The e-commerce hits keep coming. We continue to see signals for the medium’s rise, including share of consumer spending, and startup funding. The latest milestone is that Amazon has unseated Walmart as the leading U.S. retailer for apparel sales. This has key implications for large and small businesses.
Before diving into those strategic takeaways, what are the specifics on Amazon’s milestone? Wells Fargo estimates that Amazon’s U.S. apparel and footwear sales grew about 15 percent in 2020 to total more than $41 billion. This is about 25 percent greater than Walmart, meaning that Amazon has taken a meaningful lead.
Panning back for perspective, Amazon’s apparel sales now represent about 12 percent of U.S. apparel sales and about 35 percent of online sales. This is 7x more than the second-largest online player, Macy’s. Wells Fargo also estimates that Amazon is on pace to exceed $45 billion in apparel and footwear sales in 2021.
How Much Will eCommerce Grow in FY 2020?
Market Share Takeover
To address the elephant in the room, Amazon’s rise — on this measure and others — is Covid-related. Amazon was already on pace to leapfrog Walmart in apparel sales but Covid-era e-commerce inflections accelerated that milestone. This has aligned with its fashion initiatives for a perfect storm of market-share takeover.
Specifically, Amazon vastly expanded its apparel and fashion business in an effort that pre-dates Covid-19. This includes the new online fashion shops it launched last Fall, as well as the continued expansion of its third-party seller program and marketplaces. The latter has been a considerable force, as we’ve examined.
In fact, the third-party seller program has gotten so large that a new breed of companies is emerging just to roll up those stores as an aggregation play. Analogous to a P/E strategy, this is all about federating disparate stores onto one network that standardizes best practices, shared resources and economies of scale.
Perhaps a more apt analogy is a franchisor. Roll-up players like Thrasio provide a value exchange similar to what multi-location brands offer franchisees. This is where SMBs enter the picture: most third-party sellers are SMBs or even single-operator-home-office (SOHO) entities. They’ve helped fuel Amazon’s growth.
What’s Behind the Great eCommerce Rollup?
Mere Exposure Effect
Back to Amazon’s Covid-era inflections, they could sustain to some degree. The “mere-exposure effect” that alters consumer behavior throughout the economy (e.g. remote work), could transform shopping. After getting used to ordering things online that they never did before (think: socks), consumers could develop new habits.
That’s the big question we’ve been asking. Beyond just Amazon and sock sales, what Covid-driven consumer behavior will stick around in the post-Covid era? Correspondingly, what business tools and operational pivots will sustain longer-term? The next several quarters could be a “moment of truth” for these key questions.
