Amazon Is Seeing Huge Growth In Its Clothing Sales

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December 23, 2016 8:12am NASDAQ:AMZN

From Zacks: Some habits just grow on you. You start off reading about it, decide to dig deeper, then try it out. And before you know it, you’re hooked. Shopping online is just one of those things.


But shopping online for clothes? That’s one thing I thought I’d never do, because there’s so many things like fit, feel, fall, texture and color that are hard to tell from a picture. But as it turns out, it’s really convenient to browse through stuff whenever you have a few minutes to spare and save for when you’re ready to buy. And if you really like something, you can just drop in to a physical store to try it on. Don’t like carrying shopping bags? Want free delivery? Simply order online. It really is that easy.

Which is why Nielsen Channel Track found that 70% of American shoppers bought apparel in the preceding 6 months, of which 82% bought at physical stores and 41% online. There’s obviously some overlap here meaning that a growing percentage of shoppers are comfortably using both channels. Nielsen (NLSNFree Report) also found that over 60% of shoppers visited a website before buying any garment meaning that the online channel is really good for browsing or researching products.

eMarketer estimates that ecommerce sales of apparel and accessories will reach $74.03 billion in 2016, an 18.7% share of total U.S. retail ecommerce. So it goes without saying that this is one of the most important retail categories.

Amazon Fashion Has Crept Up on Us

Over the past 2-3 years, Amazon (AMZNFree Report) has done a lot to build its position in the apparel/accessories market. It started with buying fashion retailer Shopbop way back in 2006 following it up with the online shoe retailer Zappos in 2009. In 2011, it launched a flash sale site for fashion called Myhabit. The most popular items on Amazon were initially things like jeans and leggings that people are more comfortable buying online.

Gradually feeling its way into the space, Amazon announced its men’s fashion sales site called East Dane in 2013. That same year, it organized an Amazon Fashion Competition, giving away $100,000 to fashion design students. Its student competition called Amazon Fashion Studio Sessions will help nurture emerging creative talent while bringing the new generation onto the Amazon platform.

Fashion shows are a great way to build a brand in the space, especially when you’ve done the groundwork getting close to designers. So Amazon has now become a major sponsor. This year it sponsored the New York Fashion Week: Men’s. Its Japanese arm has joined the list of sponsors for Tokyo Fashion Week, which is the biggest fashion festival of Japan replacing Mercedes-Benz. In 2017, the Fashion Design Council of India (FDCI) will host the Amazon India Fashion Week Spring-Summer 2017 and Autumn-Winter 2017, in association with Maybelline New York.

Amazon also launched seven apparel brands with minimum fanfare, including Franklin & Freeman (men’s dress shoes), Franklin Tailored (men’s suits and accessories), James & Erin (women’s clothing), Lark & Ro (women’s clothing), Society New York (women’s clothing), North Eleven (women’s accessories for cold weather) and Scout + Ro (children’s clothing).

Moreover, Amazon has opened two photo studios, one in New York and the other in London. The 46,000-square foot London studio is the latest with the capacity to shoot 500K clothing photos a year. Just as well because fashion brands that have in the past kept off Amazon for counterfeit and experience issues have now started flocking to the platform for its logistics and reach.

A year ago, Amazon reportedly had 30 million clothing and accessory items including a growing number of high-end items. Earlier this year, Internet Retailer found that clothing and accessory offerings had jumped 87% over the preceding 12 months (Baird estimates 91%).

Finally, it hired former Vogue editor Caroline Palmer.

 

Amazon Gets Several Votes of Confidence

Amazon is the leading online retailer, but recent research reports say that it is also growing into the largest online apparel retailer.

It topped Internet Retailer’s leading online apparel retailers list and was followed by Macy’s (MFree Report) , Nordstrom (JWNFree Report) , Gap (GPSFree Report) , Kohl’s (KSSFree Report) and L Brands (LBFree Report) . While still well behind Wal-Mart’s total apparel sales in the U.S., it is already drawing close to Macy’s, after having surpassed the Gap, Kohl’s, Target, J.C. Penney and Nordstrom in 2015. Cowen & Co expects that in 2017, Amazon will become the largest apparel retailer in the U.S.

Morgan Stanley analysts are particularly optimistic about Amazon’s growing success in the space, estimating revenue growth of $1.1 billion in the first quarter of 2016 when department stores Nordstrom, Sears, Macy’s, Kohl’s, JCPenney and Dillard’s together saw a $225 million reduction in apparel sales. The analysts note that Amazon has been growing despite the fact that the apparel market has grown just 1% annually in the last 15 years. Amazon’s strength therefore appears to be coming from the offline to online shift, as well as its logistics capabilities, review platform and customer service.

Conclusion

Apparel is one of the categories with the deepest online penetration in the U.S. and it now appears that Amazon has had a lot to do with this. While many of the top department stores also have online stores, their sales haven’t grown quite as much as Amazon’s, possibly because the company does a lot of sales through its Prime membership program, which encourages consumption on Amazon.

Extending to high-end fashion will be particularly helpful because in Bezos’ own words, “Gross profit dollars per unit will be much higher on a fashion item than with cheaper products.”

Amazon.com, Inc. (NASDAQ:AMZN) posted small losses in premarket trading Friday. Year-to-date, AMZN has gained 13.38%, versus a 10.55% rise in the benchmark S&P 500 index during the same period.

This article is brought to you courtesy of Zacks Research.


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