An unlikely company is crushing America's biggest clothing stores
An unlikely company has suddenly catapulted to the top of the fashion world: Amazon.
Amazon is now second only to Walmart in terms of overall apparel market share, according to Morgan Stanley analysts.
The company's rise as a leader in apparel sales has been swift and relatively quiet.
Over the past couple years, Amazon has ramped up its investment in fashion by launching its own private-label clothing brands and sponsoring the first ever New York Men's Fashion Week.
The company has also hired executives from luxury fashion companies, such as Barneys New York fashion director Julie Gilhartogue — whom Amazon reportedly hired as a consultant — and vogue editor Caroline Palmer.
Also in the last few years, Amazon has started to shift its fashion strategy toward offering more high-end designer names, such as Zac Posen and Stuart Weitzman.
That shift has had some industry experts scratching their heads. Luxury fashion websites are typically well-merchandised and highly curated — not things that Amazon is necessarily known for.
But Amazon's strategy appears to be working.
Morgan Stanley analysts estimate that Amazon's apparel sales grew by $1.1 billion in the most recent quarter, while department stores Nordstrom, Sears, Macy's, Kohl's, JCPenney, and Dillard's collectively lost $225 million in apparel sales in the same period.
Department store executives have blamed declining apparel sales on the weather and consumers' changing shopping habits, which in recent years have gravitated more toward big-ticket items like televisions and vacations over clothing.
The apparel market has only grown 1% annually in the last 15 years, according to Morgan Stanley.
But department stores' loss so far has been Amazon's gain, according to Morgan Stanley analysts.
"We expect online (primarily Amazon) will continue to take share from department stores, but at an accelerating pace over the next five years given new evidence that Amazon is gaining traction in fashion," the analysts wrote in a recent note
In a 2012 interview with the New York Times, Amazon CEO Jeff Bezos gave a simple reason for why Amazon was investing in fashion: "Gross profit dollars per unit will be much higher on a fashion item," than with cheaper products, he said.
Best items on Amazon under $25:
- Target removes 'nightmare' kids' carts that shoppers called 'vehicles of mass destruction'
- Adidas and Under Armour are challenging Nike like never before
- Dick's Sporting Goods has a sneaky tactic to get all of Sports Authority's customers