Retail chains, such as Macy’s (M), Nordstrom (JWN), and Kohl’s (KSS), have released dismal earnings recently, and a new Goldman Sachs report predicts business could get worse for brick-and-mortar apparel stores.
On the other hand, the same report notes that Amazon (AMZN) has made great strides in the apparel realm — and could dominate the market even more in the future.
While Amazon doesn't reveal category sales, the Goldman report estimates that apparel and accessories represent $10 billion in sales for the "everything store"; that's 20% of the online apparel and accessories market. Macy's, the next-biggest player in the online apparel market, has just $5.2 billion in sales.
Numerous factors drive Amazon’s impressive apparel sales, including the fact that a lot of brands sell on Amazon’s website or directly to Amazon’s buyers. While existing brands say sales on amazon.com represent about 1%-4% of their overall sales, this may increase in future years given Amazon’s popularity among younger people.
Goldman Sachs noted: “Many wholesale brands still do not sell directly to amazon.com, but access to more brands – which we believe is coming – supports further growth ahead.” Later in the report, Goldman added, "We believe it is a matter of time before more brands end up selling directly on amazon.com, largely because they need to migrate to where consumer traffic is."
Moreover, Goldman said, Amazon isn't viewed as a "brand dilutive channel," meaning people will still value the value of a pair of 7 jeans, for example, even if they can buy them on Amazon.
The online apparel industry in general has been growing recently — at a rate of 20% over the past few years, according to Goldman. On the other hand, brick-and-mortar has flatlined, and Goldman predicts a drop-off in sales for mall-based retailers like Macy's and Nordstrom. The apparel sales future looks bright for Amazon, though.