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Amazon Poised To Become No. 1 U.S. Apparel Retailer By 2017

E-commerce leader  Amazon.com ( AMZN ) will become the No. 1 U.S. apparel retailer next year, investment bank Cowen predicted Wednesday. Cowen analyst John Blackledge said recent earnings reports by Amazon and Macy’s ( M ) painted a clear picture. “In light of Amazon and Macy’s recent results, we feel more confident that Amazon will displace Macy’s as the No. 1 U.S. apparel retailer by 2017,” Blackledge said in a research report. “Amazon’s Apparel & Accessories business is one of the key drivers of Amazon’s EGM (electronics and general merchandise) segment.” Amazon’s success in the apparel category is being driven by a dramatically larger selection, ramping brand relationships, superior fulfillment and technology innovations. Amazon is growing in the clothing business, while traditional retailers such as Wal-Mart ( WMT ) and Target ( TGT ) are in decline, Blackledge said. In the first quarter, the number of Amazon apparel purchasers increased 19% year over year, while apparel buyers at Wal-Mart and Target fell 1% and 5%, respectively, he said. “The longer-term trend also reflects a share shift in apparel purchasers, with Amazon apparel purchaser growth of 28% each quarter (on average) since 2014, while apparel purchasers fell 4% and 3% at Wal-Mart and Target,” he said. “In Q1, Amazon had 15% more apparel purchasers than Wal-Mart (vs. 24% fewer in Q1 2014) and 37% more apparel purchasers than Target (vs. 4% more in Q1 2014).” Macy’s on Tuesday reported soft Q1 sales and slashed its full-year forecast, sending its stock diving to a four-year low Wednesday. The Cleveland-based company said its first-quarter sales fell 7.4% year over year to $5.77 billion. Analysts on average were looking for $5.93 billion in sales. For 2016, Macy’s now expects same-store sales to fall 3% to 4%, compared with its prior guidance for a 1% decline. Macy’s stock was down 14%, below 32, in afternoon trading on the stock market today . Amazon stock was up 1.5%, near 716. On April 28, Amazon reported its highest sales growth in nearly four years . Its Q1 revenue jumped 28% to $29.1 billion, ahead of the $28 billion view.

Why Amazon’s World Domination May Come Sooner Than You Think

Loading the player… Amazon ( AMZN ) has solidified its position as an e-commerce leader, and its global takeover may happen sooner than you think. ‘Momentum’ Seen In Apparel A Cowen & Co. report out Wednesday forecasts Amazon displacing Macy’s ( M ) as the No. 1 U.S. apparel retailer by 2017, driven by selection, fulfillment and brand relationships. Amazon’s momentum in apparel is also seen leading to retailer mergers and acquisitions, as well as store closures. Cowen also projects that Amazon will displace Target ( TGT ), Walgreens ( WBA ) and CVS ( CVS ) to become the No.2 company in consumables, behind Wal-Mart ( WMT ), by 2018. The report calculates a compound annual growth rate of 27% for the e-commerce giant’s consumables market. Amazon Worth $3 Trillion? Meanwhile, Social Capital has set a very bullish $3 trillion, 10-year valuation on the stock, with the venture capital firm citing strength across retail and its Amazon Web Services segment. Amazon’s current market cap is about $314 billion, while Apple — the most valuable public company — has about a $515 billion market cap. IBD’s take: How does Amazon stack up vs. its peers? Find out at IBD Stock Checkup After gapping up on its strong earnings report last week, shares are now extended 10% from a cup-with-handle buy point initially cleared in mid-April. The stock is trading about 5% below its all-time high reached at the end of last year, and it was down 1.4% Thursday. Wal-Mart, Macy’s Stocks Lag Meanwhile, Wal-Mart recently plunged below its 50-day line and has yet to retake that level, as it slumped 0.6% in intraday trade. Shares are sitting 16% below their 52-week peak. And Macy’s shares are trading nearly 50% below their all-time high reached last July. They are on track to hit a nearly four-month low Thursday, falling 2.3%.

How E-Tail Startup Jet.com Is Taking On Giant Amazon.com

With a potential $1 billion in 2016 revenue and $803 million in funding, e-tail startup Jet.com has some heft, but it’s still a lightweight compared with e-tail king  Amazon.com ( AMZN ). But that doesn’t faze Jet CEO Marc Lore, who has a strategy, which he laid out for IBD in a phone interview from the company’s Hoboken, N.J., headquarters. It boils down to two big ideas: that e-commerce overall will soar from a $300 billion market to $1 trillion in the next 10 years; and that Amazon can’t possibly take the whole thing. His third point underlying both big ideas is that Jet is targeting shoppers that Amazon is not — those obsessive about saving money. “W e’re going after a different type of customer with a different need,” Lore said. “ We are about saving people money and empowering them to shop in a smarter way. And o ur technology is built to help consumers and retailers pull costs  out of the overall ecosystem. So it is   a more efficient way to buy product.” Jet aims to present shoppers with an experience that more closely matches what they’d find in a store. Every product, for example, has a single view. That’s unlike e-tail giants like Amazon or eBay ( EBAY ), where shoppers are confronted with multiple, competing listings from a number of sellers. Instead Jet.com finds the best price for a given product after searching multiple sellers and displays. So, for example, in a search for Levi’s jeans, a shopper would see a single listing for each style of jeans. The single product view may also help Jet.com avoid the SEO challenges that have plagued eBay , which has a longtime beef with search leader Google. Jet.com Secret Sauce Is ‘Dynamic Pricing’ But the real secret sauce for shoppers is the company’s dynamic pricing. Essentially, customers are rewarded for buying multiple items, which decreases shipping costs and thus decreases customers’ costs. Then, when the customer goes to check out, Jet’s algorithm behind the scenes figures out which sellers are the most efficient in terms of shipping and price, so if one seller is closer but charges more for shipping, you’ll buy from a more distant seller that charges less for shipping and thus results in a lower overall cost for the customer. “Ou r technology is built  more like a real- time trading system than it is an e-commerce site,” Lore said. “A s people shop,  we’re repricing products to reflect the true underlying economics of getting those products to the customer,  based on what products are already in the (checkout)  basket and based on how far away those products are from where the customer lives.” Jet continues to tweak its website. When Lore launched the venture in January 2015, the company used a membership program similar to  Costco ‘s ( COST ) to generate profit. That didn’t last long, and the company changed its business model in October, hiking prices. Though there were reports the change signaled trouble , several analysts interviewed for this report said startups often make strategic changes early on. Amazon’s E-Commerce Empire As shown by its fundraising and number of investors, Jet.com has its believers. Its venture money comes from China e-commerce giant Alibaba ( BABA ), prominent Silicon Valley venture capital firms such as General Catalyst Partners, and the venture units of financial powerhouses Goldman Sachs ( GS ) and  Fidelity National Financial ( FNF ), among others. The company is valued near $1 billion, huge for any startup but a blip compared with Amazon’s $286 billion market cap. Amazon has annual revenue topping $100 billion — not including the more than $131 billion in third-party sales — and is catching up to longtime No. 1 retailer  Wal-Mart ( WMT ). Amazon also has a nascent payments business that competes with PayPal ( PYPL ). To facilitate its e-commerce sales, the company has elected to get into the ocean shipping business, which has the potential to generate hundreds of millions in free cash flow . And that’s just the e-tail business. In E-Tail, Go Big Or Go Home Conventional wisdom holds that one strategy to beat Amazon is to pick and choose categories of goods that Amazon is not strong in. One, for example, is fashion — though Amazon recently launched its own line of apparel and a live-streaming TV show . Alibaba-funded e-tail startup ShopRunner is taking aim at Amazon that way. Lore chose another route. In Lore’s view of the e-commerce universe, mass market firms — those competing across a range of product categories — are the only viable firms. That’s because, Lore says, whether a website is selling one category of products or 10, you need to push them “through the same set of pipes.” And thus, he says, it makes more sense to leverage the same set of fixed costs to increase sales. “If you have 10 times as many categories and 10 times the gross marketplace value going through the same set of pipes, you’re going to get a lot more leverage in your fixed expenses, and your expenses as a percentage of revenue is going to be a lot lower,” Lore said. “It makes it really difficult for the specialty guys to compete on price with mass merchants for that reason.” Lore himself has a fair bit of experience with Amazon and its CEO, Jeff Bezos. As founder and former CEO of Quidsi, known for its Diapers.com, Lore spent years facing off against Amazon. Ultimately, Bezos killed Diapers.com with a price war — the e-tail giant can afford to lose money for longer than its often smaller competitors — and bought the company from Lore. The CEO stuck around for about three years but ultimately left in 2013 . A little more than a year in, Jet.com remains one of the few e-tail companies in the U.S. that’s openly challenging Amazon’s dominance. With $1 billion in gross merchandise value — a figure often very close to revenue for e-tail firms — and 3.5 million registered shoppers, Lore already has taken Jet on a long flight, with a long runway ahead.