All that pain being felt by department stores might well be Amazon’s gain — and Morgan Stanley analyst Brian Nowak said the web giant is just getting started.
Nowak and the Morgan Stanley retail team estimated in a research report that Amazon’s e-commerce platform would account for 19 percent of the U.S. apparel industry by 2020.
That’s up from an estimated $17.9 billion, or 6.7 percent of the market last year — putting Amazon just behind Wal-Mart, which Morgan Stanley estimates controls 7.5 percent of the U.S. apparel market. Wal-Mart, however, would log all of its own sales, while some of Amazon’s take would be a cut of revenues by third parties using its platform.
“We are still in the early innings of Amazon’s apparel ‘land grab,’ given its growing focus on fashion/high-end apparel,” said Nowak, who was lead author of the report.
A Morgan Stanley survey found that 20 percent of U.S. consumers are “frequently” buying apparel on Amazon, with Amazon Prime members 5.5 times more likely to turn to the site “frequently” for apparel.
Amazon has been ramping up in fashion for some time, sponsoring industry events, starting private-label brands and launching a live-streaming shopping show.
Meanwhile, department stores have been struggling, with Macy’s Inc. and Kohl’s Corp. reporting first-quarter sales declines this week.
Nowak said Internet retailers, led by Amazon, have added $27.8 billion in apparel revenues since 2005 while department stores have lost $29.6 billion, according to Euromonitor and U.S. government data.
“This share loss appears at risk of accelerating given Amazon’s bigger push into fashion and consumer willingness/acceptance to shop fashion through Amazon,” Nowak said. “We expect total department store revenue declines to accelerate from 6.5 percent annually over the past 10 years to a 8.5 percent [compound annual growth rage] through 2020.”
The projected shift in market share, were it to play out as Nowak projected, could lead to major changes in the industry, with brands feeling more pressure to sell directly to Amazon.
“Should consumers recognize Amazon more as a destination for selection than just a discount channel, the site will merit more vendor sell-in lest brands lose share in slowing brick-and-mortar channels,” the analyst said.
He said PVH Corp., VF Corp., Hanesbrands Inc. and The Children’s Place Inc., all of which rely on high replenishment products, were poised to benefit from the shift.