Amazon to benefit from acceleration in US apparel store closures
With 12,000 stores projected to close in the US by the end of this year, and the apparel and accessories sector expected to suffer particularly heavy casualties, Amazon looks likely to turn the situation in its favor.
As reported by CNBC on Tuesday, Goldman Sachs analyst Heath Terry believes that, as consumer spending strengthens, the store closures will lead shoppers to spend more of their money online.
“With apparel & accessories recording the largest share of store closures, we believe Amazon will be a primary beneficiary considering this segment already sees (more than) 20% online penetration,” he explained in a note to clients.
According to Terry, this trend will also be driven by the improved service being offered by an increasing number of e-tailers, including reduced shipping times, an area in which Amazon has made significant headway, notably with its investment of $800 million in its same-day delivery service.
The analyst also highlighted a number of other factors working in favor of pure-play e-commerce retailers, including their greater access to consumer data. According to Terry, thanks to these insights, e-tailers can create “compelling consumer experiences” and are also able to improve efficiency, as they can better adapt their “advertising, product recommendations and dynamic pricing.”
In light of the particularly strong impact of store closures on the apparel industry, Terry also highlighted the opportunity that this situation offers for the likes of online styling service Stitch Fix, which is currently expanding its reach to consumers beyond New York and California.
With major retailers including Gap, Victoria's Secret and J.Crew all shuttering stores this year, the analyst blamed the closures on slowing sales and rising occupancy costs, as well as leveraged balance sheets.
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