Report: Online apparel sales will rise 20% over next four years

Dive Brief:

Online apparel and accessories sales in the U.S. could grow 20% over the next four years, compared to just 10% six years ago, according to research by Goldman Sachs released Thursday, CNBC reports.
Nearly 35% of millennials now buy most of their apparel online, compared to about 30% for consumers between 35 and 44 years old, and 15% for those between 45 and 54. Goldman also said that wealthier consumers, digital technology advances, and Amazon’s assertive move into apparel and accessories will also help fuel the growth of online sales in those categories, according to CNBC.
The report comes the same week that research from public relations firm Walkers Sands and from UPS and comScore also found evidence of accelerations in online purchases, especially among millennials.

Dive Insight:

These series of reports are strong evidence of consumers moving online, and Goldman’s focus on apparel and accessories presents retailers with a particular challenge in an already daunting landscape. Many apparel retailers like Macy's, Kohl's, and J.C. Penney's all reported bleak results in the most recent quarter, blaming unseasonably warm spring weather and declining traffic to stores.

But this movement online also gives retailers, especially larger legacy retailers, a new set of challenges. Apparel and accessories sales logistics are exacting because of a high rate or returns—many people buying clothing online will order more than one size or style, knowing that they’ll be keeping only the ones they prefer. In that scenario, the traditional method of trying on clothes and buying in stores is replaced with fulfillment that requires retailers to not just package and ship orders, but also accept and re-stock returns, which many if not most consumers expect to be at no charge to them.

That cumbersome and expensive process led Macy’s CEO Terry Lundgren earlier this year to tell analysts that, while Amazon poses a threat in its apparel sales effort, the e-retail giant may not be quite prepared for those logistics, especially considering that they don’t have the 800 stores that Macy’s does. That allows Macy’s to more quickly accept returns, get them back onto racks, and make them available for sale.

But the Goldman report suggests that the online apparel sales train has left the station, and that older millennials could influence other demographics to also turn increasingly to the web for clothing and accessories.

"This means an additional $50 billion of sales will migrate online over the next four years, a revenue base equivalent to apparel and accessories sales for Macy's, Nordstrom and Kohl's in all channels combined," the report said, according to CNBC. "At that rate, online penetration of the apparel and accessories category will reach 25% in four years, with further adoption across the age and income spectrum.”