Amazon has become top U.S. clothing retailer, outselling Walmart, Target

Amazon has become the top clothing retailer in the United States as the coronavirus pandemic has dramatically accelerated a shift from traditional retail to ecommerce, according to a new data from Wells Fargo.

A group of the bank’s retail analysts estimate that the ecommerce giant’s U.S. sales of clothing and shoes, including third-party sellers, grew 15% in 2020 to $41 billion. The increase represents 11-12% share of all apparel sold in the U.S. and 34-35% share of all apparel sold online.

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

Still, the total is 20-25% more than Walmart, who ranks as the second largest player in the U.S. clothing market, selling roughly $33-34 billion of softlines annually. Walmart recently announced that it has hired American fashion designer Brandon Maxwell as creative director for two of its private-label brands, Scoop and Free Assembly.

Wells Fargo’s report notes only six other U.S. players in the market sell $10 billion or more in softlines annually, including TJ Maxx parent TJX Companies, Macy’s, Target, Kohl’s, Gap and Ross Stores.

Looking ahead, Wells Fargo analysts forecast Amazon will grow its softlines business at a “fairly-modest +10% rate”, selling more than $45 billion in apparel and footwear in 2021. Amazon’s U.S. gross merchandise value for apparel and footwear is estimated to grow to over $4 billion in 2021.

However, Wells Fargo expects online sales to remain flat in 2021 as consumers return to shopping in stores as COVID-19 vaccine distribution ramps up. As a result, the share of softlines sold online is expected to decline to roughly 34%, but still above the pre-COVD level of 25%.

While brick-and-mortar retailers have historically seen Amazon as a competitive threat, Wells Fargo analysts argue that there has been a large increase in partnerships on the platform.

“Many vendors are partnering with Amazon to establish a comprehensive brand presentation on the site, with assortments that minimally compete with existing channels,” analysts wrote. “Perhaps, more importantly, partnering with Amazon allows brands to better police 3rd party distribution on the site and maintain control of their brand image/equity.”

Examples include Haines Brands, PVH Corp., VF Corp., Skechers, Steve Madden and Carter’s Inc., which has created a brand, Simple Joys, specifically for Amazon.

Amazon launched its “Luxury Stores” section in September, attracting Oscar de la Renta as the first luxury brand on the platform. In addition, the company has over 100 private label apparel brands across its website.

The company also launched Prime Wardrobe in 2017, which offers a “try before you buy” model for Prime members, including name brands like Calvin Klein, Levi’s and Adidas. In July 2019, the company launched a Personal Shopper service for $4.99/month in addition to an Amazon Prime subscription, focused on convenience and providing shoppers with a stylist who provides personalized recommendations.

Overall, Amazon’s U.S. gross merchandise value in 2020, excluding Whole Foods Market, was $290 billion, a 22% year-over-year increase.

“Given that Amazon’s addressable market (as we define it) grew by $180 billion, this means that Amazon accounted for ~50% of the market’s sales growth in 2020,” the analysts added. “This marks the 21st consecutive quarter that AMZN’s share of growth has exceeded 20%, demonstrating how dominant AMZN is becoming in the retail landscape.”