Apparel Is Amazon’s Next Big E-Commerce Target

One year ago, investment bank Cowen & Co.’s John Blackledge predicted that Amazon would become the leading U.S. apparel retailer by 2017. While Macy’s was the top dog in 2016, it slipped from its perch, proving Cowen right and bringing a lot of painful disruption to the industry.

The world’s foremost e-commerce platform, Amazon is already coming closer to achieving their dream of becoming the everything store. While clothing isn’t what first comes to your mind when you think about Amazon, maybe it should be.

The data shows that for shoppers aged 18-34 – millennials– Amazon accounted for 17 percent of all online clothing sales, earning the largest amount of apparel sales of any online retailer in the U.S. The e-commerce giant even doubled the market share of Nordstrom, the second-largest online apparel retailer.

Amazon's dominance in apparel.

This data is from research firm Slice Intelligence, which obtains its data from digital receipts of online shoppers who opt into its research panel. Slice includes everything from underwear to dresses to baby clothes in its calculation, but not footwear.

Caption: This data is from research firm Slice Intelligence, which obtains its data from digital receipts of online shoppers who opt into its research panel. Slice includes everything from underwear to dresses to baby clothes in its calculation, but not footwear.

Apparel In Peril

Amazon apparel is taking the lead with a vengeance and trying to extend its reach as far as possible. The company has introduced some of its own clothing brands, such as Lark & Ro, is spinning up an athleisure brand, and increased the number of apparel and accessories on its website by 87 percent last year from the year before, according to a research report from Behind the Online Apparel Boom.

The report also showed that Amazon’s apparel sales hit $16.3 billion, which is more than the combined online sales of its five largest clothing competitors – Macy’s, Nordstrom, Kohl’s, Gap, and Victoria’s Secret.

Thus, Amazon’s unparalleled online retail growth is bad news for traditional retailers and department stores such as Wal-Mart, Target, and Gap.

Morgan Stanley’s Brian Nowak even released a statement that Prime membership service is one of the reasons Amazon is rising in apparel. Data shows that Prime members are ~5.5X more likely to “frequently” purchase clothes on the site and Amazon’s Prime member base has grown 50% on a global level each of the past two years.

Speedy delivery is not a feature that traditional apparel companies can provide. Building out the logistics would be an expensive and slow endeavor, especially when the consistent overhead costs associated with inventory and locations are considered. Amazon already has Prime, so taking on such an established program would be ill-advised.

Tough Times Ahead

That brings us to our most pressing concern: are clothing brands in deep trouble?

The answer is a little complicated. If established brands don’t act quickly and get their e-commerce game up to par, they might very well be selling all their items through Amazon in a couple of years.

As it stands, consumers face some problems with online retail . For starters, consumers don’t always have the disposable time needed to compare prices and there’s only so much inventory to be found in astore. On top of that, there is a total lack of pricing transparency when shopping on a single store website because comparing prices between competing apparel sites is cumbersome and frictional.

It requires extra time and effort for the customer to go back and forth between websites in order to compare similar purse prices and styles. Amazon resolves all of these issues through its platform, providing consumers easy access to different brands, prices, and quality all on the same search page.

Amazon provides other overarching benefits to its shoppers, such as 2-day delivery for Prime members and qualifying purchases. Additionally, the company has the ability to analyze the current and future shopping trends in order to consistently stay ahead of the times in terms of pricing and style.

Dress For Success

There are already companies such as ASOS in place, that bring multiple ‘trendy’ fashion brands to the consumer through one easily accessible website. However, even ASOS offers pricier items and can’t compete with Amazon’s delivery speed.

While general apparel has some fences to jump, Amazon’s rise to the top of apparel retail may not be such horrible news for high-end luxury brands. It was only recently that brands such as Chanel, Fendi, and Hermes, among others, announced that they would be opening online stores for selling their products.

This left many fashion junkies in shock, as Chanel’s global fashion director declared in 2013 that “fashion is about clothing, and clothing you need to see, to feel, to understand.” Regardless of his previous statement, Chanel and other super-luxury brands realized that if they don’t create an online retail presence, they might be very well in trouble.

Business of Fashion reported in October that by 2020, e-commerce is expected to drive 40% of sales growth for luxury brands. Currently, only 40% of luxury retailers sell online, as many are reluctant to do so because preserving the in-store experience is valued more highly at those companies than making sales.

Yet, as time passes, more and more luxury brands are caving as e-commerce is the path to economic opportunity. Luxury brands are becoming more aware that providing an online experience for the customers enables them to purchase more, at their own time and pace.

While luxury brands are unscathed for now, it’s unclear what impact Amazon might have on them in the future as Amazon has been having great success recently with selling high-end apparel. Some luxury brands such as Louis Vuitton and Michael Kors began selling some of their products through Amazon, giving it a trial run.

Find the Right Fit

The solution? In order to prevent Amazon from completely dominating the e-commerce apparel scene, these retailers or local brands must work together to create a fashion platform that can compete at Amazon’s speed and strength.

Fortunately, it’s not too late! Digital transformation can still offer a strong foothold in the war against Amazon.

Larger parent companies such as LVMH can acquire unique local boutiques or work together with smaller brands to create their own fashion delivery platform. Picture a GrubHub or Caviar built for apparel, one that offers same-day delivery or pickup and a tailored experience.

By creating a platform that connects customers with fashion, these smaller brands may have a chance of surviving the online storm, and the bigger brands would have a better chance at maximizing profits through their acquisitions. Selling items directly through Amazon would undercut the prices, which clothing brands definitely don’t want.

A fashion platform could look many different ways. For instance, a clothing brand could open a Bonobos-style guideshop and measure customers for custom clothing, which would later be created by third party manufacturers and designers. The customer would be able to take their measurements and connect with these third party designers through the platform available. The customer works with the designer to create a piece of clothing that is to their preference which is then made by the third party manufacturer

These are just some of the platform opportunities available to incumbents in the apparel industry. If brands and retailers hope to survive, much less beat Amazon’s disruption, they need to investigate and embrace the platform business model.


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