ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Themes
      • Active ETF
      • Artificial Intelligence
      • Beyond Basic Beta
      • China Insights
      • Climate Insights
      • Core Strategies
      • Crypto
      • Direct Indexing
      • Disruptive Technology
      • Energy Infrastructure
      • ETF Building Blocks
      • ETF Investing
      • ETF Education
      • ETF Strategist
      • Financial Literacy
      • Fixed Income
      • Free Cash Flow
      • Innovative ETFs
      • Institutional Income Strategies
      • Leveraged & Inverse
      • Managed Futures
      • Market Insights
      • Modern Alpha
      • Multifactor
      • Responsible Investing
      • Retirement Income
      • Tax Efficient Income
    • Asset Class
      • Equity
        • U.S. Equity
        • Int'l Developed
        • Emerging Market Equities
      • Alternatives
        • Commodities
        • Gold/Silver/Critical Minerals
        • Currency
        • Volatility
      • Fixed Income
        • Investment Grade Corporates
        • US Treasuries & TIPS
        • High Yield Corporates
        • Int'l Fixed Income
    • ETF Ecosystem
    • ETFs in Canada
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
  • Research
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF of the Week Podcast
    • ETF Prime Podcast
    • Video
  • Company
    • About VettaFi
    • Get VettaFi’ed
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Index Insights
  2. Investing in E-Commerce: The Future of Search, Shop, & Ship
Index Insights
Share

Investing in E-Commerce: The Future of Search, Shop, & Ship

Roxanna Islam, CFA, CAIAFeb 09, 2022
2022-02-09

Blogpost Header

Within the thematic space, the e-commerce industry can serve as a multi-sector play on strong consumer spending combined with rapid technology growth. As many investors know, e-commerce has been strengthening for several years, supported by mobile and internet penetration. E-commerce has grown steadily in the mid-teen percentage range since 2010, but the COVID-19 pandemic pulled forward e-commerce growth to the high 30% range throughout the end of 2020. Now with year-over-year growth averaging about 6.6% in 3Q21, the growth rate has diminished and seems somewhat “less exciting” at first glance. However, e-commerce sales continue to show positive growth at a more sustainable level than previous years despite tough comps in 2020 and 2021. E-commerce sales also remain a high portion of overall retail sales at levels above 13% since 3Q20—compared to 11% pre-pandemic. Today’s note discusses the S-Network Global E-Commerce Index (ECOMX) and how it captures e-commerce growth and future trends in consumer retail.


Content continues below advertisement

This is the image alt text

Why e-commerce now?

Several overarching trends have contributed to the strength in e-commerce. First of all, e-commerce has been excelling alongside the growth of mobile and internet usage. While it seems like the typical American household already has several mobile phones, tablets, and laptops, global cellular coverage is still extremely limited and possible reaches only 15% of the world.(1) As cellular coverage expands with the help of 5G and commercial satellites, access to online purchases and e-commerce may increase. Second, consumer habits have been changing. Supply chain issues have created fears of shortages—particularly with food, beverages, and other grocery essentials. As long as funds are available, there is less opportunity risk to buy extra food/product rather than running out early (e.g., toilet paper in the height of the COVID-19 pandemic). These habits—in addition to movement into the suburbs and spending more time at home—have led to an increase in bulk buying (bulk product has increased over 2% since 2019 according to some sources), which may be cheaper and easier to order online.(2) Third, remote work has been increasing with as many as 11% of total U.S. workers teleworking in December 2021 (for more corporate positions—measured by those with a Bachelor’s degree or higher—those percentages were in the 20-25% range).(3) With less consumers making an afternoon commute, it’s not as simple to stop by stores on their way home from work. Instead, consumers may find it easier to order online, especially given faster shipping times (i.e., next day, same day). While companies like Amazon (AMZN) have led the push for faster shipping times, other logistics companies could become more competitive with the growth of automated and electrified last mile delivery services—for example, companies like United Parcel Service (UPS) and FedEx (FDX) are investing capital to modernize their delivery fleet for faster and more efficient delivery.

ECOMX supports e-commerce trends with a multi-sector approach to consumer retail strength.

The ECOMX index is constructed to represent the breadth of the e-commerce space and includes 60 equal-weighted constituents allocated evenly across each of its four main business segments—online marketplaces, online retailers, content navigation, and e-commerce infrastructure. Online marketplaces are among the most well-known and primary beneficiaries in the e-commerce space—these include constituents like Amazon (AMZN) and eBay (EBAY). These online marketplaces connect buyers with multiple sellers, typically via website and mobile app. In addition, most traditional brick-and-mortar retailers have shifted business models to incorporate online retailing. For example, large retailers like Walmart (WMT) have increased net e-commerce sales by over 30% in the first nine months of 2021 compared to the same time period in 2020.(4) These online marketplaces/retailers are typically enabled by content navigation providers (e.g., advertisements, social media, consumer tracking). Finally, companies that supply infrastructure for e-commerce growth include anything from warehouses that hold inventory to transportation companies which can deliver goods as far as across the globe or as close as from store to household.

With the majority of online marketplaces and online retailers considered consumer discretionary stocks, this sector’s weighting in the ECOMX Index is currently about 40%. But the index is further differentiated from other consumer retail indexes (which typically hold 100% weighting toward consumer discretionary/staples) by a large weighting to tech and industrial-focused sectors. The heavier allocation to tech-oriented sectors gives the index a higher risk/reward potential compared to pure-play consumer retail indexes.

This is the image alt text

Bottom Line:

Investors who believe that traditional retail models are evolving may have interest in the growing e-commerce space. Because of its tilt toward higher growth tech-driven stocks, indexes like ECOMX may be able to provide higher reward in exchange for higher risk when compared to traditional retail peers.

This is the image alt text

The S-Network Global E-Commerce Index (ECOMX) is the underlying index for the First Trust S-Network E-Commerce ETF (ISHP).

This is the image alt text


 


Related Research:


Holiday Travel Metrics Suggest 2022 Won’t Be 2020, Too


Digging into 2021 Gold Miners Index Performance


A Healthy Dose of Good News for SMID-Cap Biotech Indexes


Four Megatrends Elevating the Commercial Space Industry


Crypto Mining for Digital Gold is Turning Green


 


1 Iridium Satellite Communications


2 Two Years Into Pandemic, Shoppers Are Still Hoarding – WSJ


3 Effects of the coronavirus COVID-19 pandemic (CPS) (bls.gov)


4 Walmart 3Q2020 10-Q (sec.gov)




This is the image alt text


» Popular Pages

  • Tickers
  • Articles

Sep 26

Invest for Changing Tides: DBMF Ascends As Equities, Bonds Fall

Sep 26

When Equities Slide, Check Out This Cash Alternative ETF

Sep 26

ETF Prime: Todd Rosenbluth on the SEC “Names Rule”

Sep 26

Government Shutdown May Impact Stocks? Trust Active

Sep 26

TCAF Outperforms SPY Out of the Gate

Sep 26

Investors Can Harvest Losses Even During Up Markets

Sep 26

Main Management Market Note: September 22, 2023

Sep 26

Despite War in Ukraine, Polish Stocks Are Up

Sep 26

The Case for Notable Japan ETF DXJ

Sep 26

Harbor Capital on the Role of Active ETFs This Decade

QQQ

Invesco QQQ Trust Series I

SPY

SPDR S&P 500 ETF Trust

VOO

Vanguard S&P 500 ETF

XLK

Technology Select Sector SPDR...

JEPI

JPMorgan Equity Premium...

SMH

VanEck Semiconductor ETF

TLT

iShares 20+ Year Treasury...

VGT

Vanguard Information...

VTI

Vanguard Total Stock Market...

SCHD

Schwab US Dividend Equity ETF...

Loading Articles...
Our Sites
  • VettaFi
  • Advisor Perspectives
  • ETF Trends
Tools
  • ETF Screener
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Database Pro
More Tools
  • Financial Advisor & RIA Center
Explore ETFs
  • ETF News
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Information
  • Contact Us
  • Terms of Use and Privacy Policy
  • © 2023 VettaFi LLC. All rights reserved.

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X