Amazon.com Inc (NASDAQ:AMZN) is having such a broad-based effect on commerce that some are terming that impact “the Amazon effect.” The company started with books but now has expanded into clothing and even groceries. Is there no end to the area of commerce the company will dominate? Data on same store sales in August reveals that department stores continue to lag, while the juggernaut Amazon powers on.
Amazon SSS growth recovers
Jefferies analysts reported this week that ChannelAdvisor data shows same store sales for third-party sellers on Amazon grew 11% year over year in August compared to 6% in July and 12% in June. Of note, Amazon held its annual Prime Day in July. The U.S. eCommerce market as a whole recorded a 15% increase in July and 14% increase in June, although the August number wasn’t available. Meanwhile preliminary same store sales for the seven retail chains that still report monthly declined 0.5% in August, compared to the 1.5% decline they recorded in July and 0.8% gain observed in June.
The Jefferies team said all this data points to a slow start to the back-to-school shopping season for brick-and-mortar retailers. They believe Amazon is growing about twice as fast as the total eCommerce market and between eight and ten times faster than overall retail.
They noted that ChannelAdvisor again highlighted the recent “decoupling” between growth trends and Amazon’s sales growth. The firm believes that the cause of this is the “dramatic” increase in competition among third-party sellers on Amazon. The firm recorded a 227% increase in competing offers among a sample of sellers in July. It also observed that new sellers are stealing market share from sellers that have been on Amazon for a longer time, which disproportionately impacts same store sales numbers.
Amazon growing in apparel
[drizzle]“The Amazon effect” is rapidly expanding, as Morgan Stanley analyst Kimberly Greenberger and team highlighted in a note on Wednesday that the online retailer may have added $1.1 billion in apparel sales in the second quarter alone. They say Amazon’s North America gross merchandise volume accelerated to 34% growth in the second quarter from 33% in the first.
Although the category mix is unclear, The Morgan Stanley team estimates that Amazon grew its apparel sales by $1.1 billion in the second quarter. They used Forrester’s estimated mix of total U.S. eCommerce sales and assume that 90% of the company’s North America gross merchandise volume is from the U.S. This means that 14% of the growth came from apparel sales in the U.S., they explained.
Amazon smashes department stores
The Morgan Stanley team estimates that the U.S. apparel market grew by 1.3% or between $825 million and $850 million during the second quarter. They add that department stores lost about $660 million in total sales during the period. Macy’s, Kohl’s, J.C. Penney and Sears are among the stores included in that group. If Amazon took all of the growth in the apparel market during the second quarter and all of the lost sales from department stores, it amounts to about $1.1 billion in growth just from those two sources.
Greenberger and team note that it’s unlikely that all of Amazon’s $1.1 billion apparel growth came from department stores, the size of the apparel segment’s growth suggests that they are indeed losing some share to Amazon. Analysts started observing the correlation between Amazon’s growth and declines at department stores such as Macy’s earlier this year, and this is likely to become an even hotter topic as time goes on.
Shares of Amazon edged higher by as much as 1.13% to $769.70 during regular trading hours on Thursday.
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