Dive Brief:

• Amazon is on pace to become the top U.S. retailer of apparel this year, according to a Wells Fargo client note cited by CNBC and others.

• The e-retailer’s apparel and footwear sales could surpass $30 billion this year, toppling Walmart, according to the note from Wells Fargo analyst Ike Boruchow, who also raised Amazon’s share price target.

• Amazon already commands apparel and footwear market share online (35% of share, or four times the next in line) and enjoys "remarkably high market share in the total apparel/footwear market in the U.S.," Wells Fargo said. Boruchow expects the stock to bypass $2,300 in 12 months, more than 17% over Friday's closing price, according to the report.

Dive Insight:

The e-commerce giant's success in apparel is hard won. Amazon has steadily worked to develop private label clothing in several segments and recently expanded its test of try-before-you-buy service Prime Wardrobe.

There are a lot of opportunities. Online apparel sales accounted for 27.4% of overall U.S. apparel sales last year, up from 23.5% in 2016 and 20.7% in 2015, according to the most recent Internet Retailer Online Apparel Report. Apparel retailers dominated Internet Retailer’s 2018 Top 1000 list with 266 (more than any other category) making the list. 

Wells Fargo's note comes on the heels of similar analysis from others. CPC Strategy research earlier this year found more than half (52%) of apparel shoppers who bought clothing online in the last six months said they shopped at Amazon. Morgan Stanley in April noted that Amazon is edging closer to becoming the nation’s top apparel retailer after taking another 1.5% of market share in U.S. apparel sales last year, according to a note cited at the time by CNBC, which took into account the fact that Amazon’s Prime members are twice as likely as non-Prime customers to buy clothes there, up from 1.5 times more likely last year. 

Department stores like Sears, J.C. Penney and Macy’s appear to be bearing the brunt of Amazon’s rise. Morgan Stanley predicted Macy's and Sears will have just 8% of the American apparel market in 2022, down from 24% in 2006, according to the April report. Additionally, according to research from retail think tank Coresight Macy's and J.C. Penney rank "disproportionately high" in terms of how many apparel shoppers they have lost in part or in full to Amazon Fashion. Large mall-based chains are also losing share. 

Target and Walmart have much to lose too. Among apparel shoppers who have switched to Amazon, Target was previously their go-to apparel retailer, according to Coresight. Target apparel shoppers are also more likely than average to say they expect to buy apparel on Amazon in the next 12 months. Meanwhile, Walmart lost the second most share, according to the report. But neither of the major mass merchandisers are standing still; Both have recently introduced new private apparel lines for women, men and kids.

There are also limits to Amazon's appeal, providing ambitious rivals with opportunity. People go to Amazon for well-priced apparel, according to Coresight Research. About half (48%) of Amazon apparel shoppers said they expect to pay less than full price when buying clothing or footwear on the site, 32% say they go there because Amazon offers the lowest prices and 49% say Amazon offers good value. 

Many brands — including Nike, Ugg, Calvin Klein and J. Crew — are now selling on Amazon, and Nike has said those sales are "going well."