Department Stores & Apparel: The Future is Blurry

Morgan Stanley predicts that the department store share of the apparel market will drop from 24 percent in 2006 to only 8 percent by 2022.

Many analysts continue to predict that, this year, Amazon will become the largest retailer of apparel in the United States. 

Top apparel retailers are ranked as Walmart, Amazon, Target, Macy’s, Kohl’s, The TJX Companies, Gap, Costco Wholesale, Nordstrom, Ross Stores, and JCPenney.

amznapparelmarketshare.PNG

Amazon’s gains correlate with losses at traditional department stores.

Morgan Stanley reports the biggest loss in market share in the apparel industry in 2017 include Sears Holdings, Macy’s, Ascena Retail Group, L Brands, Ralph Lauren, and Chico’s.

Please note that I wrote that Amazon.com‘s increases “correlate with” Department Store decreases. I did not write, “caused.” CDNIC (Correlation Does Not Infer Causation).

The retail environment has evolved, the customer path-to-purchase has changed, new technology, big data, compression of supply chain, availability of information… have created new opportunities, and present new challenges.

This data supports the accelerating transformation of the retail industry.

(Note: Different, not Dire. Transformation not Apocalypse.)

From Morgan Stanley’s AlphaWise survey –

“Prime appears to be driving Amazon’s apparel business, as Prime members are now ~2x more likely than non Prime shoppers to buy clothes on Amazon, up from 1.5 times last year according to our AlphaWise survey work. Amazon’s apparel shoppers are younger too with 57% of surveyed consumers aged 18-34 likely to buy clothes on Amazon in the next 12 months. This early behavior modification is bullish for Amazon’s long-term apparel share gains and bearish for store-based retailers as these shoppers age. …purchasing casual items, but not bras or lingerie.

In terms of apparel categories purchased on Amazon, the most popular remains casual tops (with 68% of Amazon clothing shoppers buying the category), followed by shoes (48%) and casual bottoms (38%). Traction in casual tops and bottoms speaks to Amazon’s success in selling everyday (relatively lower priced) apparel…and given the “Tops” and “Bottoms”apparel categories make up 56% or ~$150 billion of the ~$267 billion annual U.S. non-shoe apparel spend in 2017, continued traction here should drive faster Amazon apparel growth. 

Interestingly, purchase penetration on athletic/active dropped to 34% (from 40%)…while bras and lingerie shopper penetration remain low (14%/9%) which in our view speaks to the relative insulation of those categories from Amazon disintermediation. In terms of brands, Nike , Levi’s, Hanes, and Adidas lead the most frequently purchased brands on Amazon.”

“Unsurprisingly, Amazon’s 2017 share gains look to have come largely at the expense of department stores. Cumulatively, we estimate Sears, Macy’s, and J.C. Penney lost 0.8% share in 2017. Target  and Kohl’s shares remained roughly flat, while L Brands lost share due to the elimination of its swimwear and apparel categories. 

We expect department store share losses to accelerate from -3.9%/- $1.8 billion annually over the past 10 years to a -7.9% CAGR/-$2.5 billion per year through 2022. We forecast department stores will comprise just ~8% of the total U.S. apparel market in 2022 vs. ~24% in 2006.”

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s