Buying into the hype of the $3 billion Stitch Fix IPO is a mistake, which is why we had to make sure Money Morning readers know about a better profit opportunity in the online retail sector.
The clothing subscription service is nearing $1 billion in revenue. That's creating hype for the IPO, but this is not where you want to invest your hard-earned money.
Stitch Fix has a $469 billion competitor it may never defeat, which puts you at risk of losing all of your investment.
However, we still think the right online retail investment can be profitable for long-term investors.
That's why, today, we're going to provide our readers with details on an investment opportunity that has already netted some shareholders gains of 35% so far in 2017...
Avoid the Stich Fix IPO and Still Profit
Stitch Fix is a retail startup making waves in the online fashion world. That's fueling hype for its upcoming IPO, but there are better ways for investors to profit from the online retail sector.
Stitch Fix was founded in 2011 by current CEO Katrina Lake as a clothing subscription service for women.
Customers create a profile and answer questions about their style, size, and budget. Customers are then assigned a personal stylist who matches clothing with their taste.
For a $20 styling fee, the customer will receive five items of clothing. The recipient of the clothing pays for what they keep, and the $20 styling fee is applied to the clothes as a credit. Stitch Fix also sends its customers a prepaid UPS envelope for returns.
Lake has come a long way from first shipping orders out of her apartment in 2011, as Stitch Fix recorded $730 million in revenue for its fiscal year ending July 2016.
But despite the startup's success thus far, it has a major competitor it won't be able to contend with...
Amazon.com Inc. (Nasdaq: AMZN) launched a feature to its Prime members, called "Outfit Compare," on March 17.
Prime members can upload two pictures of themselves in two different outfits through the Amazon shopping app. An Amazon stylist will send a customer a response "a minute later," telling them which outfit looks best, according to TechCrunch report.
Amazon's move into the fashion industry is still in its infancy, but it's the first step toward bigger plans in retail.
TechCrunch speculates Amazon could use the data it collects from its shopping app to make better clothing recommendations for future customers.
And although Amazon just launched the app, it's already a preferred fashion outlet for millennials...
Amazon accounted for 16.6% of U.S. millennial online fashion spending in 2016, according to Statista. In comparison, Stitch Fix only accounted for 3.2% of U.S. millennial online fashion spending.
Stitch Fix will never outsell Amazon, and the only reason to buy Stitch Fix stock would be for speculative investors who hope Amazon will acquire Lake's company and increase the Stitch Fix stock price.
With Amazon's $22 billion in cash as of May, it doesn't need to acquire Stitch Fix. It can simply develop its own brand, just like it's doing with Outfit Compare.
But there are profit opportunities in the e-commerce space...
E-commerce spending is already in the trillions, and retail e-commerce sales worldwide are expected to climb from $1.86 trillion in 2016 to $4.48 trillion by 2021, according to Statista.
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That's a 140% increase in just five years.
And before these sales jump triple digits, this is the investment opportunity you need to know about right now...
Buy This Double-Digit Winner Instead of Stitch Fix
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We recommend avoiding the Stitch Fix IPO, but we still see a profit opportunity in online retail that's much safer than owning Stitch Fix stock: Amplify Online Retail ETF (Nasdaq: IBUY).
IBUY holds a diversified group of publicly traded companies that generate 70% or more of their revenue from online or virtual sales.
Some of its most well-known holdings include Amazon.com Inc. (Nasdaq: AMZN), eBay Inc. (Nasdaq: EBAY), and Alibaba Group Holding Ltd. (NYSE: BABA). Instead of owning shares of a company that just sells clothes, you can gain exposure to three e-commerce giants, each with market caps over $30 billion. You can also own IBUY for a fraction of what a regular share of AMZN or BABA would cost you.
| Stock Symbol | Price per Share as of Oct. 24 | Year-to-Date Return |
| IBUY | $37.17 | 35.79% |
| AMZN | $969.00 | 30.32% |
| BABA | $175.12 | 99.64% |
| EBAY | $36.88 | 24.18% |
So far in 2017, the IBUY stock price has climbed 35.79%. In comparison, the Dow Jones Industrial Average has climbed just 18.62% during the same time.
And because the stock prices for AMZN, BABA, and EBAY are expected to go higher in the next 12 months, there could be even more gains on the way for IBUY shareholders.
According to FactSet, Wells Fargo projects the AMZN stock price will climb 44.47%, to $1,400, in the next 12 months. Wells Fargo also projects the BABA stock price will climb 29.31%, to $225 per share, in the next 12 months.
For the EBAY stock price, firm DA Davidson projects it will climb 23.25% in the next 12 months, to $45 per share.
Of course, you can still profit from buying these companies directly, but IBUY provides diversification. If you owned just Amazon stock in your portfolio, your portfolio's value could wildly fluctuate if Amazon has a bad quarter.
Also, one share of Amazon costs $977.56. That limits how much stock retail investors can own.
IBUY solves both of those problems. If Amazon has a bad quarter, the IBUY stock price can still climb if Alibaba and eBay outperform quarterly expectations.
And at roughly $40 a share, it lets you profit from the best online retailers at a fraction of the cost of owning just one share of AMZN.
The Bottom Line: CEO Katrina Lake has huge competition from Amazon.com, and IPO prices can have volatile price swings in the first few months of trading. Instead of owning a risky IPO, a safer way to potentially profit from the online retail industry is by owning shares of IBUY.
Up Next: A Brand-New Way to Profit Every Week
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