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Amazon Will Have 20% Apparel Market Share by 2020, and Here’s Who Will Lose It

Amazon was never known as a place to find fashion, but the e-commerce frontrunner is determined to change that.

While the company might be increasing its footing in the space rather furtively, its clothing and accessories SKUs were a noticeable 91 percent higher for the 2015 holiday season over the previous year, and 22 apparel-related job postings for its private label business are up on amazon.com.

According to Morgan Stanley, Amazon is already the second-largest apparel retailer, with 7 percent of the market share, and its slowly transforming image of being “fashionable” will mean more opportunities in high-end apparel.

“We estimate Amazon will reach 19 percent share of the U.S. apparel market by 2020,” Morgan Stanley executive director Brian Nowak wrote, according to Barron’s. Amazon already accounts for 34 percent of U.S. online apparel sales, he added.

A Morgan Stanley consumer survey found that 20 percent of U.S. consumers buy clothes on Amazon “frequently,” with casual tops, shoes and bottoms topping the list of purchased categories.

Forty-four percent of shoppers are spending on casual tops and bottoms, 36 percent are buying “partywear” tops and 27 percent are turning to the site for dresses.

Part of the reason for Amazon’s apparel success, according to Nowak, is its Prime membership. Shoppers who pay the $99 a year for unlimited free two-day shipping are more than five times more likely to buy clothing on the site frequently.

“This speaks to how Amazon’s growing Prime member base (up over 50 percent y/y globally each of the past two years) is increasing its share of apparel consumer expenditure,” Barron’s reported Nowak as saying.

Much like Cowen and Company analysts noting “un-Amazon-able” brands will see the most success, Nowak said brands that go direct, like Victoria’s Secret and Burberry will be fairly protected.

Euromonitor and U.S. government retail sales data show Internet retailers have added $27.8 billion to their apparel revenue since 2005, and in that same time, department stores lost $29.6 billion.

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“This share loss appears at risk of accelerating given 1) Amazon’s bigger push into fashion, and 2) consumer willingness/acceptance to shop fashion through Amazon,” Nowak wrote.

Morgan Stanley expects total department store revenue declines to ramp up from what has been roughly -6.5% in the last 10 years to -8.5% through 2020, and says that by then, department stores will hold just 7 percent of U.S. apparel market share compared to today’s 11 percent and 26 percent in 2005.

Brands like Gap are also at risk because sales of basic commodity items will likely migrate to the lowest-price or most convenient channel.

It will be vertical integration and strong branding, like that of Victoria’s Secret or Lululemon—which are highly unlikely to sell to Amazon in order to maintain that consistency of branding—that will be less at risk for getting displaced.

“We see less substitution risk for these brands given superior performance characteristics, stringent fit requirements, and a high-touch in-store service proposition (bra fit specialists in every store, for example), thus, they are less likely to lose market share to Amazon,” Barron’s reported Nowak as saying.