The number of shopping centers in the US was estimated at 114,258 in 2012, approximately five years prior to what many analysts forecasted was already the “death spiral” of multi-retail storefronts. Except those analysts had no way of predicting the past two years. A 2021 report from Moody Analytics projects an increase of 12.7 percent for retail vacancy rates from just one year ago when the number of retail storefront closures had already exceeded 12,000.
A depressing thought for big apparel retailers, many of whom built their reputation on widespread physical visibility. While the increased consumer attention towards digital retail should have given new life to many brands, the transition wasn’t always seamless. Particularly for brands who historically relied on regular foot traffic to maintain sales. Even venerable institutions including Neiman Marcus, JC Penney and Men’s Warehouse parent entity Tailored Brands declared Chapter 11 bankruptcy in 2020; victims as much of their own strength in brick and mortar as they were economic pessimism.
Apparel retail is far from flatlining. But the priorities have shifted. eCommerce represented approximately 46 percent of all apparel sales in 2020, with mass merchant platforms claiming an increasing portion of that share. In March, Amazon reportedly became the top clothing retailer in the US, with apparel sales of over $45.1 billion projected for 2021—outpacing even mainstays like the Gap, Macy’s, and Kohl’s. With revenue on Amazon Marketplace for last year estimated at $295 billion last year, it shouldn’t come as a surprise that big apparel retail has its eyes on the third-party sales market.
The Amazon Halo Effect and the Value of Independent Sellers
It’s easy to judge retail success using Amazon as a yardstick. After the past two years, even the most vocal Amazon opponents can no longer deny that the retailer’s presence has altered the very makeup of retail models as many of us have come to know them. But while big apparel brands struggle to maintain both relevancy and profit margins in the upheaval of the digital shift, third-party sellers saw a $95 billion increase in sales on Amazon between 2019 and 2020. For many analysts, that success was dumbfounding—especially since many Amazon customers are still entirely unaware that purchases have been conducted through independent marketplace sellers. But rather than diluting brand power, third-party sellers have both contributed to and thrived by the strength of Amazon. It’s a mutually shared effect where Amazon’s digital empire is broadened considerably while seller visibility is extended simply by the virtue of being active participants in its landscape.
Active participants who are responsible for almost 60 percent of Amazon’s gross merchandise volume.
Why Big Apparel Retailers are Embracing Third Party Sales
Product diversity has always been a hallmark of digital commerce. And that diversity is in no small part responsible for Amazon’s immediate success. But in brick and mortar, product line diversity has historically diluted a retailer’s branding and image; not the least of which included big apparel. The cultivation of an exclusive, brand-specific retail image was a contributing factor in the popularity of shopping mall traffic; one which is still fresh in the minds of many consumers. But as digital commerce expanded, so did the very possibilities of retail. Shoppers were no longer isolated in their purchasing options but gained increasing control in the retail narrative.
That sense of influence proved to be a key factor for millennial shoppers, whose spending power was estimated at $700 Billion as early as 2012. By and large, brands like Express, J.Crew, and Urban Outfitters have targeted much of their spending on appealing to that same millennial demographic—a strategy that was more than sufficient by consumer standards in 2012. But 2012 isn’t 2021. Not only have consumer habits changed, but so has the retail landscape. Express, Inc. reported a year-over-year sales decrease of 34 percent in Q3 2020, while long-standing retail linchpin J. Crew was forced to declare Chapter 11 bankruptcy protection earlier in May, spurred by sluggish growth and a failure to adapt to retail transformations.
In order to compete, some apparel retailers have already begun collaborating with third-party sellers by curating independent product lines in an attempt to rebrand themselves in a post-Amazon retail landscape. And it’s not without due cause. Customers in 2021 aren’t simply looking for the best deal. They’re becoming increasingly demanding of variety in both product lines and purchasing options. While larger retailers may have historically had a final conversion rate nearly twice as much as those of smaller stores online, customer loyalty is being sorely tested by both a change in target demographic purchasing habits as well as economic circumstances no one would have predicted. And customers are just as likely to be more discerning in 2022 than they were as recently as five years ago.
“The marketplace was an opportunity for us to offer merchandise that our customers desire, and that our customers want to purchase, but are outside of our core categories,” Express CEO Chief Timothy Baxter told the Wall Street Journal earlier in June. “Our strategy is to edit those categories and showcase brands that we know our customers will like.”
Apparel Retailers and Third-Party Sales: Too Little, Too Late?
The advantage of a third-party-friendly platform like Amazon is that it is a one-stop-shop for the vast majority of its customers. Not only does product breadth and diversity result in higher search rankings, but it also reduces cart abandonment rates—recently estimated as high as 69.8 percent in 2020 for all consumer purchases. And for apparel, it can be much higher. Recent data from SaleCycle indicates cart abandonment rates of almost 90 percent for the fashion industry.
Big apparel retailers who cultivated their identity long before the rise of eCommerce are just as vulnerable to abandonment as they are to decreased customer loyalty in a changing medium. In an increasingly crowded marketplace, reputation can frequently be the sole lifeline for brands transitioning from brick and mortar to digital. The third-party marketplace has already become flooded with counterfeiters and assorted bad actors, as much prevalent on Amazon as they are in any untested market. And if big apparel retailers don’t carefully vet just who they’re collaborating with and ensure there’s a high potential audience in place, they could easily risk permanently tarnishing their very brand image.
But for the likes of Express, which views third-party partnerships as critical to their 2024 goal of $1 Billion in online sales, it’s a gamble which has already begun to pay off.
“We are very, very happy with the quarter-over-quarter and month-over-month growth we are seeing in the marketplace,” said Express CEO Timothy Baxter in reference to third-party partnerships.
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