Inc. isn’t just an e-commerce giant, it’s also the biggest seller of clothing and shoes in the U.S., according to the latest edition of Wells Fargo’s report “Amazon & the Retail Rainforest.”

Wells Fargo estimates that U.S. sales of apparel and footwear on Amazon

exceeds $41 billion, including sales through third-party sellers. That total is 20%-to-25% higher than Walmart Inc.
the second biggest apparel seller in the nation. And it represents an 11%-to-12% of all share of apparel in the country.

It’s also a commanding 34%-to-35% of all U.S. online apparel sales. That’s seven times more than the second-largest online seller in the U.S., Macy’s Inc.

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Wells Fargo estimates that Amazon will reach U.S. apparel and shoe sales of $45 billion in 2021.

Wells Fargo analysts cite data provided by eMarketer, showing that Amazon’s gross merchandise volume (GMV) grew from $36 billion in 2019 to $41 billion in 2020.

“While this was only a modest increase of +15%, we believe that overall demand for apparel was stifled by the pandemic, and Amazon’s customers were more focused on ‘essential’ items and/or items that catered to the newfound work-from-home environment,” the report said.

“By comparison, Amazon had grown their apparel/footwear GMV by a +20-to-30% CAGR [compound annual growth rate] the prior three years.”

Analysts note that even though the growth rate slowed in 2020, Amazon outperformed the softlines category as a whole.

Wells Fargo calls the 10% growth rate for 2021 “fairly modest,” but attributes it to shoppers returning to stores and the “law of large numbers.”

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All of this said, analysts take note that e-commerce soared during the pandemic and now it’s coming back to Earth.

“Although e-commerce seems to be pervasive, we’d note that it actually still represents a relatively small portion of total retail sales,” analysts led by Ike Boruchow said.

“According to data from the U.S. Census Bureau, the U.S. e-commerce industry is ~$836B (LTM [last 12 months] basis through June 2021) – which accounted for 14% of total retail sales ($6.2 trillion), as the online channel grew +26% over the LTM – marking a significant acceleration versus recent years.”

And, Wells Fargo says, the impact that Amazon is having on traditional retailers is not fully understood.

“Simply stated, while Amazon is a dominant force in the market, its dominance is taking a step back as other aspects of the retail economy recover against closures and with a strong consumer backdrop,” the report said.

Where Amazon is having a notable impact is on things like delivery speed and logistics.

See: Walmart and Home Depot beat earnings expectations but a number of factors are putting a squeeze on the consumer shopping spree

And the company’s push into broader areas of clothing and accessories, like the luxury space, and moves into the beauty category and other parts of the retail arena suggest it’s looking for ways to grow this sizable business. History shows that Amazon tends to chip away at the share of category competitors before becoming the dominant force.

An August eMarketer report forecasts that Amazon’s total e-commerce sales in 2021 will reach $386.40 billion by the end of this year, with $94.40 billion in GMV in consumer electronics.

With all of the government focus on tech companies, particularly from the Federal Trade Commission, and the scrutiny of Amazon specifically, Christian Magoon, chief executive of Amplify ETFs, says Amazon could spinout the e-commerce and cloud businesses. He even suggests a ticker for the retail business: “ECOMM.”

“It builds a case for Amazon as an e-commerce monopoly,” he said. “They’ve only gotten stronger, in terms of market share and building up logistics.”

Amazon has been the subject of antitrust talk in the past.

Moreover, the company has become omnipresent, thanks to its Prime membership ecosystem.

“I think that’s hurting them. They’re just so visible,” Magoon said.

And Amazon’s retail moves aren’t just online. On Wednesday, the company announced that its “Just Walk Out” technology will be installed at two Whole Foods locations. Amazon department stores are reportedly in the works and other bricks-and-mortar locations have opened their doors.

One thing that could change if Amazon were to break off its retail business is the perception of all of the hefty spending on things like fulfillment and delivery.

“As a retail stock, can they make the same massive investments? Stand-alone retail stocks haven’t been able to,” Magoon said, noting the impact that a multibillion-dollar capital investment announcement had on Walmart back in 2015.

“It would make it a little bit more of a level playing field.”

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And Magoon questions whether the company would be able to function with the same synergies as separate businesses, seamlessly integrating Prime Video, the device business and other company offerings with the e-commerce platform or during an event like Prime Day.

Meanwhile, Amazon is enjoying being a go-to shopping destination for many consumers. Wells Fargo conducted a survey of 1,000 U.S. Amazon shoppers to analyze engagement during the pandemic. Many increased their engagement in 2020. Though the company reported a sales miss in its most recent earnings announcement.

“The question that is weighing on the retail industry is how much of 2020s online share gains will stick in a post-pandemic world—so far in 2021, we are seeing that the answer is ‘quite a bit,’” Wells Fargo said.

Amazon shares have gained 7.5% for the year to date. The Amplify Online Retail ETF

is nearly break-even. And the benchmark S&P 500 index has gained nearly 20% for the period.

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