Moody's: Online Apparel Sales at "Critical Mass"

2/26/2013
Online sales of apparel and footwear have reached a critical mass, Moody's Investors Service says in a new report, "Apparel Retailers at the Crossroads." Online sales now exceed 10 percent of all apparel and footwear sales in the U.S., which means retailers face some strategic decisions.

"We estimate that in the U.S. online apparel and footwear sales will top $40 billion in 2013 and $45 billion in 2014," says Moody's vice president and author of the report Margaret Taylor. "The online channel is now a crucial driver of growth for clothing and footwear retailers, to the benefit of the entire sector."

But department stores and specialty apparel retailers must make some critical strategic decisions around store counts, marketing and how they spend their capital if they are to remain relevant over the long term, Taylor says. "Those that invest in technology, fulfillment capabilities and inventory to provide a seamlessly integrated store and online shopping experience will benefit the most from increasing online sales."

At the same time, retailers must invest in branding and store experience to build customer relationships by providing what online cannot — that is, engaging and friendly face-to-face experience, backed up by helpful customer service. Moody's considers department stores Nordstrom and Macy's, as well as Gap, the specialty apparel retailer, to be leaders in providing an integrated, multi-channel shopping experience.

"The strong growth in online apparel and footwear sales gives department stores and specialty apparel retailers the opportunity to expand their customer bases," Taylor says. "It should also help department stores combat a decade-long secular decline in brick-and-mortar sales." Indeed, it was that decline that first prompted stores including Nordstrom and Macy's to invest heavily in their online business.

Off-price retailers such as TJX Companies remain on the sidelines, however, currently selling little or no merchandise online. Nonetheless, they could gain a late-mover advantage if they build online businesses that are integrated with their physical stores, Taylor says. And in doing so they could also avoid the headaches the early movers faced in blending separate online and brick-and-mortar divisions.

Read the full report here.

X
This ad will auto-close in 10 seconds