How Amazon Is Beating Department Stores at Their Own Game (AMZN)

Amazon’s rise in the clothing apparel industry is unstoppable. The online company is taking over the retail game and leaving the conventional department stores behind.

Amazon AMZN shopping, Inc. (NASDAQ:AMZN) first showed its desire to enter the fashion industry in 2012. The company released a chic and stylish ad featuring an attractive model for a signature brand. Today, Amazon is the top online seller of clothing apparel. It could soon take over the entire industry as it’s currently fighting with rival Wal-Mart (NYSE:WMT) for the top position in becoming the biggest seller of clothes in the US.

In 2015, Amazon earned a total revenue of $107 billion. Jeff Bezos, Amazon’s founder and chief executive, has always believed in the importance of the fashion industry as it relates to the company’s long-term goal of reaching $200 billion in sales. During his interview with Fortune magazine Bezos stated that, “I think there’s so much opportunity for invention there.”

During the past few years, Amazon has been aggressive in their efforts to be recognized as a fashion powerhouse. The e-commerce giant sponsored the 2012 Met Gala. It opened photo studios in New York in 2013 and in London in 2015 hoping to boost the clothing options offered in the company’s e-commerce sites every year. Amazon also launched a free fashion show which airs live online every day. It sponsored the Council of Fashion Designers of America/Vogue Fashion Fund reality TV series called “The Fashion Fund” showed on Amazon Prime. Both shows feature renowned fashion authorities Diane von Furstenberg and Anna Wintour.

Amazon also sponsored the growing Men’s Fashion Week in New York and India Fashion Week. Next month, the Tokyo Fashion Week will be renamed “Amazon Fashion Week” in Tokyo, Japan. Clearly, the online retailer is trying to project itself also as a major brand fashion name. And their efforts are actually materializing as major companies like Kate Spade, 7 for All Mankinf, Vince, and French Connection are already offering their products on Amazon’s website.

In addition to that, Amazon still has a huge potential to grow as a clothing shop. Records show that the sales of conventional department stores are consistently dropping. During the second quarter of the current fiscal year, it was recorded that U.S. department stores lost a total of $660 million in revenue on a year-over-year basis. This has affected the revenue of many brands as a majority of their sales comes from the physical retail outlets.

Experts believe this change is mostly due to the reaction of consumers who want to spend smartly. The repercussions of the financial crisis in 2008 though at small levels still affects many Americans and their spending behavior. However, a survey by investment banking giant Morgan Stanley (NYSE:MS) showed that customers are willing to shop for clothes on Amazon because of the convenience and free 2-day shipping for Prime members. This means that people are more attracted to the logistics service offered by Amazon and not necessarily the type of clothes offered on the website.

The same study showed that a majority of the revenue lost by department stores were gained by the company. Since 2005, the company has added a staggering average of $27.5 billion yearly in apparel revenue. And they don’t have any intention of slowing down. The Seatlle-based online titan is planning to offer bigger promos for its fashion products. Its Prime membership program is also getting a lot of subscribers. Morgan Stanley’s experts claim that if this trend continues, Amazon could own a fifth of the collective US apparel sales by 2020.

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