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Don’t Conflate E-Commerce with the ‘Work-from-Home’ Sector

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Online shopping was thriving prior to the coronavirus pandemic, but the global health crisis has significantly bolstered e-commerce, leading some market participants to conflate online retail with work-from-home (WFH) strategies.

This year, investors are noting that the brick-and-mortar-heavy SPDR S&P Retail ETF (XRT) is up 48% while Amazon (NASDAQ: AMZN) is basically flat. Those factoids don’t mean e-commerce is fading or that the ARK Next Generation Internet ETF (NYSEArca: ARKW) should be ignored.

For starters, ARKW is actively managed. It’s also not a dedicated retail ETF. The fund is modestly higher on a year-to-date basis and while Amazon isn’t among its 47 holdings, the ARK fund is positioned to capitalize on an online shopping equity rebound.

“Following a major shift to online retail in 2020, retail ecommerce sales will continue to grow by double digits through 2023 and make up an increasing share of total retail sales worldwide. By 2023, we project worldwide retail ecommerce sales will total $6.169 trillion and make up a 22.3% share of total retail sales, up from $3.351 trillion and 13.8% in 2019,” according to eMarketer.

While Amazon, the company most synonymous with online retail in the U.S., has been around a while, internet shopping, even with the pandemic boost, still represents a relatively small slice of overall retail sales in the world’s largest economy. E-commerce accounts for just 19% of retail sales in the U.S.

“We expect ecommerce growth will remain strong throughout 2021 as the pandemic persists in many parts of the world and more consumers have gotten used to shopping online,” adds eMarketer.

ARKW is uniquely levered to that growth proposition because it features a compelling mix of traditional online retailers like Etsy (NASDAQ: ETSY), platform providers like Shopify (NYSE: SHOP), and payments processors such as Square (NYSE: SQ). The fund also has some exposure to the budding social commerce trend thanks to Snap (NYSE: SNAP), among other holdings.

Lastly, ARKW taps into the global nature of online retail.

“In 2020, all 32 markets we track recorded high growth in ecommerce. All markets recorded double-digit growth except Argentina, which had triple-digit growth,” notes eMarketer.

MercadoLibre (NASDAQ: MELI), an ARKW holding, provides exposure to online retail growth in Latin America.

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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