Amazon is reportedly on track to become the biggest American clothing retailer, with a report by Cowen suggesting that Amazon will overtake Macy's by 2017.
The online retailer is becoming especially big when it comes to things like handbags and jewelry and has begun ramping things up by offering clothing from brands like Tommy Hilfiger and Levi's.
"We estimate AMZN's U.S. retail Apparel GMV [gross merchandise value] grows from $16BN in '15 to $52BN in '20, with U.S. market share rising from 5 percent to 14 percent and comfortably passing Macy's in '17," said the report.
There are a number of reasons for Amazon becoming so big when it comes to clothing. For example, the company doesn't have to pay overhead costs for retail stores, meaning that it can essentially afford to offer clothing at much lower prices.
The competition from Amazon certainly isn't coming at a good time for retailers like Macy's. People in the U.S. are spending less on clothes of late, with apparel spending having declined 1.5 percent in June and department stores like Macy's and JCPenney having all reported mediocre results over the past few months.
While these retailers have blamed things like delayed inventory shipments and bad weather for a slowing of sales, it's becoming more apparent that those in the U.S. are starting to spend less on clothing, a trend that could seriously hurt the likes of Macy's in the years to come.
One potential reason for the decline is higher spending on other things leading to less disposable income, with a recent report by Morgan Stanley showing that millennials are spending more on things like rent and phone bills.
It's important to note that Amazon's apparel segment is secondary to its electronics and general merchandise market, which makes up around 70 percent of its revenue. Amazon itself was founded in 1994, however, it did not enter the clothing and apparel market until 2002.
"The company's Apparel & Accessories footprint has come a long way since it first began selling Apparel in '02 and numerous comments suggest Fashion is now the fastest growing vertical within Amazon's largest revenue source, the EGM segment. Additionally, Amazon Fashion President Cathy Beaudoin disclosed Amazon Fashion has over 40MM customers (as of Feb. '15)," continued the report.
Amazon has outsold both Target and Walmart when it comes to apparel in the past six quarters, and the report by Cowen notes that 11 percent of those who bought clothing from Target and Walmart also buy clothing from Amazon. This is up from eight percent in 2014.
