U.S. consumers are feeling generous this holiday season. According to a recent report by Associated Press, retail sales in November jumped .8 percent from the previous month, and October sales were up .5 percent.
Online shopping was a huge factor in the increase in sales, with a 2.5% increase in November.
This bodes well for retailers this holiday season, but new shopping trends have been developing in the apparel industry in the last few years, which pose a threat to companies who have invested in building brand loyalty. Customers are less focused on brands than they used to be, and more interested not only in better prices but in high-quality items.
Amazon has dominated the online retail space, and its reach has recently gravitated to new industries such as meal kit services, high-end grocery with its purchase of Whole Foods, and even genetic testing. The online giant has recently added private-label clothing to its list, and sales have been unsurprisingly robust.
A recent report by Bloomberg News revealed that Amazon’s “no-name” clothing brand has now upended the clothing retail market, too. Stores like The Gap, Nike and Lululemon, who rely on brand loyalty for customer retention are being challenged by Amazon’s private label, which is fast becoming the preferred destination for online shoppers looking for good quality items at a low price.
According to the report, Amazon wasn’t focused on margins or how many units they sold, but rather getting good reviews and hiring top-level designers to create clothing people would prefer.
Amazon is also working with companies like Nike, selling their products over its site. But it’s unclear whether partnering with Amazon will help or hurt these brands in the long run as Amazon expands its own offerings.
This year, Amazon has beaten Macys and TJ Maxx to become the second biggest seller of footwear and apparel in the US, according to a Wells Fargo estimate. In the activewear category, which is becoming increasingly popular among Americans as everyday wear, private label sales account for 20% of sales, and is likely to grow even more. Amazon stands to gain specifically in this industry, because fewer people need to try on spandex workout pants or tank tops and are more comfortable ordering these types of items online.
This private label strategy isn’t new. Target was successful in building its own desirable clothing brand by hiring top-end designers like Isaac Mizrahi several years ago to create custom designs. Since then, Target has dropped the designers but promoted its private label. According to reports, its kids’ clothing line Cat & Jack surpassed $2 billion after only a year on the shelves. Other retail giants like Wal-Mart are now following suit. (Wal-Mart hired a veteran designer from Saks Fifith Avenue and Ralph Lauren.)
Some analysts say that while consumers might by clothing on Amazon, three quarters of shoppers still like to try clothing on before purchasing, making Amazon’s reach limited, especially for the picky shopper.
Regardless, this is shaping up to be a busy holiday season.
