food and Beverage category have seen the greatest increase, growing 221% in Q2 and 162% in Q3—and remember that grocery stores are considered essential businesses and were never forced to close. More consumers may no longer feel it necessary to hand-pick their produce and browse physical grocery aisles. And, importantly, technological advances are rapidly improving the ability of companies to profitably deliver an order consisting of many small-ticket items.
What does performance tell us (so far)?
Even with the recent positive COVID-19 vaccine news breathing a bit of life into moribund bricks-and-mortar retail stocks, the ProShares Online Retail Index has outperformed the Solactive ProShares Bricks and Mortar Retail Index in 2020. More importantly, since the inception of the indexes in 2017, the online index has returned nearly 130% compared with just 11.5% for the bricks and mortar index as of 10/31/20. It’s a distinction that’s been meaningful long before pandemic lockdowns and may continue to be so in a post-pandemic world.
Source: Bloomberg, as of 09/30/2020. Standardized performance data as of 09/30/2020. For ONLN NAV: 87.02% one-year, 73.57% YTD, 22.81% since inception (07/13/18). ONLN Market Price: 87.00% one-year, 74.02% YTD, 22.86% since inception (07/13/18). CLIX NAV: 79.58% one-year, 72.79% YTD, 29.81% since inception (11/14/17). CLIX Market Price: 79.55% one-year, 72.67% YTD, 29.77% since inception (11/14/17). EMTY NAV: -22.28% one-year, -15.89% YTD, -10.96% since inception (11/14/17). EMTY Market Price -22.33% one-year, -15.93% YTD, -11.00% since inception (11/14/17). Operating Expenses: ONLN 0.58%, CLIX 0.65% and EMTY 0.66%. Performance quoted represents past performance and does not guarantee future results. Investment return and principal value will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained at ProShares.com. Index returns are for illustrative purposes only and do not represent fund performance. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged, and one cannot invest directly in an index.
Retail Disruption: Will Online Habits Die Hard?
Will consumers be won over for the long term by the convenience and ease of online shopping? While e-commerce has been accelerated by COVID-19, the struggle of traditional bricks-and-mortar retailers and growth of online shopping was in place long before the pandemic. Retail disruption appears to be an ongoing transformative trend that may result in long-term investable opportunities.
Invest in Retail Disruption
ProShares offers three ETFs that enable investors to tap into the long-term trends of retail disruption. Explore the suite of products.
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.
Tracks retailers that principally sell online or through other non-store channels
Is a dedicated short fund designed to benefit from the decline of traditional bricks-and-mortar retailers
Sources: U.S. Department of Commerce, November 2020; Adobe Analytics, October 2020; Statista, November 2020; Bloomberg
As of 10/31/2020: ONLN included allocations of Amazon 22.86%, Alibaba 13.14%, Chewy 4.81% and Etsy 4.49%. The long-side of CLIX included allocations of Amazon 19.61%, Alibaba 11.27%, Chewy 4.12% and Etsy 3.85%. EMTY included 0% allocations to Amazon, Alibaba, Chewy and Etsy. Holdings are subject to change
Any forward-looking statements herein are based on expectations of ProShare Advisors LLC at this time. ProShare Advisors LLC undertakes no duty to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Investing is currently subject to additional risks and uncertainties related to COVID-19, including economic, market and business conditions; changes in laws or regulations or other actions made by governmental authorities or regulatory bodies; and world economic and political developments.
ProShares EMTY seeks a return that is -1x the return of an index (target) for a single day, as measured from one NAV calculation to the next. Due to the compounding of daily returns, EMTY's returns over periods other than one day will likely differ in amount and possibly direction from the target return for the same period. Investors should monitor their holdings consistent with their strategies, as frequently as daily. For more on correlation, leverage and other risks, please read the prospectus.
Investing involves risk, including the possible loss of principal. These ProShares ETFs are non-diversified and entail certain risks, which may include risks associated with the use of derivatives (such as swap agreements, futures contracts and similar instruments), imperfect benchmark correlation, leverage and market price variance, all of which can increase volatility and decrease performance. EMTY seeks short exposure and should lose money when its index rises. CLIX’s short positions are not intended to hedge the portfolio in market downturns, but rather to allow stocks with unfavorable outlooks to contribute to performance. Short positions lose value as security prices increase. 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. ONLN and CLIX invest in international investments, which may involve 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. In emerging markets, many risks are heightened, and lower trading volumes may occur. Please see their summary and full prospectuses for a more complete description of risks. There is no guarantee any ProShares ETF will achieve its investment objective.
"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, ProShares Online Retail Index and Solactive-ProShares Bricks and Mortar Retail Store 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. Neither the ProShares Decline of the Retail Store ETF ("EMTY") nor the ProShares Long Online/Short Stores ETF (CLIX) are 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.
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.
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