E-commerce players, international “invaders” and off-price retailers are creating a whirlwind of disruption

E-commerce players, international “invaders” and off-price retailers are creating a whirlwind of disruption

The death of the department store, the exaggerated rise of Amazon as an apparel retailer power, and the threat of European fast-fashion specialists to US retail are among a number of misconceptions currently bedevilling the retail  industry, a new report explains.

E-commerce players, international "invaders" and off-price retailers are creating a whirlwind of disruption for middle-ground incumbents, according to Fung Global Retail & Technology report 'Deep Dive: Retail Revolution - US Apparel Shifts'.

It dispels claims that Amazon's apparel sales now exceed those of department store retailer Macy's. In the fiscal year ended January 2016, Macy's saw an estimated US$22.7bn in sales, compared with Amazon's estimated $5.5bn in first-party apparel sales.

In a ranking of America's ten largest clothing, footwear and accessories retailers by value, Walmart overtook Macy's to become the top apparel retailer in the year ended January 2016. Two of the top ten apparel companies are off-price retailers: TJX Companies and Ross Stores.

Amazon failed to make the top ten. However, the report suggests that if Amazon can grow its first-party sales by around 20% a year, it will be retailing an estimated $9bn of apparel by 2019.

"Amazon is not yet among the top ten retailers in the US if we consider only estimates for sales it makes itself and not third-party sales it facilitates," says Fung Global Retail & Technology managing director Deborah Weinswig. "However, those first-party sales appear to be growing rapidly, and will almost certainly propel Amazon into the top ten in the not-too-distant future."

The report also points to the reported threat posed by European fast-fashion specialists, which Li & Fung says has been "significantly overstated".

H&M has led the charge of international fast-fashion invaders. However, its sales of $3.2bn in 2016 constituted less than a 1% share of the US apparel market last year.

H&M ranks between privately-owned Forever 21, which generated $4.4bn in sales in 2015, and American Eagle Outfitters, which turned over $3.1bn in the year ended January 2016. Inditex remains much smaller, the report says, and, in terms of revenue, is in the same ballpark as British online-only retailer Asos.

"Despite its substantial medium-term growth, H&M's US performance has recently nosedived, with total sales growth supported by continued store openings," the report explains. "A number of brokers estimate that comparable sales were negative in 2016, and were deeply negative in the three most recent quarters."

According to the report, Primark looks to be the next big challenger to incumbents, with sales expected to approach $1bn by September 2020. The retailer opened its first US store in Boston September 2015, and now has six stores in the country.

Meanwhile, off-price and discount channels are set to be the strongest performers among the largest apparel retailers.

The off-price apparel specialist segment, in particular, grew revenues by 39% between 2011 and 2016, and now accounts for 22.5% of all apparel specialists' sales. While, major retailers in this segment grew store numbers by 23% from 2012 to 2016. This compares with 2.2% growth in store numbers across the total US clothing and footwear specialist sector, according to Euromonitor figures.

Between 2012 and 2016, segment leader TJX Companies grew sales at its US T.J.Maxx and Marshalls chains by 30%, to $19.9bn, the report found.