In 2015, online apparel sales took the number one spot in total online sales from the computer hardware sector (personal computers and tablets), which had been the undisputed online sales leader for a decade.
With the growth of online shopping and increasing online apparel sales starting to explode, it’s no wonder America’s bricks-and-mortar apparel retailers are closing stores across the country.
If these trends continue, and researchers expect them to, Wall Street analysts say we could see 50 retail bankruptcies in the next 12 to 24 months.
The End of an Era
According to the Centre for Retail Research, online sales in 2015 in the U.S. reached $347.25 billion.
ComScore, an online metrics firm that captures online sales data of everything and tracks online habits, reported that in 2015 online sales of apparel and accessories reached $51.5 billion while online sales of personal computers, tablets and other computer hardware equipment totaled $51.1 billion. After ten straight years of commanding the largest sector of online sales, apparel took that throne from computers, and it looks like it will stay that way for good.
As online sales in general increase, percentage of total online sales for apparel and accessories, items traditionally purchased in stand-alone stores and shopping centers across America, are expected to grow at about 19% annually. That’s an increasing slice of a rapidly growing pie.
Online sales in the U.S. totaled $399.53 billion in 2016, up 14.4% from 2015. Sales in 2017 are expected to rise 14.9% to $459.07 billion in 2017, according to the Centre for Retail Research. Looking ahead, they’re slated to grow another 15.4% to in 2018 to at least $529 billion.
ComScore’s research indicates that apparel shoppers started feeling it was “less risky to shop for clothes online.”
One big concern was returning merchandise. “Return policies got much better a few years ago, and that has lowered the friction to people buying in the apparel category,” said Andrew Lipsman, ComScore’s vice president of marketing and insights.
Besides the ease of returning merchandise, online shoppers have increasingly been offered free returns, and often free shipping, depending on the dollar volume of an order or the shopper’s online buying history.
The great purveyor of “free shipping” and “two-day delivery” is, of course, Amazon.
Becoming an Amazon Prime member for only $99 a year gives Amazon shoppers free two-day delivery. That’s on top of the other services Prime members enjoy like free streaming of videos and music, as well as other perks.
According to Consumer Intelligence Research Partners, nearly one half of U.S. households are Prime subscribers. Amazon’s Prime offerings essentially force competitors to offer similar shipping deals or lose business to the undisputed king of e-commerce.
The Rise of the Machines
Another surprising trend in the online apparel sales universe is the growing number of people who buy through their smartphones.
Again, ComScore notes that because of their comfort shopping online for apparel and accessories, shoppers are doing less online research than they browse on laptops and tablets, and more frequent buying on smartphones.
That’s another nail in the bricks-and-mortar retailers’ coffin; online smartphone sales are seeing explosive growth across all merchandise categories, but especially apparel.
Already in 2017, we’ve seen 14 bricks-and-mortar retailers try and reorganize, declare bankruptcy, or liquidate themselves. That’s almost as many as the total number of distressed companies that broke down last year, when there were 16 companies knocked to the ground.
That kind of carnage makes 50 potential bankruptcies in the next 12 to 24 months very possible, if not probable.
There lots of ways to play the retail ice age, or ‘extinction level event’ as I call it.
We’re targeting a lot of retailers in my trading services, and I have planned lots of interesting positioning in the very near future. There will be some winners and tons of losers in apparel, and we’ve designed different ways to play them both.
In the coming weeks, I’ll keep you up to date on everything happening in the retail sector – including some very specific ways you can profit as bricks-and-mortar retailers crumble.