May 12, 2020
Market disruptions? For online and bricks-and-mortar retailers it’s more of the same
While bricks-and-mortar stores are forced to shutter, online retailers are attracting attention. But is this really any different from before?

Here’s a statistic that would probably surprise most people: According to the U.S. Census Bureau, e-commerce sales accounted for 11% of U.S. retail sales in 2019. What may not be surprising is that e-commerce grew at over four times the rate of overall retail sales. Put those pieces together and, standing on January 1, you have a recipe for potential e-commerce growth. However, while e-ecommerce's share of the retail pie is growing, it’s still only a slice.

While e-ecommerce's share of the retail pie is growing, it’s still only a slice.


The continual erosion of bricks-and-mortar stores

Shuttering of non-essential businesses during the coronavirus outbreak has put a great deal of pressure on traditional retailers’ revenue streams. Even when doors reopen, some companies may still be facing a cash squeeze as loans become due. However, while the first half of the year is certainly not a normal market, the trends we’re seeing are not new. Major household names declaring bankruptcy have made headlines for years. In 2019, over 9,300 retail stores closed their doors—a 59% increase from 2018. 2020 is expected to bring even more of a jump, with some analysts predicting that 15,000 stores will permanently close.

A look at e-commerce in the post-pandemic world

Of course, e-commerce has been a central player during global quarantine, so what might growth look like in a post-pandemic world? At the beginning of the year, estimates were that U.S. e-commerce in 2020 would grow 12% over 2019. Could that still make sense? While overall consumer demand may be challenged, new habits may be hard to break. Consider this: Food and beverage has been e-commerce’s least penetrated category at just over 3% of category spending as of 2019, but many consumers have been getting their groceries delivered as of late. Temporary behavior changes may have the potential to become permanent shifts in shopping habits.

What do the retail disruption indexes tell us?

Since the market peak on February 19 through April 30, the ProShares Online Retail Index, which tracks a basket of companies that principally sell online or through other non-store channels, has gained 8%, while the Solactive-ProShares Bricks and Mortar Retail Store Index, which tracks a basket of brick-and-mortar retailers, has declined 20%.

Temporary behavior changes may have the potential to become permanent shifts in shopping habits.

Index construction is important. The online index is market cap weighted, noting how important scale is in online retail. Amazon has of course been a key driver—rising 14% since the market’s February peak—but other constituents such as Chewy and Wayfair have contributed as well. The bricks-and-mortar index is equal weighted. In a “normal” environment this arguably reflects an equally distributed chance that a couple of the constituents might get omnichannel “right” and perform well. Equal weighting came in handy during the quarantine as well. During the quarantine, while several of the consumer staples constituents performed well, the index captured the broader picture of bricks-and-mortar downturn. A look at the longer trend shows that this is not simply a quarantine phenomenon. Since the inception of these indexes, the online index has risen 52% while the bricks-and-mortar index has fallen -16%.

Retail Disruption Index Performance, Nov 2017-Apr 2020

Source: Bloomberg, as of 4/30/2020. Standardized performance data as of 03/31/2020. For ONLN NAV: -13.23% one-year, -8.58% YTD, -10.26% since inception (07/13/18). ONLN Market Price: -13.09% one-year, -8.35% YTD, -10.22% since inception (07/13/18). CLIX NAV: 8.39% one-year, 14.00% YTD, 15.13% since inception (11/14/17). CLIX Market Price: 8.79% one-year, 14.32% YTD, 15.26% since inception (11/14/17). EMTY NAV: 47.35% one-year, 49.64% YTD, 10.73% since inception (11/14/17). EMTY Market Price 47.77% one-year, 50.13% YTD, 10.85% since inception (11/14/17). Operating Expenses: ONLN 0.58%, CLIX and EMTY 0.65%. 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 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.


It's too early to tell what the impacts of COVID-19 may mean for the retail sector. What we do know is that disruptive secular trends were in place long before the pandemic hit, and they are likely to remain deep-rooted long after it has passed.

How investors can participate in retail disruption

For investors looking to take advantage of the long-term changes in retail disruption, ProShares offers a suite of retail disruption ETFs.


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

ProShares Retail Disruption ETFs provide investors with multiple strategies to take advantage of the investment potential of the new retail reality.

Sources: Coresight Research, March 2020; Bain & Co. 2019; eMarketer May 2019

ONLN and CLIX holdings as of 03/31/2020: Amazon 27.03%, 24.05%; Wayfair 3.82%, 3.40%; Chewy 6.53%, 5.81%. EMTY has zero holdings to Amazon, Wayfair and Chewy. Holdings 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.

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

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