Amazon expected to become top U.S. clothing retailer

Will ecommerce giant become the king of clothing in Canada?

Last week, the business press was abuzz with a bold prediction from a research firm: Amazon will become the number-one apparel retailer in the U.S.

In a report, New York-based Cowen and Co. said Amazon will sell $27.7 billion worth of apparel in the U.S. in 2017, enough to dethrone Macy’s as the number-one clothing retailer. This year, Cowen and Co. expects Macy’s apparel revenue to reach $22.2 billion in 2015, compared to $16.34 billion for Amazon.

Amazon has only recently launched its online clothing store in Canada, where it sells 1.5 million items for men, women and children, including brands like Levi’s, French Connection and Puma. But, it will soon become Canada’s biggest fashion retailer, according to one analyst.

“I believe that this year, Amazon will quickly bolt to the number one ecommerce retailer as far as apparel goes in the country,” said Randy Harris, president of apparel market researcher Trendex North America. “Part of that is due to [Amazon] being good. The other problem is Canadian apparel retailers are bad [at ecommerce], relatively speaking to their U.S. counterparts.”

While some retailers are ramping up their ecommerce efforts, including Hudson’s Bay and Sears, “they’re late to the game and they don’t have the infrastructure built in like Amazon does, where they’re doing same-day deliveries in Toronto,” said Harris.

According to Trendex’s forecast, ecommerce apparel sales in Canada will reach $1.8 billion this year, climbing to $2.8 billion by 2018. Harris said the effect of Amazon in Canada will be broad-based. “In other words, everybody will get dinged a little bit, some a bit more,” he said.

Toronto retail consultant Ed Strapagiel believes casual-wear retailers are most at risk, but he doesn’t think Amazon will unseat the top clothing retailers in Canada anytime soon.

“In general, Amazon is a bigger deal in the States than it is in Canada. That’s where it started, it’s more established and their delivery system is much more developed in the U.S.,” he said. “I think the U.S. will lead Amazon’s progress and Canada will follow behind perhaps by a lag of two to five years.”

The Cowen and Co. report noted it’s likely Amazon’s momentum in North America will spur further retail industry consolidations, mergers and acquisitions and bricks-and-mortar store closures.

Strapagiel doesn’t expect any store closures as a direct result of Amazon. But, if retailers don’t play in the ecommerce space, “their market will gradually erode.”

How To Beat Amazon

Trendex’s Harris said middle-of-the-market retailers such as Sears, Hudsons’ Bay, Walmart and Mark’s will be most affected by Amazon. To compete, they have to step up their ecommerce game dramatically.

“That means they’ve got to cut out shipping charges and speed up delivery times,” said Harris. “They have to look at all of the advantages that Amazon has and say ‘we’ve got to compete with these.’”

Canadian retailers may have been slow to embrace ecommerce, but they have an “ace up the sleeve,” noted Carol Spieckerman, president and CEO of Bentonville, Ark.-based retail consultancy NewMarketBuilders. “Canadian shoppers are still loyal to Canadian brands.”

“Canadians don’t appreciate American brands coming into Canada saying ‘we’re great, everyone in the U.S. loves us, you’ll love us too,” said Spieckerman. “So I think playing that loyalty card and playing up the Canadian connection is a very valid way to go.”

And retailers shouldn’t even think about trying to beat Amazon on price. “[It’s] a losing proposition because they have the diversity of portfolio to attack a category and a willingness to go after a category even unprofitably to build market share,” said Spieckerman.

Instead, retailers should offer more convenient online options, including buy online and pick up in store and home delivery. “I think that will go a long way to building loyalty in a way that price simply won’t,” said Spieckerman.

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