Clash of the Retail Titans

Amazon (AMZN - commentary - Trade Now) and Wal-Mart (WMT - commentary - Trade Now) are going toe to toe this holiday season as Wal-Mart looks to expand its Web presence and Amazon seeks to expand its retail footprint. While people focus on the battle, however, they miss the war -- and a good way to profit from it right now.

The story isn't that these two giants are battling it out for retail dollars, it's that there's nobody else left in the story. This is the British Empire vs. Napoleon, or the U.S. against the Soviet Union. Other retailers are mere spectators in the war for supremacy, featuring lots of collateral damage and the threat of retail Armageddon: pure price-comparison shopping.

Home Media Magazine highlights the situation with a recent article detailing how Best Buy (BBY - commentary - Trade Now) is falling behind the two hegemons in their price-cut battle. It also gives a glimpse of the future of retail. According to an industry analyst cited in the story, Amazon recently had the lowest prices on a sampling of products sold by all three retailers, with Wal-Mart coming in second and Best Buy trailing.

It has become a cliche to say the Internet allows consumers to instantly compare prices and find the best deal, but it has never been truer than it is today. Apple's (AAPL - commentary - Trade Now) iPhone has an app that already allows consumers to scan barcodes and get instant information on a potential impulse buy, and it won't be long before consumers can walk into a store, scan the item they want and have their phones show them the cheapest available price.

While I believe Wal-Mart will survive, as will niche retailers that find a competitive space, the ETF that will best capture this trend is First Trust Dow Jones Internet Index (FDN - commentary - Trade Now). FDN holds a combination of companies that use the Web to deliver products and services, along with the companies that build and support the Internet infrastructure.

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At the time of publication, Dion owns FDN.

Don Dion is president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.