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From Abercrombie To Peloton

September 08, 2020
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David Mazza, Managing Director, Head of Product

ACCELERATING THE CONNECTED CONSUMER OPPORTUNITY

I am not ashamed to admit it. I worked at Abercrombie & Fitch in high school and college. Admittedly, I am still a young person, but I am old enough to have worked there when they were on top of the retail world. By that, I mean, they could produce suggestive catalogues, sell t-shirts with borderline offensive messages, and aggressively spray cologne in your face upon entry. All the while, kids like me (and/or their parents) would pump their earnings into buying their muscle tees, crop tops, and short shorts.

The era of me working in a New Hampshire mall and Boston’s Faneuil Hall seems like an entirety ago, but back then, internet at my mom’s house was still coming in the mail. Technically, the internet was dial-up, but we needed a CD-ROM from AOL to get online. Before the widespread introduction of broadband, the internet was not good for much more than surfing the web.

To put it into context, current internet speeds are over 300 times faster today than available at
the time. This makes nearly everything we do at our homes or on our phones impossible back then. Even looking at data beginning in 2008 shows how considerable an acceleration has occurred over a 10-year period to 2017. In 2020, the average internet speed across the US is over 30 megabits per second.

INTERNET CONNECTION SPEEDS HAVE JUMPED


Source: Statista, retrieved August 2020.

Today, most of us take this for granted as e-commerce has exploded with online sales comprising 27% of total retail sales in April 2020 from 6% in 2009. In addition to faster speeds, a key driver powering the ability for this to occur is access. In 2000, only 52% of Americans used the internet. Today, over 90% have internet access with nearly 100% of both 18 to 29 and 30 to 49 year olds having

ability to do so.

INTERNET ACCESS HAS BROADENED SIGNIFICANTLY


Source: Pew Research Center, as of December 2019.

Internet access has not just expanded, but its quality has even across income groups. What is remarkable is over 50% of households making less than $30,000 a year have broadband access. The wealthiest cohort has always led the way with 92% of those making over

$75,000 a year having access in 2019.

BROADBAND ACCESS HAS INCREASED ACROSS INCOME SPECTRUMS


Source: Pew Research Center, as of February 2019.

Simply put, the transition to more connected consumption model is only possible in today’s world. The COVID-19 pandemic caused major disruptions to our day-to-day lives including an acceleration of how consumers behave. This trend is more than simply a    shift from in-person to online purchases. It includes how we entertain ourselves, such as an increased use of streaming services, gaming, and e-sports. Other historically in-person interactions have also changed including connecting with friends and family through social media and other communication tools. It includes education whether it be new means of accessing traditional schooling or adults learning new skills for an evolving economy. It also permeates how we keep ourselves healthy including virtual wellness experiences and healthcare services. The explosion of Peloton, which doubled subscribers to 886,100 in the first quarter, epitomizes this disruption as people embrace the benefits of high quality fitness experiences from top instructors available within one’s home.

Our connected lifestyles will continue to increase due to shifts in customer preferences, increased convenience, and improved enablement technologies, such as fast broadband and mobile access. Post COVID-19, these trends are likely to see lasting engagement driven by older generations behaving similar to millennials and Gen Z were doing prior to the crisis.

It also means if I keep it up on the Peloton, I may be able to fit into that sweet muscle tee from 1999, but it is likely better suited for a life like an AOL CD-ROM at this point.

The Direxion Connected Consumer ETF

(Ticker: CCON) offers exposure to companies across four technology pillars, allowing investors to capture those companies that stand to benefit from consumers connecting to products and services in new ways, especially virtual ones. The four pillars include Home Entertainment, Online Education, Remote Health and Well-Being, and Virtual and Digital Social Interaction.


An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund’s prospectus and summary prospectus call 866-301-9214 or visit our website at direxion.com. A Fund’s prospectus and summary prospectus should be read carefully before investing.

Market Disruptions Resulting from COVID-19. The outbreak of COVID-19 has negatively affected the worldwide economy, individual countries, individual companies and the market in general. The future impact of COVID-19 is currently unknown, and it may exacerbate other risks that apply to the Fund.

CUSIP Identifiers have been provided by CUSIP Global Services, managed on behalf of the American Bankers Association by Standard and Poor’s Financial Services, LLC, and are not for use or dissemination in any manner that would serve as a substitute for a CUSIP service. The CUSIP Database, ©2011 American Bankers Association. “CUSIP” is a registered trademark of the American Bankers Association.

Solactive AG is not a sponsor of, or in any way affiliated with, the Direxion Connected Consumer ETF.

Shares of the Direxion Shares are bought and sold at market price (not NAV) and are not individually redeemed from a Fund. Market Price returns are based upon the midpoint of the bid/ask spread at 4:00 pm EST (when NAV is normally calculated) and do not represent the returns you would receive if you traded shares at other times. Brokerage commissions will reduce returns. Fund returns assume that dividends and capital gains distributions have been reinvested in the Fund at NAV. Some performance results reflect expense reimbursements or recoupments and fee waivers in effect during certain periods shown. Absent these reimbursements or recoupments and fee waivers, results would have been less favorable.

Direxion Relative Weight ETFs Risks - Investing involves risk including possible loss of principal. There is no guarantee the investment strategy will be successful. The value of stocks of information technology companies and companies that rely heavily on technology is particularly vulnerable to rapid changes in technology product cycles, rapid product obsolescence, government regulation and competition, both domestically and internationally, including competition from competitors with lower production costs. ADRs are issued by non-U.S. companies and are subject to various foreign investment risks including but not limited to the risk that the currency in the issuing company’s country will drop relative to the U.S. dollar, that politics or regime changes in the issuing company’s country will undermine exchange rates or destabilize the company and its earnings. Additional risks of the Fund include, but are not limited to, Index Correlation/Tracking Risk, Index Strategy Risk, Market Disruption Risk, American Depositary Receipts Risk and risks associated with the market capitalizations of the securities in which the Fund may invest. Please see the summary and full prospectuses for a more complete description of these and other risks of the Fund.

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