Move Over Macy’s, Because Here Comes Amazon

There’s about to be a new sheriff in Retail Town.

Amazon is on track to become “America’s largest clothing retailer,” surpassing both Macy’s and Nordstrom in total sales, by 2017, according to a new report entitled “Amazon: Fashion Media & Deals” from L2, a firm that specializes in digital brand performance.

That’s right Amazon, from its humble beginnings as an online bookstore, will soon be the U.S.’s largest clothing retailer, too.

Amazon launched its own apparel vertical, Amazon Fashion, in 2012 that sold everything from designer clothes, apparel and other accessories, but despite its gaining traction as a fashion retailer, both customers and brands are hesitant to currently embrace Amazon as a retailer for designer labels, according to Mabel McLean, one of the authors of the report and director of L2’s Amazon IQ product.

McLean noted that less than a third of fashion brands — it’s 29 percent to be exact — currently distribute through Amazon.

“Amazon, as a retailer, has had a hard time getting away from its reputation for steep discounts,” McLean said, so a lot of more exclusive brands are reluctant to offer their clothes and apparel for sale on the site.

“Many have intentionally rebuffed Amazon for fear of the grey market, deep discounting and threats to brand equity,” the report notes. “Nonetheless, the number of clothing and accessory units available on the platform increased 91 percent between 2014 and 2015. As Amazon becomes an increasingly dominant outlet, more fashion brands will likely pivot to a pro-Amazon strategy.”

McLean said the typical apparel item that sells on Amazon costs between $20 and $40 for men’s shirts and pants, and the pricing doesn’t change too much for women’s brands either.

Customers are currently buying more “fashion basic” items on Amazon, like t-shirts, underwear and socks, rather than the latest seasonal trends in fashion.

“I think, right now, Amazon is more in the Costco range of retailing than the Macy’s or Nordstrom’s, which is where it wants to be,” McLean said.

But McLean says she sees customers’ perception of Amazon shifting in coming years as more and more users will use the site to shop for fashion brands online.

“Slowly but surely, they’ve trained their consumers just as they did that you could buy toothpaste online,” McLean said. “It will come naturally that way.”

But Amazon is not content to merely sit back and wait for the best fashion brands to eventually come around to it in order to become the U.S.’s largest clothing retailer in the next year.

“Earlier this year, Amazon made headlines for ramping up hiring efforts for its own private fashion label team and proceeded to launch seven in-house brands,” the report notes. “These brands have more than 1,800 products listed on the platform, spanning men’s, women’s and children’s apparel and accessories.”

Even 1,800 products is a lot for a store like Macy’s or Lord & Taylor.

Possibly holding back Amazon’s perception as a major competitor in the high-fashion retail sector is the online retailer’s “notoriously poor” internal inventory management system, however. Or, put more succinctly, it’s the reason Amazon always seems to sell out of its most popular items.

And while this may be frustrating for customers, McLean said it perfectly suits Amazon’s business needs.

“It is in Amazon’s best interest to maintain as little inventory as possible,” McLean said. “It’s frustrating for fashion partners to work with, and I think it’s been a little prohibitive from that side, but at the end of the day, the bottom line is probably the same for Amazon.”

As Amazon begins to encroach more and more into the high-end fashion retail market, McLean said, you will see brick-and-mortar stores, like Macy’s and Nordstrom, adapt some of their retailing habits to stay competitive.

In fact, McLean said, you’re already starting to see this with Nordstrom pledging to match online retailers’ prices, while Macy’s is also starting to implement some innovations at its fulfillment centers.

But McLean said she does not foresee Amazon as a legitimate threat to any of those brick-and-mortar stores anytime soon.

“I don’t expect Nordstrom or Macy’s to go away anytime soon,” she said. “At this point, the retailers fit very different needs.”

Still, you might soon have to start thinking about logging onto Amazon if you’re interested in purchasing some of the newest and hottest fashion trends. All this from a company that got its start selling discounted books online.