ProShares Decline of the Retail Store ETF (EMTY)

The ProShares Decline of the Retail Store ETF (EMTY) makes an explicit bet that traditional physical retail stores will continue to shrink — that Amazon, digital platforms, and changing consumer behaviour will destroy the economics of shopping malls and street-level retail, while enriching the companies and industries that benefit from that shift. Rather than trying to pick individual e-commerce winners, EMTY takes a thematic approach: hold a basket of securities that profit if retail store square footage declines and consumer shopping migrates online.

The core insight behind EMTY is simple: the decline of physical retail is not a temporary disruption but a structural, decades-long shift. Shopping malls opened in the 1960s and 1970s were built for a world where consumers could not buy anything without driving somewhere. That world no longer exists. A consumer can now order almost anything from their phone and receive it the next day. The real estate, labour, and logistics infrastructure that traditional retail requires became unnecessary.

This shift has been happening for years. Circuit City and Blockbuster collapsed not because they were incompetent but because the distribution channels they depended on became obsolete. Sports Authority, Toys “R” Us, and countless regional department stores shut down because they could not compete with Amazon and the shift to online shopping. In 2020, the pandemic accelerated what was already underway: consumers moved even faster online, and thousands of retail stores closed permanently.

EMTY bets that this trend will continue. Physical retail will not disappear entirely, but it will shrink from roughly 15–20% of retail spending to perhaps 5–10% over the next decade or two. That contraction will destroy value for retail landlords, traditional retail companies, and the supply chains built around shopping malls. It will enrich the companies that provide the alternative: e-commerce platforms, logistics companies, warehouse operators, delivery networks, and the technologies that enable shopping and payments online.

The fund was launched in 2018, after the initial e-commerce boom but at a time when Amazon and digital retail had already proven they were here to stay. The thesis was not contrarian at that point — most investors had already accepted that retail was declining — but EMTY offered a way to invest directly in that thesis as a unified fund rather than assembling a custom portfolio.

The fund’s structure is a basket of roughly 40–60 companies that the managers believe will either profit directly from retail decline or will be safer bets than traditional retailers. E-commerce platforms and their logistics providers are core holdings — companies that move goods from warehouse to doorstep. Payment processors and financial-services companies that enable digital commerce are also included, since they make money on every transaction regardless of whether it happens in a store or online. Tech companies that provide software or infrastructure for online retail also appear in the fund. Some positions are thematic shorts — companies directly exposed to mall retail — though the fund primarily focuses on long positions in companies expected to benefit.

The fund is actively managed, meaning ProShares and its advisers choose which companies to hold and in what proportions. This requires active decisions about which beneficiaries are most attractive and which are overvalued. Unlike a simple “buy Amazon” strategy, EMTY diversifies across multiple beneficiaries of retail decline — no single company dominates, which reduces idiosyncratic risk but also means the fund’s performance depends on the collective fortunes of a thematic basket rather than a few mega-cap names.

One of the real risks for EMTY is that “retail decline as an investment theme” assumes the shift will be linear and predictable. In reality, disruptions are messy. E-commerce might slow down if consumer confidence declines. Amazon and other platforms might face regulatory pressure that limits their growth. New retail concepts — experiential retail, luxury outlets, niche physical stores — might thrive in niches and prove more durable than traditional shopping malls. Clothing and home goods might remain inherently physical categories where online penetration plateaus.

Additionally, the companies that supposedly benefit from retail decline are not guaranteed to thrive. Amazon faces competition from rivals in China and other countries. Logistics companies face labour shortages and rising costs. Payment processors face regulatory scrutiny. The fund is betting that these companies will overcome these challenges and continue growing, but that is not a certainty. A company might benefit from retail decline in general yet still face headwinds from its own competitive or operational problems.

The fund is also sensitive to macroeconomic cycles. In recessions, consumer spending drops, and e-commerce companies that benefit from a shift in the mix of spending (from physical to digital) still see their absolute revenues affected by lower overall spending. EMTY’s performance depends not only on retail decay but on whether e-commerce companies and logistics providers can continue to grow in the absolute sense.

Currency and market-cap sensitivity matter as well. EMTY tends to be concentrated in large US tech and logistics companies, so its performance is deeply tied to the tech sector’s fortunes. In periods when tech stocks underperform or when market-cap-weighted US equities are out of favour, EMTY can underperform despite the continuation of retail decline.

The fund charges an expense ratio reflecting active management, which is a cost relative to a passive index-tracking fund. For the strategy to justify its fees, the managers must not only pick companies that benefit from retail decline but also do so in a way that outperforms a simple passive e-commerce or consumer-discretionary index. This is a high bar.

EMTY appeals to investors who genuinely believe physical retail is in terminal decline and who want a thematic fund that captures the beneficiaries without having to assemble the portfolio themselves. It is less suitable for investors sceptical that retail decline will be linear, or for those who believe that e-commerce companies themselves are overvalued despite their growth.

To research EMTY, start with the fund’s prospectus and fact sheet, which detail the current holdings and the managers’ thesis about which types of companies will benefit. Compare EMTY’s holdings and performance against a simple large-cap growth index or a consumer-discretionary sector ETF to understand whether the thematic focus is adding value. Track the pace of retail store closures and changes in e-commerce penetration to assess whether the macro backdrop still supports the fund’s thesis. Monitor the fund’s largest holdings and their individual performance; a few mega-cap tech companies might drive most of the fund’s returns, so understand which names carry the most weight. Finally, assess whether the fund’s expense ratio is justified by the potential for outperformance versus a DIY portfolio of e-commerce and logistics stocks.