behind the online apparel - internet...

There’s an explosion in online sales of apparel. Here are the financial, operating and marketing statistics and trends of the 250 leading apparel e-retailers that are taking all of the growth away from stores.

IR RESEARCH the global leader in e-commerce data

I N T E R N E TR E T A I L E R

BEHIND THE ONLINE APPAREL

BOOM

Sponsored by:

Newgistics | ForeSee | Bronto

1 The Leaders…3The Amazon effect….4Analyzing the Top 250 apparel e-retailers in America…6The retail chains still dominate online apparel….7Department stores: The anchor in online apparel…8Web-only apparel sites are growing faster…9Toward a new competitive balance—Who’s growing fastest…11Apparel sites in decline—Failures in pricing…12

2 What Types of Merchandise Sell Best Online…14Men’s Apparel…15Outerwear…16Specialty Apparel…16Shoes…16Plus-Size…19Department Stores…19

3 What Types of Apparel Are Underperforming Online…20Handbags & Luggage…20Sleepwear & Lingerie…21General Apparel…21

4 How Search and Social Marketing Drive Online Apparel Sales…22Search engine marketing….23E-Mail marketing….24Social media marketing…25

5 What Types of Shoppers Drove the Growth in Online Apparel in 2015?…29The gender factor…30 The youth factor…31The wealth factor…32

6 CONCLUSION…33

CONTENTS

About the Author: Jack Love is co-founder of Vertical Web Media and publisher of its Internet Retailer media properties.

3

BEHIND THE

Apparel is the resilient backbone of the American economy. More retailers are devoted to selling apparel and accessories than any other form of merchandise. And more than any of type of product, apparel is what consumers purchase during the year-end holiday season, which is when most retailers bank their profits for the entire year.

So when there’s a sea change in the way consumers shop for apparel, the waves wash over the entire U.S. economy. That sea change is happening right now and consumers in droves are abandoning apparel stores for apparel websites.

ONLINE APPARELBOOM

Total U.S. Online Apparel Sales

Total U.S. Apparel Store Sales

Online Apparel Sales Soar...

19.7%

1.1%

...And Take Market Share Away From Stores

20152014

17.0%14.8%

Online Share of U.S. Apparel

U.S. Apparel Sales 2015 2014 2015 Growth

Online Apparel 250 $50,401,772,630 $44,219,513,219 14.0%

Amazon & Other E-Retailers $26,581,522,985 $20,076,985,972 32.4%

Total Online Apparel $76,983,295,615 $64,296,499,191 19.7%

Source: Top500Guide.com, U.S. Commerce Department, Internet Retailer estimates. Online Apparel 250 are the 250 merchants ranked in the Internet Retailer Top 1000 primarily classified as selling apparel and accessories. Amazon and other e-retailers is Internet Retailer’s estimate of the online sales of apparel transacted on Amazon, and other retail websites, not primarily categorized as apparel retailers. Total apparel sales is an analysis of U.S. Commerce Department data

Apparel Stores $375,350,000,000 $371,230,000,000 1.1%

Total Apparel Sales $452,333,295,615 $435,526,499,191 3.9%

Online Share of U.S. Apparel 17.0% 14.8%

How Apparel Sales Fare Online Vs. Offline

220 basis points increase

2015 Growth

In 2015 alone, total reportable online apparel sales grew by 19.7% to an estimated $77 billion, fully 55% faster than the growth rate for all other types of merchandise sold on the web. Even these numbers are understated because they exclude the online sales of apparel by mass merchants, such as Wal-Mart Stores Inc. and Target Corp., which do not break out their sales of clothing on the web.

Even with that understatement, the web last year account for 17.0% of total apparel sales in the U.S., up from 14.8% the previous year—a remarkable one-year gain of 220 basis points in share of market for apparel e-retailers. Aside from the market share that Amazon.com Inc. grabbed each year from book stores in its early days and the bite that Apple Inc. took from record stores in the years following the launch of iTunes, the web has not previously taken such an enormous amount of revenue from stores so quickly. It is the reason why store sales of apparel grew a meager 1% last year—less than one-third of the average growth of store retailing—and why so many apparel stores have been shuttered or are hanging on by a proverbial thread.

BY JACK LOVE

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As with so many other changes in the retail landscape wrought by the internet, it is Amazon that is leading the shift in apparel sales from stores to the web. Since it formed its Apparel and Accessories marketplace in 2002, through which it sells apparel for other retailers and manufacturers for a fee, Amazon has steadily taken market share from apparel stores. But last year, Amazon’s apparel marketplace shifted into high gear (see the cover story on “Amazon’s Foray into Fashion” in Internet Retailer Magazine’s January 2016 issue). According to investment banker R.W. Baird & Co., Amazon increased the number of apparel and accessory SKUs on its website by 87% in the 12 months

ending October 31, 2015.

This product expansion, along with other aggressive moves, drove the online giant’s apparel sales up by 48% last year to $16.3 billion, according to the Cowen Group investment consultancy. That stunning growth in one year’s time massively extended Amazon’s lead in online apparel over second-ranked Macy’s Inc. and expanded its share of the total online apparel market to 21%. In fact, Amazon’s apparel sales last year equaled the combined web sales of its five largest competitors in the online apparel segment, including Macy’s, Nordstrom Inc., Kohl’s Corp., Gap Inc., and L Brands (the parent company of Victoria’s Secret).

Led by Amazon, the country’s Top 10 Apparel Retailers (see top 10 list on next page) grew their web revenues by 26.7%, double the growth rate of all other retail websites in the U.S. Together these 10 leading apparel e-retailers last year accounted for 49% of the online apparel market, a high concentration given the hundreds of web merchants specializing in apparel.

48% for Amazon.com in 2015 to $16.3 billion

Apparel sales grew

THE LEADERS

The Amazon Effect

Category

Product Count (Amazon and Marketplace)

Product Count (Amazon Only)

Clothing, Shoes & Jewelry - Men 9,770,753 119,968

Clothing, Shoes & jewelry - Women 8,353,306 213,888

Clothing, Shoes & Jewelry - Girls 959,086 23,071

Clothing, Shoes & Jewelry - Boys 851,758 18,895

Clothing, Shoes & Jewelry - Baby 434,245 17,855

Clothing, Shoes & Jewelry - Misc/Other 13,053,289 300,677

Total 33,422,437 694,354

A Breakdown of Amazon's Apparel Catalog

Source: 360pi, May 2016

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TOP101. Amazon.com Inc.

2016 Top 1000 Rank: 12015 Online Apparel Sales: $16,300,000,0002014 Online Apparel Sales: $11,000,000,000Growth: 48.2%

2. Macy’s Inc.2016 Top 1000 Rank: 62015 Online Apparel Sales: $6,210,000,0002014 Online Apparel Sales: $5,400,000,000Growth: 15.0%

3. Nordstrom Inc.2016 Top 1000 Rank: 182015 Online Apparel Sales: $2,832,000,0002014 Online Apparel Sales: $2,356,000,000Growth: 20.2%

4. Kohl’s Corp.2016 Top 1000 Rank: 192015 Online Apparel Sales: $2,818,400,0002014 Online Apparel Sales: $2,168,000,000 Growth: 30.0%

5. Gap Inc.2016 Top 1000 Rank: 202015 Online Apparel Sales: $2,530,000,0002014 Online Apparel Sales: $2,503,000,000 Growth: 1.1%

6. L Brands Inc.2016 Top 1000 Rank: 282015 Online Apparel Sales: $1,681,724,0002014 Online Apparel Sales: $1,628,000,000Growth: 3.3%

7. J.C. Penney Co. Inc.2016 Top 1000 Rank: 332015 Online Apparel Sales: $1,415,200,0002014 Online Apparel Sales: $1,220,000,000Growth: 16.0%

8. L.L. Bean Inc.2016 Top 1000 Rank: 342015 Online Apparel Sales: $1,412,517,7002014 Online Apparel Sales: $1,284,107,000Growth: 10.0%

9. Neiman Marcus2016 Top 1000 Rank: 362015 Online Apparel Sales: $1,338,400,0002014 Online Apparel Sales: $1,184,424,779Growth: 13.0%

10. Fanatics Inc.2016 Top 1000 Rank: 382015 Online Apparel Sales: $1,265,000,0002014 Online Apparel Sales: $1,100,000,000Growth: 15.0%

2015 Total Top 10 Online Apparel Sales

$37,803,241,7002014 Total Top 10 Online Apparel Sales

$29,843,531,7792015 Growth

26.7%

ONLINE APPAREL

THE LEADERS

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Despite such heavy concentration at the top of the online apparel market, it is impossible to fully grasp the magnitude and analyze the forces behind the online apparel boom without looking closely at a much larger swath of the market. This report does just that by studying the performance of the country’s 250 largest e-retailers (referred to in this report as the “Online Apparel 250”) which obtain virtually all of their revenue from apparel and accessories.

These leading apparel web merchants comprise one-quarter of the e-retailers that are ranked, profiled and thoroughly detailed in Internet Retailer’s Top 1000 Database, which contains 276 separate financial, operating, marketing and performance metrics on each of America’s 1,000 largest e-retailers. Based on the information in that database, which was mined to produce this research report, the Online Apparel 250 accounted for $50.4 billion of total web-based apparel and accessory sales in 2015, or 65% of the entire online apparel market. Most of the remaining market share is controlled by Amazon’s apparel marketplace, the detailed financial and operating performance of which is not subject to outside scrutiny.

$50,401,772,630 TOTAL 2015 WEB SALES FOR THE ONLINE APPAREL 250

This report will analyze all aspects of the Online Apparel 250—their make-up by type of merchant and classification of apparel they sell. It will examine the fastest growing apparel websites as well as those in decline. It will look at their pricing and measure the impact of all aspects of their marketing efforts—from promotional e-mails they distribute to customers to the base of Twitter followers they have cultivated. And it will describe in detail the demographics of their shoppers. In all cases, the report seeks to explain how all of these factors affect the growth of their online apparel sales.

Analyzing the Top 250 ApparelE-Retailers in America

Online Apparel 25065.5%

Amazon & Other E-Retailers

34.5%The Make-Up of the Online

Apparel Market

Source: Top500Guide.com, Internet Retailer estimate. Online Apparel 250 are the 250 merchants

ranked in the Internet Retailer Top 1000 primarily classified as selling apparel and accessories. Amazon and other e-retailers is Internet Retailer’s estimate of the total value of apparel sales transacted on Amazon, and other large store-based websites like Walmart, Target and other

discount stores, or those not primarily categorized as apparel retailers.

THE LEADERS

A close observer of the table of the 10 largest online apparel merchants will notice one very differentiating characteristic of this market: Aside from top-ranked Amazon, whose apparel sales come primarily from its marketplace platform representing more than 40,000 of retailers and manufacturers which buy, stock and ship the merchandise they sell through Amazon, all of the remaining top 10 apparel sites are operated by retail chains. That is a distinctly different competitive makeup from all other merchandise categories in e-commerce, and in fact, from the global e-commerce market as a whole.

Our 2016 Top 500 Guide, which ranks the country’s 500 largest e-retailers that control 84% of the U.S. e-commerce market, reports that 41.3% of total sales of the Top 500 web merchants is generated by web-only merchants, while 32.5% is generated by websites run by retail chains, 11.1% by manufacture websites and 9.7% by catalogers. The chart on the right of this page shows a different picture for the online apparel business.

When it comes to the Online Apparel 250, retail chains control a whopping 63.9% of web sales, compared to just 14.3% for web-only apparel retailers, about the same share that’s held by the websites of apparel manufactures. Why do store chains dominate this one, very significant segment

of e-retailing, while chains in other market segments have much less control of the e-commerce market? As we shall see later in this report, it isn’t because of their pricing models, above-average conversion rates, the types of apparel they offer to online shoppers, or the demographic make-up of their shopper base.

THE LEADERS

The Retail Chains Still Dominate Online Apparel

According to online pricing automation company 360pi, there are

apparel sellers on Amazon as of May 2016.

40,080Dominate the 250

Largest Sellersof Apparel Online

BIG CHAINS

Retail Chain$32,228,842,833

63.9%

Cataloger$3,674,635,001

7.3%

Web-Only$7,199,479,027

14.5%

Manufacturer$7,298,815,768

14.3%

OnlineApparel 250

Sellers by Type

Source: Top500Guide.com. Figures exclude apparel sales on Amazon and other merchant sites not primarily categorized as apparel such as Walmart.com and Target.com.

Total: $50,401,772,630

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Rather, it seems, the dominance of chain stores in the online apparel market has more to do with their long-standing relationships with consumers, particularly those who view an apparel purchase as a very personal decision, one that should be done with merchants they trust. The data support this hypothesis.

No big-name retail chains have a stronger reputation for apparel—and multi-generational connections with apparel buyers—than the country’s major department stores. Before websites, they were the place where America shopped for the leading apparel brands. Fortunately for them, a good number of department stores—from Macy’s to Neiman Marcus—saw the need to embrace the web early on in order to keep their apparel customers from abandoning them in the digital age for a younger, flashier, and tech-driven web-only retailers. Indeed, six of the nine department store chains in this study were launched between 1998 and 2001. And after they launched their sites using their well-known brands, they promoted them heavily with paid advertising on Google and other search engines. Even today, four of the top 10 search advertisers in the Online Apparel 250 are department stores chains.

That e-retailing record has served the department stores well. The nine department stores that occupy the ranks of the Online Apparel 250 control 30.9% of the total revenue generated by all 250 apparel web merchants. These nine department stores are the single biggest reason that store chains still dominate the online apparel business. Just as their off-line cousins anchor suburban malls, the online department stores anchor apparel e-retailing. Had chain stores in other markets followed the early lead of department stores, they may have avoided the fate of the retail chains that bit the dust in the last decade at the hands of their web-centric rivals.

It may well be too late for other types of store-based apparel merchants to benefit from the department store lesson. That’s because in apparel, as in all other corners of the e-commerce world, web-only merchants are in ascendance. While chains dominate apparel e-retailing, web-only merchants now boast the fastest rate of growth. The 91 web-only apparel merchants in the Online Apparel 250 grew web sales last year by 16.3%, comfortably above the 79 retail chains on the list, which grew at 14.8%.

More worrisome for the chains is the fact that the web-only apparel merchants are growing faster by attracting the highly coveted millennial and gen-x shoppers. These shoppers account for nearly two-thirds of their customer base. By comparison, 62% of consumers who shop at the websites of apparel chains are 45 years old and above. That group may be wealthier now, but their incomes—and their spending on apparel—are not growing as fast as younger consumers. If the websites of the department stores and other apparel stores cannot reverse this demographic imbalance, their position at the top of the online apparel business is clearly at risk.

Web-only apparel merchants are also attracting the fastest-growing group of online apparel shoppers—men. No merchandise segment in online apparel is growing faster than men’s clothing. As we’ll explore in greater detail in the shopper demographic section of this report, the 10 apparel e-retailers with the highest percentage of male shoppers last year grew their sales by 21.5%, or 50% faster than the average growth rate for the Online Apparel 250. In short, the web-only merchants are growing faster than all other types of apparel competitors by targeting the two fastest-growing niches in the apparel market, something the more nimble web-only merchants do well in all segments of e-commerce.

THE LEADERS

Department Stores: The Anchor On Online Apparel

Web-Only Apparel Sites Are Growing Faster

Web-Only 16.3%

Retail Chain 14.8%

Manufacturer 13.8%

Cataloger 3.9%

TOTAL 14.0%

Web-Only Apparel Merchants Are Growing Faster

Source: Top500Guide.com

Merchant Type Shoppers Under 45 Male Shopper %

Web-Only 64% 49%

Retail Chain 38% 40%

Manufacturer 61% 43%

Cataloger 50% 37%

Online Average 61% 44%

By Attracting A Younger and More Male-Oriented Clientele


Apparel retailers today are facing multiple challenges. Fast fashion—that is, new clothing lines moving from the catwalk into circulation at record speed in response to fashion trends—continues to grow. That means brands are scrambling to ensure their products are available for customers when they want them. Additionally, international expansion is becoming increasingly important for apparel retailers to stay relevant and ahead of their competition.

“A lot is changing in the world of apparel retail,” says Chris Andrasick, chief strategy and innovation officer at Newgistics, which owns Tacit Knowledge, a commerce integration consultancy he founded in 2002. “And these brands must be able respond quickly.”

According to Andrasick, this changing apparel environment means these retailers are facing scalability challenges with their e-commerce platforms. “They are struggling to scale in terms of third-party logistics, and how they deal with fulfillment and returns,” he says. “And to fix this, they really need help right-sizing their platforms by finding solutions that help them with all of their true end-to-end needs.”

This requires the types of tools that allow retailers to focus on their business, rather than technology, he says. To do that, they need a platform that incorporates several important attributes.

The most effective e-commerce platforms, Andrasick says, should be able to adapt to any screen format as well as provide high-resolution images. They should incorporate machine-learning personalization technology so that brands are able to cater to customers’ unique interests and predicted behaviors. These platforms should offer real-time control so retailers are able to update content across all geographies—including internationally—instantly, and should utilize big data trend analysis to extract actionable insights and drive better business decisions.

The best platforms should include prebuilt customizable front-end user experience templates so that products are displayed appropriately, allowing for an exceptional customer experience while keeping costs, development efforts and

time-to-market reasonable. And they should serve as a dynamic customer communications engine that delivers relevant messages to customers—increasing retention and retailer revenue.

Additionally, an e-commerce platform should incorporate technology and services that handle logistics. “It should create a truly integrated brand experience—including fulfillment, pick and pack, package delivery, and returns management—from device to doorstep,” Andrasick says.

Newgistics’ ncommerce platform encompasses all of these attributes, he adds. “ncommerce is a single platform designed to simplify e-commerce and allow retailers to focus on building their business rather than their technology,” he adds. “A key business rationale behind bringing ncommece to market is that there are many layers of touch points in the digital shopping landscape, as well as the post purchase experience, that are better served if we’re taking a holistic approach to commerce – in this way we create value by bringing these different services together.”

As apparel retailers continue to face growing challenges related to fast fashion and global expansion, they need tools that will enable them to adapt immediately to stay competitive and relevant to their customers. And an end-to-end e-commerce platform that takes a holistic approach to their business may be the answer.

The right end-to-end e-commerce platform drives apparel retailers’ success

SPONSORED INSIGHT

The Online Apparel 250

http://ncommerce.com/

http://ncommerce.com/

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The changing competitive balance in the online apparel market noted above can be seen in stark relief by looking at the wildly disparate growth rates of the individual apparel web merchants. America’s 10 fastest growing apparel websites achieved a combined growth rate last year of 136.5% (see table below). The most notable characteristic of this group is that seven of its members are web-only merchants, most of which target specific types of customers and apparel.

The leader of the pack—the fastest growing online apparel merchant in America—is NineLineApparel.com. The four-year-old website, founded by two former Army officers, grew its web sales nearly five-fold last year to $9.3 million, and it projects that sales will reach $15 million this year. Like many of the most successful apparel sites, Nine Line targets a very specialized market by selling military and patriotic apparel to veterans and first responders. That highly focused targeting goes well beyond the specialized merchandise it sells. Its marketing message is equally focused. A prominent quote on the home page of its website clearly describes the type and attitude of shoppers it seeks to serve. “It’s much more than getting dressed everyday. It’s about being proud of who you are, what you wear, and how you walk through life. We are Relentlessly Patriotic. We hold no punches, we don’t apologize for our love of country, we are America’s NEXT GREATEST GENERATION.”

In many ways, Nine Line has the characteristics of the type of apparel website that is changing the competitive make-up of the online apparel market. In an e-commerce market as broad, diverse and highly competitive as apparel and accessories, success now is often found by targeting and retaining a specific type of customer and with a product line that appeals directly to them. Eloquii Design, the second-fastest growing apparel site, is focused on women

looking for plus-sized clothing, as is Ashley Stewart, the seventh-fastest growing e-retailer in apparel. Tipsy Elves, the eighth-fastest grower sells what it describes as “ugly” and “tacky” Christmas sweaters. In the summertime, it features equally distinctive patriotic and military apparel not found in mainstream store. Swap.com, the sixth-fastest growing apparel site, is an online consignment store for lightly used apparel and accessories that its customers purchase from the site or send to the site for sale.

A unique product line and targeted customer base are not the only features distinguishing the fastest growing sites. The fastest growing apparel sites are also the youngest, averaging four years in age vs. 16 for the slowest growing sites. The fastest growing apparel e-retailers also have younger shoppers, 62% of whom are under 45, compared to 57% for the slowest growers. And the fastest growers have much smaller average tickets than the weighted average ticket of the Online Apparel 250 ($92 vs. $130), befitting the younger and less affluent customer base they attract. Even more important may be how they reach their audience. Their ratio of Facebook Likes to each dollar of sales is 0.94%, compared to 0.56% for the slowest growers and 0.79% for the online apparel market as a whole.

Toward a New CompeTiTive BalaNCe

WHO’S GROWING FASTEST?

America’s 10 Fastest Growing Apparel Websites Expand 136.5% in 2015


Top 1000 Rank Company Merchant Type Apparel Segment 2015 Web Sales 2015 Growth

849 Nine Line Apparel Web Only Mens Clothing $9,329,472 391.1%

604 Eloquii Design Web Only Plus-Size Apparel $21,000,000 320.0%

453 rue21 Inc. Retail Chain General Apparel $35,000,000 150.0%

151 Shoes.com Web Only Shoes $222,992,939 149.9%

915 Swap.com Web Only Womens Clothing $7,000,000 133.3%

314 Everlane Inc. Web Only General Apparel $72,000,000 100.0%

737 Ashley Stewart Retail Chain Plus Size Apparel $13,328,000 80.0%

711 Tipsy Elves Web Only Specialty Apparel $14,400,000 80.0%

836 Country Club Prep Web Only Specialty Apparel $9,900,000 80.0%

854 Emilie M. Accessories Brand Manufacturer Handbags/Luggage $9,000,000 80.0%

Fastest 10 Totals $413,950,411 136.5%

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While the apparel market is booming overall, not everybody is sharing the glory. Indeed, nine of the Online Apparel 250 experienced a decline in sales last year (see table below). Unlike the characteristics shared by the fast-growing sites, it’s harder to spot a common thread that explains the decline of these web merchants. Half of the list of the 10 slowest-growing apparel sites are web only merchants, whose counterparts sport the biggest growth rates.

In some cases, the explanation between the apparel sites with declining sales is the result of a strategic change. Coach, the luxury handbag retail chain and manufacturer, last year suffered a 60% decline in online sales, the second largest drop among the Online Apparel 250. The decline is directly attributable to a top management decision to discontinue selling discounted merchandise on the site and feature only full-price items. Similarly, Vera Bradley’s web business declined 13% last year, because it totally eliminated its huge discounts of 60% or more and trimmed back all other promotional activity. Lands’ End, one of the oldest and historically successful apparel e-retailers, also experienced a web sales decline last year of 5%, which management attributed in part to a reduction of promotional efforts that was designed to increase margins. In some cases, such as Vera Bradley, the strategy of increasing margins can deliver high profits on a smaller revenue base.

Nonetheless, the declines for these three web merchants is telling, because failure to compete on price on a web platform that allows for easy price comparisons across merchants is a typically flawed strategy. A strategy of building sales through deep discounts can be a path to rapid growth online, at least in the short term. But if those discounted prices cannot be sustained over the long-term through operating efficiencies, a sharp decline is sales will likely be the result. That is probably why the member-based flash sales apparel sites, all the rage just a few years ago, are looking more like flash-in-the-pan websites today. As a group, the five flash sites in the Online Apparel 250 grew their combined sales by only 2.7% in 2015, compared to growth rates of 21% in 2013 and 30% the year before that. Indeed, the largest flash sales web retailer, Gilt Groupe, which built its membership to nine million shoppers, suffered a 5% drop in sales in 2015. Early this year Gilt was acquired on the cheap by Hudson’s Bay, which will reposition it as part of its Saks Off 5th division.

Top 1000 Rank Company Merchant Type Apparel Segment 2015 Web Sales 2015 Growth

658 Tonzof Inc. Web Only General $17,000,000 0.0%

895 Historical Emporium Inc. Web Only Uniform/Tradeswear $7,474,000 -0.5%

510 The Wet Seal LLC Retail Chain Women $27,500,000 -2.0%

69 Gilt Groupe Web Only Flash-Sale Apparel $600,000,000 -4.8%

44 Lands’ End Catalog/Call Center General Apparel $1,140,950,000 -5.0%

994 WebUndies.com LLC Web Only Sleepwear/Lingerie $3,250,000 -7.1%

995 Luxury Divas Corp. Web Only General Apparel $3,200,500 -8.6%

233 Vera Bradley Retail Stores Brand Manufacturer Handbags/Luggage $114,535,204 -13.2%

163 Coach Brand Manufacturer General Apparel $200,000,000 -60.0%

978 JunoActive by Junonia Catalog/Call Center Plus Size $5,000,000 -61.2%

Slowest 10 Totals $2,118,909,704 -16.4%


America’s Slowest Growing Apparel Websites Decline 16.4% in 2015

apparel SiTeS iN deCliNe

FAILURES IN PRICING

13

The mandate for sustainable competitive pricing in online apparel is not the same as having the lowest average ticket. Big-ticket web apparel merchants can be very price competitive if they offer the same type and quality merchandise online at a price that’s somewhat lower than their direct competitors. In fact, as the table on page tk show, the ten apparel websites with the highest average tickets grew much faster than those with the lowest average tickets.

Sporting an average ticket of $533, slightly better than that four times the average ticket for all e-retailers in the Online Apparel 250, the 10 highest-ticket apparel e-retailers have a four-year compounded average growth rate (CAGR) of 18.9%, slightly above the average of all apparel sites and well above the 12.4% four-year CAGR of the lowest-ticket apparel merchants. The conclusion: the best-selling apparel online is not the cheapest apparel. Like most shoppers, web shoppers are looking for good prices, not cheap merchandise.

THE BEST-SELLING APPAREL ONLINE IS NOT THE CHEAPEST APPAREL

Company Name Top 1000 Rank Subcategory 2015 Web Sales Average

Ticket 2015 Growth 4-year CAGR

Yoogi's Closet 668 Women $16,474,984 $900 5.2% 36.0%

Lafayette 148 New York 376 Women $51,430,000 $766 7.3% 16.5%

Indochino 454 Custom Apparel $35,000,000 $650 40.0% 73.1%

Fashionphile LLC 780 Handbags/Luggage $11,730,000 $600 15.0% 16.8%

Barneys New York Inc. 168 Department Store $194,115,496 $450 17.0% 17.7%

Neiman Marcus 36 Department Store $1,338,400,000 $410 13.0% 15.3%

Kate Spade 140 Women $248,544,000 $400 44.1% 49.3%

Burberry Ltd. 356 General Apparel $59,160,000 $400 16.0% 22.7%

Yoox Net-a-Porter Group 72 Women $558,000,000 $391 19.7% 30.9%

Gilt Groupe 69 Flash-Sale Apparel $600,000,000 $360 -4.8% 11.4%

Big Ticket E-Retailer Average $3,112,854,480 $533 12.4% 18.91%

Total Apparel Average $50,401,772,630 $129 14.0% 18.59%


10 Highest Ticket Apparel Web Merchants Slowed Last Year After An Impressive 4-Year Run

Company Name Top 1000 Rank Subcategory 2015 Web Sales Average

Ticket 2015 Growth 4-year CAGR

Spreadshirt Inc. 442 Custom Apparel $37,000,000 $43 0.0% 16.8%

Threadless.com 387 Custom Apparel $49,680,000 $40 8.0% 13.4%

Genesco Inc. 496 Shoes $29,154,000 $40 13.0% 3.1%

80sTees.com Inc. 735 General Apparel $13,440,000 $40 5.0% 6.3%

The Tie Bar 808 Fashion Accessories $10,631,250 $35 20.0% 27.7%

Steals.com 666 Off-Price Apparel $16,731,350 $32 3.3% 3.1%

SunFrog Shirts 717 Custom Apparel $14,160,000 $30 18.0% 12.3%

Phoenix Leather Goods 910 Handbags/Luggage $7,030,000 $30 12.8% 4.9%

Luxury Divas Corp. 995 General Apparel $3,200,500 $21 -8.6% 12.7%

DesignByHumans.com Inc. 954 Custom Apparel $5,851,630 $20 10.0% 9.2%

Small Ticket E-Retailer Ave $186,878,730 $33 7.6% 12.4%

Total Apparel Average $50,401,772,630 $129 14.0% 18.59%


10 Lowest Ticket Apparel Web Merchants Underperform the Online Apparel Averages Year After Year

If not cheap merchandise, what types of apparel and accessories are the best performers on the web. The short answer is all types. Department stores control another 31% of the total sales of the Online Apparel 250 and the other general (or multiple-type) web apparel merchants control 26%. Shoes, women’s apparel, and sportswear sites round out the top five apparel categories online measured in terms of sales.

WHAT TYPES OF MERCHANDISE SELL BEST ONLINE ONLINE?

MARKET SEGMENT 2015 WEB SALES SHARE OF MARKET

Department Stores $15,552,927,246 30.9%General Apparel $13,141,712,354 26.1%

Shoes $5,871,896,604 11.7%

Women's Apparel $4,051,699,806 8.0%

Sportswear $3,975,353,021 7.9%

Sleepwear/Lingerie $1,963,290,139 3.9%

Flash-Sales Apparel $1,492,612,000 3.0%

Children's $887,560,963 1.8%Men's Apparel $625,663,333 1.2%Plus-Size Apparel $588,278,000 1.2%Custom $414,691,630 0.8%Handbags/Luggage $626,075,395 1.2%Off-Price Apparel $400,071,543 0.8%Uniform/Tradeswear $333,645,599 0.7%Outerwear $264,203,088 0.5%Specialty Apparel $145,660,659 0.3%Fashion Accessories $66,431,250 0.1%

Total Online Apparel 250 $50,401,772,630 100%


Breakdown of Online Apparel 250 Sales by Merchandise Type

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MEN’S APPARELBut where the online apparel market is right now is not where it’s heading. Indeed, when apparel web sites are categorized by the type of merchandise they sell, a different picture emerges. For example, those e-retailers focused primarily on selling men’s apparel are growing faster than any other clothing or accessory category. While they account for just 1.2% of an online apparel market that has traditional courted female shoppers, seven men’s apparel sites in the Online Apparel 250 grew 29% last year, tapping into what is likely the most underserved segment of the market and serving it with aggressive, and often unique, merchandising strategies.

In addition to NineLineApparel.com, whose 391% growth rate last year is explained above, the other growth standouts in men’s clothing web sites include the largest e-retailer in the group, The Men’s Warehouse (which grew sales 35% in 2015); second-ranked Bonobos, which grew 24% last year; and J. Hilburn, the second-fastest growing e-retailer in the men’s category with a 40% sales increase in 2015.

Perhaps no merchants show the growing demand on the web for men’s clothing than The Men’s Wearhouse, which more than tripled its online sales in 2014 by acquiring Jos. A. Bank Clothiers in March of that year. Such growth by acquisition of a direct competitor might be expected to result in a sales consolidation the following year as overlapping lines are trimmed. Not so here. The Men’s Wearhouse grew web sales in 2015 by 35% to $290 million, in part by eliminating the “buy 1 get 3” deals that were common for Bank. As a result of the acquisition and the melding of the two competitors that followed, The Men’s Wearhouse now controls an impressive 47% on the online men’s apparel market.

Bonobos, the second-largest men’s apparel web site, grew its business in 2015 by 24% to $105 million, most of which was generated from its men’s site (Bonobos also operates the women’s clothing site, Ayer.com). Some of that growth is attributable to the 20 “guideshops” Bonobos opened last year, allowing customers to try on clothing at an outlet that maintains all colors and sizes of Bonobos apparel. When an item is selected at the outlet, it is purchased online at the store and shipped for free to the customer. Another 10 guideshops are set to open this year.

J. Hilburn, the second-fastest growing men’s apparel web business, achieved its 40% growth rate last year (to $84 million) by expanding its original line of custom shirts to include custom suits, jackets and pants. The custom configurator on its site allows men to select and custom manufacture a particular style, color and size of shirts or other clothing item. The site also maintains a portfolio of thumbnail pictures of every item a shopper has purchased from the site, making it easy to re-order the same item but in different color or pattern.

Men’s Apparel 29.0%

Outerwear 26.6%

Specialty Apparel 23.5%

Shoes 20.5%

TOTAL ONLINE APPAREL 250 14.0%

Plus-Size Apparel 19.4%

Department Stores 19.0%

Custom 18.4%

Women’s Apparel 17.7%

Children’s 15.9%

Sportswear 15.9%

Uniform/Tradeswear 15.7%

Fashion Accessories 13.1%

General Apparel 9.3%

Off-Price Apparel 8.7%

Sleepwear/Lingerie 4.6%

Flash-Sales Apparel 2.7%

Handbags/Luggage-31.5%


Men’s Apparel: Fastest Growing Segment of Online Apparel2015 web sales growth by market segment

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SHOESThe fourth fastest growing apparel segment on the web, shoes, grew 20.5% last year. And the fastest-growing web site run by the 37 shoe e-retailers in the Online Apparel 250 is also the oldest, the 20-year-old Shoes.com. Its growth strategy can be summed up in a word: acquisitions. In 2014, the 46-year-old Vancouver e-commerce entrepreneur Roger Hardy decided to create one of the largest online shoe retailers in North America. And why not? He had previously co-founded Coastal Contacts, whose Coastal.com web site was one of the leading eyewear e-retailers. After selling that in early 2014, Hardy had the cash, the e-commerce expertise, and capital investment connections to launch his new venture. In one year, he purchased three shoe web sites—Shoeme.ca (a Canadian e-retailer), Shoes.com (the e-commerce site owned by Brown Shoe), and OnlineShoes.com, the largest shoe e-retailer of the three. All three still operate separate web sites, using the OnlineShoes.com e-commerce platform. Shoes.com, which we report as the umbrella brand for the group, generated revenues of $223 million, 150% higher than the pre-acquisition period the year before. Hardy is not finished. In May 2015 Shoes.com raised $45 million for additional acquisitions, the first of which occurred late last year—the socks and briefs e-retailer Richer-Poorer.com

Can Shoes.com move from ninth place in the shoe segment to become the largest shoe e-retailer? Not likely. That position is held by Nike.com, which last year was the fourth fastest-growing shoe web site, increasing revenues by 30% to $1 billion, generating more incremental revenue in 2015 than Shoes.com reported in total revenue. Much of Nike’s growth in e-commerce last year was fueled by national sites it has launched in China and other major foreign markets around the world. Such aggressive marketing strategies explain why Nike.com boasts a five-year CAGR of 30.1% in online sales.

The second-fastest growing shoe web site, JustFab.com, grew online sales in 2015 by 43% (to $505 million) by following a strategy of adding stores to what had previously been a web-only operation. Its Fabletics.com subsidiary, co-founded by actress Kate Hudson, is the leading factor behind JustFab’s impressive growth. Last year, Fabletics, which sells footgear and other high-end activewear apparel, opened five stores on the East Coast and plans more this year. The company also operates FabKids.com and ShoeDazzle.com.

26.6%Outerwear online apparel retailers grew at a remarkable

Nearly all of that growth came from Colombia Sportswear, who grew sales by

38%

OUTERWEARThe second-fastest growing apparel segment on the web is outerwear, and the six e-retailers in that category within the ranks of the Online Apparel 250 collective grew their sales by 26.6%. Nearly all of that growth—and fully two-thirds of the segment’s total sales—came from one merchant, Columbia Sportswear, which grew its online revenue in 2015 by 38% to $180 million. A big part of that growth is attributable to Columbia’s $190-million cash acquisition in May 2014 of Prana Living, a maker and retailer of yoga and other fitness clothing, which helped Columbia diversify its product line from heavy reliance on outerwear. Columbia expanded Prana aggressively last year by adding the line to its international operations which have successfully expanded the company’s web business to China and other foreign markets. Indeed, Columbia’s strategy of expanding of its web operations around the globe helps explain why the company’s online apparel sales have achieved a 35% five-year CAGR, which demonstrates to all online apparel merchants the untapped potential opportunity they have in selling abroad.

SPECIALTY APPARELAs indicated in the experience of Nine Line Apparel, targeting highly specialized types of apparel not easily found in stores can be a winning strategy. Though we categorized Nine Line in men’s clothing, because that’s the biggest part of its business, it could easily have been classified under specialty apparel, which would have made it the fastest-growing merchandise category on the web. Even without Nine Line, however, the 10 web merchants listed in the specialty category of the Online Apparel 250 grew online revenues last year by 23.5% to $146 million. The two fastest growing e-retailers in the specialty apparel segment both grew 80%: Tipsy Elves and County Club Prep, the merchandise of which is described by its name.

The leader in the category, western clothing retailer Sheplers Inc., commands just over a third of the online specialty apparel market, but it grew last year by only 6%. It was acquired in June of last year by Boot Barn, which grew its online revenue last year by 26% to $23.7 million, making it one of the fast growing sites in the shoes category of online apparel. Boot Barn has rebranded and merged Sheplers’ 258 stores under its branded umbrella, but it continues to operate Sheplers.com as a separate web business, one that last year generated $53 million in online revenue, more than double that of Boot Barn.

#1rankNike.com in Shoes Category

4th Fastest Grower in Shoes2015 Web Sales: $1 billion2015 Growth: 30%5 Year CAGR: 30%

NIK

E

Studies show that the customer experience—whether on a website, on a mobile device, or in-store—is critical to a retailer’s ability to grow its business. Yet recent research has also shown that time and again, retailers are failing when it comes to delivering an exceptional experience to their customers. According to a recent report by research firm Forrester, 71% of companies say that their customer experience programs are failing to move the needle when it comes to growing their business.

“One problem is that many companies don’t use the same level of precision, certainty, and rigor for customer experience programs that they use in other areas of their business,” says Eric Feinberg, vice president of ForeSee, a customer experience analytics company. “You wouldn’t manage inventory or financial projections with high-level, vague information, and you shouldn’t run customer experience programs that way either. Retailers need to move from conducting general or haphazard customer surveys to a scientific and actionable measure of the full experience they are providing their customers across channels.”

Feinberg says this is especially true for apparel retailers, who are facing the challenge of increasing customer expectations coupled with a decreasing understanding of the omnichannel customer experience. According to the ForeSee Experience Index (FXI), an annual report that analyzes customer experience with hundreds of retailers, 53% of apparel shoppers are not loyal to a particular apparel retailer. “In fact, most shoppers consider several retailers equally,” Feinberg says. “Apparel retailers in particular have a chance to really differentiate and win based on the customer experience they provide, since we know that good experiences breed both sales and loyalty.”

For apparel retailers to connect with their customers in ways that improve business outcomes, they must do three things: measure their experiences with certainty, visualize those experiences, and respond accordingly. The ability to accomplish these goals relies on tools, such as ForeSee’s analytics technology.

“We measure using surveys that frame the right questions, which allow our clients to understand and improve their customer’s experience meaningfully,” Feinberg says. “Visualizing those experiences using a ‘movie replay’ technology actually allows apparel retailers to watch how customers are engaging with a digital experience, including scrolling and mouse movements. ” This enables the retailer to see where shoppers are struggling and efficiently resolve issues that are negatively impacting the customer experience.

“And we respond by providing tools that improve visibility and inspire brand confidence by capturing reviews and ratings, along with expert analysis, to understand the larger picture of the customer experience,” Feinberg explains. By using an algorithmic approach to analyzing survey responses and benchmarks, he adds, a full suite of tools give apparel retailers a peek into the future—allowing them to act with certainty when making decisions about their business.

ForeSee’s technology was recently put to work for one large apparel retailer with a reputation as a customer service leader. Some of its online shoppers were becoming frustrated after they placed an item in their cart that was listed as available on the e-commerce site and then discovering at checkout that it had disappeared. The retailer’s internal technology team investigated the issue, was unable to recreate the error and assumed that it wasn’t really impacting the business. This highlights the chasm between what a business understands about its customer and what is actually going on in the minds of its customers. That’s when ForeSee stepped in with its movie replay tool—and it was able to show that the problem was occurring much more frequently than the retailer suspected.

“At an average product price of $68 and the problem occurring potentially between 2,000 and 12,000 times per day, the retailer was losing up to $816,000 worth of sales every day for merchandise that should have been available,” Feinberg says. “But not only were they losing the sale of the item that was falling out of the cart, they were also losing even more when customers would abandon their carts entirely.”

According to Feinberg, this is a perfect example of why customer experience is so critical to the success of any retailer. “Customer experience programs should be strategic, rigorous disciplines in retailers’ business, and they should be based on metrics that allow them to act with certainty,” he adds. “In order to compete today and to drive the outcomes they want, apparel retailers must begin to use a comprehensive platform to understand their customer experience needs.”

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PLUS-SIZE APPARELAs noted above, Eloquii Design became the second-fastest growing web site in all of apparel last year by focusing on plus-sized apparel for women. Continuing the online apparel industry’s growth through sharp targeting of specialty products, plus-size apparel was the fifth fastest-selling apparel segment on the web in 2015, with five competitors expanding their combined sales by 19.4%. But this is a market thoroughly dominated by one competitor—Ascena Retail Group, which grew 17.6% last year to $529 million. Ascena, which owns such brands as Justice, Lane Bryant, and Maurices, accounted for 90% of total web sales generated by the five companies in the Online Apparel 250 that are categorized in the plus-size apparel

segment.

DEPARTMENT STORESThe largest merchandise category in the Online Apparel 250 consists of the nation’s nine largest Department Stores. Because they have the largest selection of apparel in all of retailing, we put them in their own category separate from the general apparel web sites, which have merchandise that tends to be somewhat more focused. Collectively, the $15.5 billion in online sales generated by department stores in 2015 accounts for 31% of the total sales of the Online Apparel 250. As a group, the department store web sites grew online sales by 19% last year, and each member of the category posted 2015 growth rates within several percentage points of the category average.

Market Segment Segment Leader Rank in Top 1000 2015 Web Sales Segment Share

Department Stores Macy’s Inc. 6 $6,210,000,000 40%

General Apparel Gap Inc. 20 $2,530,000,000 19%

Shoes Nike Inc. 47 $1,000,000,000 17%

Women's Apparel Yoox Net-a-Porter Group 72 $558,000,000 14%

Sportswear Fanatics Inc. 38 $1,265,000,000 32%

Sleepwear/Lingerie L Brands Inc. (Victoria's Secret) 28 $1,681,724,000 86%

Flash-Sales Apparel Gilt Groupe 69 $600,000,000 40%

Children's The Children's Place 112 $324,568,000 37%

Men's Apparel The Men's Wearhouse Inc. 119 $290,958,750 47%

Plus-Size Apparel Ascena Retail Group 76 $529,000,000 90%

Custom CustomInk (Custom Tee Shirts) 125 $273,000,000 66%

Handbags/Luggage Coach Inc. 163 $200,000,000 32%

Off-Price Apparel TJX Cos. Inc. 117 $309,450,000 77%

Uniform/Tradeswear Duluth Trading Company 175 $186,645,000 56%

Outerwear Columbia Sportswear Co. 181 $180,000,000 68%

Specialty Apparel Sheplers Inc. (Western) 373 $53,159,000 36%

Fashion Accessories Wild Attire Inc. 482 $30,800,000 46%

What Web Merchants Lead Each Segment of the Online Apparel Market


There were two exceptions. The fastest growing online retailer among department stores was Canada’s Hudson Bay Co., which purchased Saks Fifth Ave. in 2013, one year after buying Lord & Taylor. North America’s oldest company, the Bay increased its online sales by 34.4% to $538 million, thanks to a major investment in digital technology in the last two years. While CEO Gerald Storch is no fan of stand-alone e-commerce operations, he is aggressively implementing an omnichannel strategy that features buying online and shipping from the store. The strategy is delivering impressive online results three years after the acquisitions.

The other above-average grower in the online department store category is Kohl’s Corp., which grew its web business 30% last year to $2.8 billion. Kohl’s has been an e-commerce leader among department stores, sporting a five-year CAGR of 29% in web sales. The factors behind its growth in e-retailing last year included a major push behind programs that allow consumers to buy online and pick-up in the store or ship from the store, a strategy that obviously appeals to its shopper base. In addition, Kohl’s has been successful in building its mobile e-commerce sales.

The 10 merchants in the handbags and luggage segment collectively experienced a

decline in online sales in 2015.31.5%

HANDBAGS & LUGGAGEThis category suffered the biggest decline in online sales last year, with combined web sales of the 10 apparel merchants in the category dropping 31.5% to $626 million. As noted above, this decline was largely attributable to Coach’s decision not to price promote its high-end products on its web site, a decision that may have improved the profitability of the site but also contributed to a 60% decline in online sales. Since Coach was, and still is, the leader in this online category, this one merchant’s sales decline brought down the entire category’s overall growth. The third-largest online competitor in handbags, Vera Bradley, also experienced a 13.2% decline in sales to $114.5 million, but unlike Coach, this decline was more the result of underperforming products and marketing efforts, and not a decision to cut promotions. In June 2015, Vera Bradley recruited a new chief marketing officer, Theresa Palermo, who previously worked in global marketing at Fossil Group, and assigned her the task of turning around the web site through new marketing strategies.

While fully 11 of the 16 merchandise categories in online apparel grew faster last year than the average 14% growth rate for the Online Apparel 250, six fell short of the mark, including five that were significantly below the average. They include Handbags and Luggage, Flash-Sales Apparel, Sleepwear and Lingerie, Off-Price Apparel and General Apparel.

The decline in the Handbags & Luggage segment was largely

attributable to Coach’s decision that may have improved the

profitability of the site but also contributed to a 60% decline in online

sales.

Declining web sales for these two category leaders has created an enormous void in this segment of the online apparel and accessory market, and one company, at least, has taken advantage of that opportunity. Emilie M. Accessories, which manufactures and sells handbags for under $100 through its four-year-old web-only channel, EmilieMShop.com, has clearly found a growing niche in a market crowded with high-end merchandise. The company grew it sales by 80% last year to $9 million, making it’s the fastest growing online competitor in the segment.

WHAT TYPES OF APPAREL ARE UNDERPERFORMING ONLINE?

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SLEEPWEAR AND LINGERIEHere, too, the category leader, L Brands and its Victoria Secret business, has been troubled in recent years by dramatically slower growth. Early this year, this trend prompted a management change at the top, corporate layoffs and a repositioning of the company’s marketing designed to engage with customers through loyalty programs rather than what L Brands says were its “traditional catalogs and offers.” With $1.7 billion in online sales last year, up only 3.3% from the prior year, L Brands still owns 86% of this online market segment.

The other eight online competitors in this segment are trying to capitalize on L Brands troubles. Two pure-plays, HourglassAngel.com and HipsandCurves.com, grew their web sales from small bases last year by 50% and 30%, respectively, and manufacturer Hanes Brands grew 20%.

GENERAL APPARELPerhaps the most telling evidence of the move to specialization in the online apparel market is the fact that the 47 online merchants in the general apparel category collectively grew only 9.3% last year to $13.1 billion, making it the second largest merchandise category among the Online Apparel 250. It includes some of the biggest names in the apparel trade, including Gap, Lands’ End, Abercrombie & Fitch, and Aeropostale—all four of which grew their web sales by 2.5% or less. Had this category, which accounts 26% of the Online Apparel 250, grown at the average rate of 14% for the group, the explosion in online apparel in 2015 would have been that much more intense.

There were two general apparel e-retailers which last year grew online sales better than 10 times faster than the category’s average growth rate. In the case of one of them, that trick was achieved by adopting a very unique merchandising program that made it stand out. San Francisco-based Everlane, a five-year-old web only merchant, doubled its sales last year to $72 million by adopting what it calls “radical transparency,” under which it reveals to web shoppers its factory costs for the designer clothing it acquires and the mark-up it charges shoppers.

But the fastest growing web site in general apparel is Rue21, a 1,000-plus store chain selling casual apparel for teenagers. Since emerging from Chapter 11 in 2003, the chain spent the next decade on a five-fold store expansion, targeting underserved retail markets around the U.S. The chain did not even launch its Rue21.com e-commerce web site until 2013, the same year it was acquired by private equity firm Apax Partners. Now, Rue21 is playing catch-up online, and its web site is starting to reveal a growth strategy previously reserved for its store building program. The web site managed only $6 million in online sales during its launch year, but last year Rue21 grew online sales by 150% to $35 million.

86%shareL Brandsowns 86% of the sleepwear and lingerie segment of the Online Apparel 250

Market Segment Fastest Growing Merchant 2015 Web Sales 2015 Growth

Department Stores Hudson's Bay Co. $537,868,800 34.4%

General Apparel rue21 Inc. $35,000,000 150.0%

Shoes Shoes.com $222,992,939 149.9%

Women's Apparel Reitmans $46,730,210 63.5%

Sportswear Barstool Sports $6,000,000 71.4%

Sleepwear/Lingerie Hourglass Angel LLC $12,249,216 50.0%

Flash-Sales Apparel JackThreads.com $137,280,000 30.0%

Children's Lolly Wolly Doodle Inc. $20,250,000 35.0%

Men's Apparel Nine Line Apparel $9,329,472 391.1%

Plus-Size Apparel Eloquii Design Inc. $21,000,000 320.0%

Custom Indochino $35,000,000 40.0%

Handbags/Luggage Emilie M. Accessories LLC $9,000,000 80.0%

Off-Price Apparel Stein Mart Inc. $22,100,000 70.0%

Uniform/Tradeswear U.S. Patriot Tactical $23,504,650 42.1%

Outerwear Columbia Sportswear Co. $180,000,000 38.5%

Specialty Apparel Tipsy Elves LLC $14,400,000 80.0%

Specialty Apparel Country Club Prep $9,900,000 80.0%

Fashion Accessories Trend Nation LLC $25,000,000 25.0%

Who’s the Fastest Growing Merchant in Each Merchandise Segment


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Some of the ups and downs occurring in the online apparel industry are the result of changes in the market, and how some e-retailers are responding to it and some are not. The trend toward specialization is an example. Most general merchants have not kept pace with the changes in online market, but department stores have adapted well by coupling their strong brands with well-conceived omni-channel programs. But many of the competitive shifts in the online apparel market are also the result of the marketing strategies that apparel web merchants are following.

This section of the report attempts to determine what marketing strategies work best in today’s online apparel market. It does so with a series of tables that examine the comparative performances of online apparel merchants based on their relative aggressiveness in applying the most important forms of digital marketing—paid search advertising, e-mail marketing, and the two most important platforms of social media marketing—Facebook and Twitter. The accompanying tables identify the 10 apparel web merchants with the most aggressive programs in each type of marketing with the 10 apparel merchants with the least aggressive programs in each type of marketing. This analysis is designed to determine which digital marketing techniques are more likely to move the online sales needle. These correlations may not explain the causal differences between any two retailers with different marketing approaches, but in comparing marketing practices of the top 10 and bottom 10 practitioners of a particular marketing tool, the results shed light on the effectiveness of that tool.

Marketing

HOW SEARCH AND SOCIAL MARKETING DRIVE ONLINE APPAREL SALES

L BrandsNike

Adidas

Top 3 on Facebook

Children’s PlaceBeyond the RackNeiman Marcus

Top 3 Biggest E-Mailers

Macy’sKohl’s

Nordstrom

Biggest SEM spenders

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Paid search engine advertising has long been considered the sine qua non of e-commerce marketing, and judging by the empire Google has built on its advertising revenue, this form of advertising is not just popular but also extremely effective. For the 10 apparel e-retailers who spent the most of SEM ads, it remains effective—at least on the surface. As a group, these 10 web merchants grew sales last year by 19.1%, nicely above the average 14% for all merchants in the Online Apparel 250. And the three companies that spend most on paid SEM—Macy’s, Kohl’s and Nordstrom—grew their combined sales by a whopping 26%. It’s hard to prove that their combined monthly spending of nearly $14 million is the primary reason for that growth, but it is a compelling correlation.

Unfortunately for SEM advertising proponents, however, it’s a correlation that doesn’t lead to the conclusion that would please Google.

In the first place, all e-retailers in the Online Apparel 250

actually spent a higher percentage (1.21%) of their total online sales on paid search marketing compared to the biggest three spenders, which spent 1.14% of their total sales on search.

The correlation of paid search to online sales is further weakened by examining the 10 apparel web merchants who spent the least amount of advertising on search engines. Indeed, these 10 e-retailers collectively spent only about $10,000 on search ads last year, a mere .005% of their online sales. And yet, as a group these 10 merchants grew their online sales last year by a stunning 24.8%, well above the average growth rate of the Online Apparel 250 and nearly six percentage points above the 10 biggest SEM advertisers.

The conclusion: Now that just about all major e-commerce players spend significant amounts on Google advertising, paid SEM is probably not the best vehicle for distinguishing yourself in the online market and for building sales.

MARKETING

Search Engine Advertising

Company Top 1000 Rank Subcategory 2015 Web Sales 2015 Growth Monthly SEM Ads

Macy’s Inc. 6 Department Store $6,210,000,000 15.0% $7,096,935

Kohl's Corp. 19 Department Store $2,818,400,000 30.0% $3,825,295

Nordstrom Inc. 18 Department Store $2,832,000,000 20.2% $2,975,602

ASOS.com Ltd. 176 General Apparel $186,259,230 29.0% $2,620,510

Nike Inc. 47 Shoes $1,000,000,000 30.4% $2,321,082

Hudson's Bay Co. 75 Department Store $537,868,800 34.4% $1,616,012

L.L. Bean Inc. 34 General Apparel $1,412,517,700 10.0% $1,257,809

Yoox Net-a-Porter Group 72 Women $558,000,000 19.7% $1,174,363

VF Corp. 92 Sportswear $420,000,000 20.0% $1,104,667

Foot Locker Inc. 50 Shoes $941,300,000 8.8% $1,044,637

Top Paid SEM $16,916,345,730 19.1% $2,503,691

All Apparel $50,401,772,630 14.0% $224,569


10 Biggest Spenders on Search Advertising Grow Faster than Average Online Apparel Retailers

Company Top 1000 Rank Subcategory 2015 Web Sales 2015 Growth Monthly SEM Ads

ShopTV 848 Specialty Apparel $9,365,625 20.0% $173

ShoeZoo.com LLC 689 Shoes $15,276,000 20.0% $162

KatydidCollection.com 945 Women $6,001,798 8.0% $143

StrongerRx Worldwide Corp. 998 Sportswear $2,250,000 7.1% $136

6 Pack Fitness 863 Handbags/Luggage $8,750,000 25.0% $63

J. Hilburn Inc. 295 Men $84,000,000 40.0% $44

Emilie M. Accessories LLC 854 Handbags/Luggage $9,000,000 80.0% $43

UsTrendy 941 Women $6,050,000 10.0% $18

Threadless.com 387 Custom Apparel $49,680,000 8.0% $5

Gotham City Online 893 Shoes $7,542,551 10.0% $1

Bottom Paid SEM $197,915,974 24.8% $79

All Apparel $50,401,772,630 14.0% $224,569


But 10 Smallest Spenders on Search Engine Advertising Grow Even Faster

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23

Anybody following e-commerce marketing these days understands that e-mail marketing—the original form of digital promotion—is not nearly as effective as it once was. Many apparel e-retailers still do a lot of it, but they have little to show for their efforts. The 10 online apparel merchants with the highest frequency of e-mail promotions—averaging 60 e-mail sends a month—grew their online sales last year by 9.3%, well below the 14% Online Apparel 250 average.

Conversely, the 10 apparel web merchants sending the fewest promotional e-mails—averaging just four per month—grew their online sales last year by 12.8%. Again, both of these results simply show a low correlation between e-mail promotion and sales. But in the face of these results, it’s hard to conclude that e-mail is an excellent way to build online sales in the apparel market. In fact, it may well be the worst.

MARKETING

Email Marketing

Company Top 1000 Rank Subcategory 2015 Web Sales 2015 Growth Monthly E-Mails

The Children's Place 112 Children $324,568,000 16.0% 66

Beyond the Rack 190 Flash-Sale Apparel $160,000,000 0.0% 65

Neiman Marcus 36 Department Store $1,338,400,000 13.0% 64

The Real Real Inc. 206 Women $141,885,000 35.0% 63

RueLaLa.com 80 Flash-Sale Apparel $504,000,000 5.0% 63

Bare Necessities Inc. 256 Sleepwear/Lingerie $100,370,160 14.0% 60

Chico's FAS Inc. 85 Women $458,490,000 2.0% 56

American Eagle 63 General Apparel $720,000,000 20.0% 55

L Brands Inc. 28 Sleepwear/Lingerie $1,681,724,000 3.3% 54

New York & Co. Inc. 217 Women $126,385,682 18.0% 52

Most E-Mail Campaigns $5,555,822,842 9.3% 60

All Apparel $50,401,772,630 14.0% 24


Top 10 E-Mail Marketers in Online Apparel Have Little to Show for Their Efforts

9.3%Top 10 apparel e-retailers with most

emails: 2015 growth rate

12.8%Bottom 10 apparel e-retailers with

fewest emails: 2015 growth rate

Company Top 1000 Rank Subcategory 2015 Web Sales 2015 Growth Monthly E-Mails

The Buckle Inc. 244 General Apparel $105,500,000 11.9% 7

Spreadshirt Inc. 442 Custom Apparel $37,000,000 0.0% 6

CustomInk 125 Custom Apparel $273,000,000 21.3% 5

New Balance 284 Shoes $86,852,649 12.0% 5

Wild Attire Inc. 482 Fashion Accessories $30,800,000 3.0% 5

Christopher & Banks Corp. 347 Women $60,270,000 23.0% 4

BHFO Inc. 470 Off-Price Apparel $32,100,000 4.9% 4

PlanetShoes 465 Shoes $32,500,000 7.3% 3

Road Runner Sports Inc. 268 Sportswear $93,093,979 6.0% 2

DrJays.com 229 General Apparel $119,527,143 8.0% 2

Fewest E-Mail Campaigns $870,643,771 12.8% 4

All Apparel $50,401,772,630 14.0% 24


And the Bottom 10 E-Mail Marketers in Online Apparel Grow Faster than the Top 10

24

The forms of digital marketing that relate directly with online success in apparel retailing involve the two biggest social media—Facebook and Twitter—and this strong correlation, while not necessarily causation, explains why more web merchants of all kinds are turning to social network marketing at the expense of more traditional forms.

Of these two, Facebook leads the way to sales

The 10 online apparel retailers with the highest number of Facebook Likes grew their web sales last year by 18.6%, nearly five points above the average growth rate for the Online Apparel 250, and better than three times the growth rate of the 10 apparel e-retailers with the fewest number of Facebook Likes. More telling are the ratios of Likes to web sales. For the apparel sites with the greatest following on Facebook, the ratio of Likes to sales is 0.13%. For those with the fewest Likes, the ratio is practical zero, or .0006% to be exact. The weighted

average ratio for the Online Apparel 250 is in between at .003%.

While the correlation of Facebook Likes to online sales is strong, it is not a linear one. The three apparel e-retailers with

the highest ratios are Levi Strauss (at 14.8%), Burberry (at 28.8%), and Calvin Klein, which sports the highest ratio of Likes to Sales (at 76.2%). These three top SEM advertisers grew their combined online sales last year 16%, two percentage points above the growth rate for the Online Apparel 250. However, the two fastest growing e-retailers in the list of apparel merchants with the biggest Facebook audience were shoe manufacturers, Nike and Adidas, which grew web sales last year by 30.4% and 39.9%, respectively. While their Facebook Likes-to-sales ratios were an impressive 2.38% and 3.58%, they were nonetheless well below the ratios of the very top Facebook marketers.

In sum, Facebook is likely the most important form of digital marketing for apparel e-retailers, and those merchants who give it short shrift do so at their peril. Still, a major presence on Facebook isn’t the only factor that explains why one apparel e-retailer grows faster than another.

MARKETING

Social Media Marketing

Company Top 1000 Rank Subcategory 2015 Web Sales 2015 Growth Facebook Likes

L Brands Inc. 28 Sleepwear/Lingerie $1,681,724,000 3.3% 26,945,163

Nike Inc. 47 Shoes $1,000,000,000 30.4% 23,766,628

adidas America Inc. 66 Shoes $638,000,000 39.9% 22,862,678

Levi Strauss & Co. 194 General Apparel $151,897,200 16.2% 22,476,776

Burberry Ltd. 356 General Apparel $59,160,000 16.0% 17,044,651

Macy’s Inc. 6 Department Store $6,210,000,000 15.0% 14,135,201

Forever 21 272 Women $91,530,918 28.0% 12,828,326

Kohl's Corp. 19 Department Store $2,818,400,000 30.0% 11,416,535

American Eagle 63 General Apparel $720,000,000 20.0% 11,058,279

Calvin Klein Inc. 718 General Apparel $14,131,780 13.0% 10,781,389

Most Facebook Followers $13,384,843,898 18.6% 17,331,563

All Apparel $50,401,772,630 14.0% 1,600,200


Facebook Moves the Growth Needle for Online Apparel Merchants with the Biggest Facebook Audience


JunoActive by Junonia 978 Plus Size $5,000,000 -61.2% 1,761

ShoeZoo.com LLC 689 Shoes $15,276,000 20.0% 904

Captain Dave's 952 Specialty Apparel $5,911,663 20.0% 838

Gotham City Online 893 Shoes $7,542,551 10.0% 753

Trend Nation LLC 548 Fashion Accessories $25,000,000 25.0% 656

Historical Emporium Inc. 895 Uniform/Tradeswear $7,474,000 -0.5% 625

Kaehler Luggage 719 Handbags/Luggage $14,056,350 5.0% 485

Prep Sportswear 515 Sportswear $27,089,820 14.0% 328

StrongerRx Worldwide Corp. 998 Sportswear $2,250,000 7.1% 164

Phoenix Leather Goods 910 Handbags/Luggage $7,030,000 12.8% 83

Fewest Facebook Followers $116,630,383 5.6% 660

All Apparel $50,401,772,630 14.0% 1,600,200


While the 10 Apparel Web Merchants With the Lowest Facebook Presence Suffer as a Result

25

How Twitter Impacts Online sales

Fully six of the 10 apparel web merchants with the most Facebook Likes are also listed among the 10 apparel e-retailers with the highest number of Twitter followers, suggesting that marketers with a strong affinity to social networking want to be well represented on both platforms. But the two do not appear to be equal in their impact on online apparel sales. The 10 apparel e-retailers with the highest number of Twitter followers grew their combined sales last year by 15.9%, faster than average and 2.5 points above the 10 apparel e-retailers with the lowest ratio of Twitter followers to sales. The former group has a ratio of Twitter followers to sales of .09% and the later has a ratio of .0002%. The average Twitter followers-to-sales ratio for the Online Apparel 250 is again in between these extremes at .0005%, but much closer to the bottom Twitter users than the top. And what about those apparel e-retailers that occupy both lists of leading social network

marketers. They are L Brands, Nike, Adidas, Burberry, Calvin Klein and Forever 21. Their combined growth in sales in 2015 was 16.7%.


L Brands Inc. 28 Sleepwear/Lingerie $1,681,724,000 3.3% 9,199,874

Burberry Ltd. 356 General Apparel $59,160,000 16.0% 6,032,879

Nike Inc. 47 Shoes $1,000,000,000 30.4% 4,008,700

adidas America Inc. 66 Shoes $638,000,000 39.9% 2,587,832

Calvin Klein Inc. 718 General Apparel $14,131,780 13.0% 2,364,726

Forever 21 272 Women $91,530,918 28.0% 2,198,035

TOMS Shoes Inc. 247 Shoes $104,976,000 8.0% 2,169,819

Threadless.com 387 Custom Apparel $49,680,000 8.0% 2,152,307

Ralph Lauren Media 53 General Apparel $890,000,000 14.1% 1,711,047

Andrew Christian 649 Men $17,415,111 15.3% 1,396,964

Most Twitter Followers $4,546,617,809 15.9% 4,227,773

All Apparel $50,401,772,630 14.0% 249,168


10 Apparel Web Merchants with the Most Twitter Followers Grow Faster than Average


Kaehler Luggage 719 Handbags/Luggage $14,056,350 5.0% 466

Dungarees.net 525 Uniform/Tradeswear $26,335,000 15.0% 445

Phoenix Leather Goods 910 Handbags/Luggage $7,030,000 12.8% 394

ShoeZoo.com LLC 689 Shoes $15,276,000 20.0% 363

Massey's Outfitters 968 Sportswear $5,338,503 5.0% 341

ShopTV 848 Specialty Apparel $9,365,625 20.0% 325

Children's Wear Digest Inc. 625 Children $18,899,572 7.1% 276

BareBones WorkWear 696 Uniform/Tradeswear $15,080,000 30.0% 245

LogoUp.com Inc. 816 Sportswear $10,304,000 12.0% 225

BootBay.com 862 Shoes $8,788,000 4.0% 11

Fewest Twitter Followers $130,473,051 13.4% 309

All Apparel $50,401,772,630 14.0% 249,168


And Those with the Fewest Twitter Followers Lag Slightly Behind the Growth Curve

26

Paul Fredrick is a respected brand among men’s apparel. The company had made strides over the years to effectively reach its online shoppers, but recently decided to up its communications game.

“Our biggest priority was to improve the relevance of our email communication to customers,” says Scott Drayer, vice president of marketing at Paul Fredrick. “And we thought that through implementing campaign automations, we could improve the relevance and speed of communication–which would be beneficial for both Paul Fredrick and our customers.”

By using automated campaigns, such as cart recovery and browse recovery, Paul Fredrick is among innovative retailers finding ways to become more relevant to shoppers.

“Technology is allowing apparel brands to take better command of their conversion funnel,” says Susan Wall, vice president, marketing at Bronto, a commerce marketing automation platform provider.

But not all retailers are taking advantage of the benefits these tools offer, likely because they think it may be too difficult to implement and maintain with their limited resources, Wall says.

“And that’s simply not true,” she adds. “With these cart recovery and browse recovery apps, a nontechnical business user can dream up, build and deploy sophisticated, automated marketing plans–without the need for IT help.”

Cart recovery apps allow marketers to send automated, personalized emails to shoppers who put something in their shopping cart and then leave the site without purchasing. “Cart recovery campaigns are all about getting those cart-abandoning customers back to the site to complete that purchase,” Wall says. “These emails are incredibly powerful persuaders.”

So powerful, in fact, that retailers that use Bronto’s Cart Recovery app have seen 53 times the return on investment, according to Bronto’s analysis.

Browse recovery also is a powerful tool, Wall says. It captures and stores product page views for all shoppers and ties that behavior to a known contact or saves the browse activity so it can later be matched to a known contact. With that information, merchants can set up automated emails that will encourage shoppers to revisit their sites and check out those

items they’ve browsed, or offer recommendations for similar items.

“Browse recovery applications have been used by larger commerce marketers, such as Amazon, but have only recently reached the ease and cost effectiveness that allow small and mid-tier merchants the capability,” Wall says.

Wall says these tools are more valuable to retailers now than ever because of the evolving apparel e-commerce landscape. “Customer expectations are changing overall,” Wall says. “They know retailers have a lot of information about them, and they expect those brands to use it to deliver personalized communications. And that’s especially important in apparel, where customers are probably doing more browsing than they are when shopping in other categories.”

These tools have certainly paid off for Paul Fredrick, which uses Bronto’s platform for commerce marketing automation. “Automated campaigns, including cart recovery and browse recovery messages, now account for about 30% of our email-generated revenue,” Drayer says.

Additionally, since implementing Bronto’s platform, Paul Fredrick has achieved more than 70% revenue growth from recurring messages and a 5.6% increase in email-generated revenue year over year from post-purchase email campaigns. And the company’s abandoned cart messages saw a conversion rate of more than 10% in just three months.

Drayer adds that with Paul Fredrick’s old platform, campaigns used to take weeks or more to execute. Now, he says, they only take minutes or hours. “The interface is very user friendly and allows us to accomplish things quite easily–giving us the opportunity to try them much more easily,” he says.

Wall says that rather than feeling intimidated, apparel brands should be empowered by these tools. “Every year, retailers are feeling more pressure to drive revenue, and they need more ways to do that without adding on new resources,” she explains. “With these apps, there is so much more that retailers can do with their existing resources to drive more revenue. And Bronto can help them do that.”

Cart and browse recovery campaigns drive revenue, but don’t require extensive resources

SPONSORED INSIGHT


http://bronto.com/

The Bronto Marketing Platform is the ultimate solution for retailers to drive

revenue through email and cross-channel marketing. With Bronto, it’s easy for

Paul Fredrick to analyze, target and reach their audience with highly-tailored,

personalized messages that get noticed and generate clicks and orders.

For more information, visit bronto.com.

Scott DrayerVice President, Marketing

“Automated campaigns, including cart recovery and browse recovery

messages, now account for about 30% of our email-

generated revenue.”

http://bronto.com/

The answer to that is somewhat surprising. Using the same types of correlations compiled to compare the sales impact of different forms of digital marketing, it appears that last year, at least, men contributed more to faster sales growth than women; youth trumped age and shoppers with smaller incomes were a more important than those with wealth.

SHOPPER DEMOGRAPHICS

WHAT TYPES OF SHOPPERS DROVE THE GROWTH IN ONLINE APPAREL IN 2015?

Dolls KillDesignbyHumans.com

Karmaloop.com

E-Retailers Appealing Most to Youths

Inked Shop Hot Topic

DesignbyHumans.com

E-Retailers Appealing Most to the Non-Wealthy

World Wrestling EntertainmentU.S. Patriot Tactical

NBA

E-Retailers Appealing Most to Men

29

Company Top 1000 Rank Subcategory 2015 Web Sales 2015 Growth Ave. Ticket Return Shoppers Female

Emilie M. Accessories 854 Handbags/Luggage $9,000,000 80.0% $65 13.8% 81.5%

Ulla Popken 592 Women $21,689,806 13.6% $134 39.9% 77.2%

Lolly Wolly Doodle 610 Children $20,250,000 35.0% $60 4.3% 76.2%

Igigi 612 Plus Size $19,950,000 14.0% $120 28.9% 75.9%

Gotham City Online 893 Shoes $7,542,551 10.0% $100 10.2% 74.9%

Dailylook 554 Women $24,700,000 30.0% $150 35.5% 74.7%

Sole Society 485 Shoes $30,371,889 20.0% $60 39.9% 74.5%

JunoActive by Junonia 978 Plus Size $5,000,000 -61.2% $136 32.6% 74.2%

Steals.com 666 Off-Price Apparel $16,731,350 3.3% $32 65.9% 72.9%

Francesca's 653 Women $17,100,000 18.8% $60 38.0% 72.6%

Highest % Female $172,335,596 13.9% $91.69 30.9% 75.5%

All Apparel $50,401,772,630 14.0% $129 37.2% 56%


Company Top 1000 Rank Subcategory 2015 Web Sales 2015 Growth

Ave. Ticket

Return Shoppers Male

World Wrestling Entertainment 558 Sportswear $24,240,000 20.0% $46 61.2% 63.7%

U.S. Patriot Tactical 569 Uniform/Tradeswear $23,504,650 42.1% $127 27.2% 64.1%

NBA Media Ventures 467 Sportswear $32,400,000 5.4% $50 33.4% 64.0%

Lifted Research Group 903 General Apparel $7,213,871 10.0% $80 38.4% 64.0%

Bonobos 245 Men $105,400,000 24.0% $200 49.1% 65.0%

C.C. Filson Co. 685 General Apparel $15,505,689 8.1% $110 37.0% 65.0%

ShoeZoo.com 689 Shoes $15,276,000 20.0% $89 65.7%

RevZilla 281 Sportswear $87,450,000 20.0% $75 60.6% 65.7%

Indochino 454 Custom Apparel $35,000,000 40.0% $650 66.9%

Andrew Christian 649 Men $17,415,111 15.3% $100 50.8% 70.5%

Highest % Male $363,405,319 21.5% $152.70 44.7% 65%

All Apparel $50,401,772,630 14.0% $129 37.2% 44%


While it is often assumed that women are the driving force behind online apparel sales, they were not as closely associated with sales growth last year than men were. It wasn’t even close. The 10 apparel web sites with the highest average percentage of female shoppers had a shopper base that was 75.5% female, well above the average 56% female shopper make-up of the Online Apparel 250. That did not hurt them; it just didn’t seem to help. These 10 heavily female-oriented web sites grew sales last year by 13.9%, just a hair below the average growth rate for apparel e-retailers in this study.

Conversely, the 10 apparel web sites that serve primarily male shoppers did far better. As a group, 65% of their shoppers were men, and they grew their web sales last year by 21.5%—half again as fast as the top female web sites. Growth is not the only difference between the top male and female apparel web sites. Apparel e-retailers with the highest percentage of male shoppers

have a much largest average ticket than their counterparts on the female side of the equation—$153 for the men and $92 for the women. Equally important is how frequently male shoppers return to the favorite sites to shop again. The 10 apparel sites with the highest percentage of male shoppers also have a much higher percentage of return shoppers than have the top 10 female sites—45% to 31%.

Does this gender factor represent another aspect of the sea change occurring in apparel e-retailing? If it continues, it very well might.

At the very least, however, it suggests that many more apparel web sites would be well advised to seek growth by appealing to more men.


The Gender Factor

Apparel Sites With Highest Male Patronage: Faster Growth, Bigger Tickets and More Loyal Shoppers

Apparel Sites With Highest Female Patronage: Average Growth, Smaller Tickets, and Fewer Return Shoppers

30

Company Top 1000 Rank Subcategory 2015 Web Sales 2015 Growth Ave. Ticket Shoppers Under 45

Dolls Kill 394 Women $47,250,000 35.0% $200 80%

DesignByHumans.com 954 Custom Apparel $5,851,630 10.0% $20 79%

Karmaloop.com 149 General Apparel $224,953,012 4.0% $105 79%

Express Design Group 960 Specialty Apparel $5,677,149 1.0% $57 77%

Zumiez 220 Sportswear $124,905,240 14.0% $55 76%

American Apparel 338 General Apparel $62,050,000 0.0% $79 76%

Sneakerhead.com 759 Shoes $12,769,000 13.0% $100 76%

World Wrestling Entertainment 558 Sportswear $24,240,000 20.0% $46 76%

Uniqlo USA Ltd. 354 General Apparel $59,573,005 35.0% $120 75%

Everlane 314 General Apparel $72,000,000 100.0% $125 75%

Youngest Shoppers $639,269,037 17.2% $90.70 77%

All Apparel $50,401,772,630 14.0% $129 61%


Apparel E-Retailers With Youngest Shoppers Growing Faster Despite Smaller Average Tickets

Company Top 1000 Rank Subcategory 2015 Web Sales 2015 Growth Ave. Ticket Shoppers Over 45

Christopher & Banks Corp. 347 Women $60,270,000 23.0% $50 66%

StrongerRx Worldwide Corp. 998 Sportswear $2,250,000 7.1% $55 65%

Ulla Popken 592 Women $21,689,806 13.6% $134 64%

Gotham City Online 893 Shoes $7,542,551 10.0% $100 62%

The Talbots 137 Women $250,000,000 19.0% $118 62%

Benchmark Brands 226 Shoes $120,508,692 3.0% $88 61%

Stein Mart 586 Off-Price Apparel $22,100,000 70.0% $77 60%

The Bon-Ton Stores 169 Department Store $192,662,950 15.0% $90 58%

Phoenix Leather Goods 910 Handbags/Luggage $7,030,000 12.8% $30 58%

SunFrog Shirts 717 Custom Apparel $14,160,000 18.0% $30 57%

Oldest Shoppers $698,213,999 15.8% $77.21 61%

All Apparel $50,401,772,630 14.0% $129 40%


Apparel E-Retailers With Oldest Shoppers Growing Faster Despite Smaller Average Tickets

The 10 apparel web sites that have the highest percentage of shoppers under the age of 45 (77%) are growing faster than apparel e-retailers with the highest percentage of such shoppers over 45 (61%). But the web sites at both ends of the age continuum are growing faster than the average for all apparel web sites. Those with the most youthful shoppers grew 17.2%, which compared to 15.8% for those with the highest share of older shoppers and 14% for the Online Apparel 250, which as a group serve a shopper base than is 60.7% composed of shoppers under 45.

Surprisingly, both the youngest- and oldest-oriented apparel web sites achieve better than average growth rates despite having average tickets that are below the $129 average purchase for all apparel e-retailers. Those with the youngest shoppers achieved an average ticket of $91 and those with the oldest shoppers settled for an average ticket of $77. That doesn’t mean that lower age tickets equate to higher growth rates across the board. As explained above, the 10 apparel web sites with the lowest average tickets ($33) also suffered a growth rate nearly half that of the average growth of the Online Apparel 250. The key to understanding the faster growth rates of the apparel sites catering mostly to the young or mostly to old shoppers is that while both age groups spend below average on each visit, they shop more frequently online.


The Youth Factor

31

Company Top 1000 Rank Subcategory 2015 Web Sales 2015 Growth Ave. Ticket Over $60K

Stuart Weitzman 478 Shoes $31,320,000 4.6% $90 67%

RueLaLa.com 80 Flash-Sale Apparel $504,000,000 5.0% $150 66%

Tumi 393 Handbags/Luggage $47,840,000 15.0% $290 66%

Gotham City Online 893 Shoes $7,542,551 10.0% $100 65%

Gilt Groupe 69 Flash-Sale Apparel $600,000,000 -4.8% $360 64%

Bag Borrow or Steal 634 Fashion Accessories $18,301,841 4.0% $80 64%

Peruvian Connection Ltd. 461 Women $32,800,000 1.1% $312 63%

Tory Burch 120 Shoes $287,500,000 25.0% $246 63%

BCBG Max Azria Group 431 Women $38,957,949 6.4% $165 62%

Bonobos 245 Men $105,400,000 24.0% $200 62%

Highest Income Shoppers $1,673,662,341 5.3% $199.30 64%

All Apparel $50,401,772,630 14.0% $129 53%


Apparel Sites Catering to Wealthiest Shoppers Have Bigger Tickets But Slower Growth

Company Top 1000 Rank Subcategory 2015 Web Sales 2015 Growth Ave. Ticket Under $60K

Inked Shop 761 Specialty Apparel $12,740,000 30.0% $48 63.7%

Hot Topic 283 General Apparel $86,939,258 10.0% $56 63.0%

DesignByHumans.com 954 Custom Apparel $5,851,630 10.0% $20 62.6%

Dolls Kill 394 Women $47,250,000 35.0% $200 60.8%

Spreadshirt 442 Custom Apparel $37,000,000 0.0% $43 60.0%

J.C. Penney Co. 33 Apparel Department Store $1,415,200,000 16.0% $160 59.6%

Zumiez 220 Sportswear $124,905,240 14.0% $55 59.5%

Emilie M. Accessories 854 Handbags/Luggage $9,000,000 80.0% $65 59.5%

HipsandCurves.com 549 Sleepwear/Lingerie $24,960,000 30.0% $90 59.0%

World Wrestling Entertainment 558 Sportswear $24,240,000 20.0% $46 58.5%

Lowest Income Shoppers $1,788,086,128 16.1% $78.33 61%

All Apparel $50,401,772,630 14.0% $129 47%


Apparel Sites Catering to Lowest Income Shoppers Have Just the Reverse

Apparel web sites with the wealthiest clientele might seem to be on a faster track to growth than e-retailers with the lowest income apparel shoppers. In fact, the reverse is true. It is true that the 10 apparel web sites with the wealthiest shoppers (64% of whom have incomes above $60,000) have a higher average ticket ($199 vs. $129 for the Online Apparel 250). Still, their combined web sales last year grew only 5.3%. By comparison, the 10 web sites with the highest percentage of shoppers (61%) with incomes under $60,000 grew 16.1% last year, three times as fast as the sites with the highest share of customers earning more than $60,000.


The Income Factor

32

All of the sales trends in online apparel retailing point to an inescapable conclusion that selling clothing and accessories online is a very hot market at the moment. But simply competing in this market does not guarantee success. Though apparel is one of the web’s fastest growing markets, it is perhaps the most competitive. Responding to that competition by offering deep promotional discounts has not been a strategy that leads to success. Nor does following the crowd that appeals to the most common types of shoppers with the largest selection of apparel.

Targeting a select group of shoppers with a highly specialized line of apparel—and building and strengthening your brand with a high level of social networking with your shopper base—is a formula more likely to yield success online. Couple that strategy with some level of participation in apparel marketplaces run by Amazon and others, as opposed to going it entirely alone—is perhaps the very best formula for prospering in today’s online apparel market.

THE CONCLUSION

33

Department Store Apparel

Rank Company Name 2015 Growth

1 Macy’s Inc. 15.0%

2 Nordstrom Inc. 20.2%

3 Kohl's Corp. 30.0%

4 J.C. Penney Co. Inc. 16.0%

5 Neiman Marcus 13.0%

6 Hudson's Bay Co. 34.4%

7 Barneys New York Inc. 17.0%

8 The Bon-Ton Stores Inc. 15.0%

9 Von Maur Inc. 19.0%

General Apparel


1 Gap Inc. 1.1%

2 L.L. Bean Inc. 10.0%

3 Urban Outfitters Inc. 32.0%

4 Lands’ End -5.0%

5 J. Crew Group Inc. 8.0%

6 Ralph Lauren Media 14.1%

7 Abercrombie & Fitch Co. 2.5%

8 American Eagle 20.0%

9 Eddie Bauer LLC 15.0%

10 Express Inc. 8.0%

11 Karmaloop.com 4.0%

12 Aéropostale Inc. 0.0%

13 Brooks Brothers 14.0%

14 Boden 13.0%

15 ASOS.com Ltd. 29.0%

16 Levi Strauss & Co. 16.2%

17 DrJays.com 8.0%

18 The Buckle Inc. 11.9%

19 Guess Inc. 14.2%

20 Hot Topic Inc. 10.0%

21 Sundance Catalog Co. 4.0%

22 Trina Turk 30.0%

23 Hugo Boss 5.0%

24 Everlane Inc. 100.0%

25 American Apparel Inc. 0.0%

26 Pacific Sunwear of California 3.5%

27 Uniqlo USA Ltd. 35.0%

28 Burberry Ltd. 16.0%

29 Tilly's Inc. 1.1%

30 A/X Armani Exchange 4.0%

31 Michael Kors 70.0%

32 Jimmy Jazz 18.0%

General Apparel cont.


33 rue21 Inc. 150.0%

34 Roots Canada Ltd. 5.0%

35 Island Co. 12.0%

36 Vince LLC 12.0%

37 Tonzof Inc. 0.0%

38 C.C. Filson Co. 8.1%

39 Hermes International 17.0%

40 True Religion Brand Jeans 20.0%

41 Calvin Klein Inc. 13.0%

42 80sTees.com Inc. 5.0%

43 BlueCotton 18.0%

44 Steven Alan 15.0%

45 Lifted Research Group Inc. 10.0%

46 South Moon Under 6.0%

47 Luxury Divas Corp. -8.6%

THE ONLINE APPAREL 250The largest e-retailers in North America that predominantly sell apparel are ranked here in their primary segment of apparel retailing, along with their 2015 web sales growth rate. These merchants collectively represent 65.5% of the online apparel market in the U.S.

Shoes


1 Nike Inc. 30.4%

2 Foot Locker Inc. 8.8%

3 adidas America Inc. 39.9%

4 JustFab Inc. 42.7%

5 Shoebuy 8.0%

6 Tory Burch LLC 25.0%

7 DSW Inc. 4.0%

8 Deckers Brands 4.8%

9 Shoes.com 149.9%

10 Mason Companies Inc. 8.0%

11 Caleres 3.0%

12 Nine West Holdings Inc. 10.0%

13 Crocs Inc. 15.6%

14 Benchmark Brands Inc. 3.0%

15 TOMS Shoes Inc. 8.0%

16 Wolverine Worldwide Inc. 8.0%

17 New Balance 12.0%

18 Payless ShoeSource Inc. 20.0%

19 PlanetShoes 7.3%

20 Stuart Weitzman LLC 4.6%

21 Aldo Group Inc. 2.1%

22 Sole Society 20.0%

23 Genesco Inc. 13.0%

24 Skechers USA Inc. 0.4%

25 Heels.com 6.3%

26 Boot Barn Inc. 26.0%

27 ShoeZoo.com LLC 20.0%

28 JGear Inc. 10.0%

29 StreetModa.com 17.0%

30 Sneakerhead.com 13.0%

31 Shiekh Shoes 12.0%

32 Cole Haan LLC 25.0%

33 R.G. Barry Corp. 10.0%

34 Shoes of Prey Ltd. 18.0%

35 BootBay.com 4.0%

36 Gotham City Online 10.0%

37 Okabashi Brands Inc. 14.0%

34

Men’s Apparel


1 The Men's Wearhouse Inc. 35.0%

2 Bonobos 24.0%

3 Destination XL Group Inc. 12.5%

4 J. Hilburn Inc. 40.0%

5 Paul Fredrick 4.9%

6 Andrew Christian 15.3%

7 Nine Line Apparel 391.1%

Plus- Sized Apparel


1 Ascena Retail Group 17.6%

2 Eloquii Design Inc. 320.0%

3 Igigi Inc. 14.0%

4 Ashley Stewart Inc. 80.0%

5 JunoActive by Junonia -61.2%Sleepwear/Lingerie


1 L Brands Inc. (Victoria's Secret) 3.3%

2 Bare Necessities Inc. 14.0%

3 Jockey International Inc. 10.0%

4 Spanx Inc. 4.1%

5 Frederick's of Hollywood Inc. 1.0%

6 HipsandCurves.com 30.0%

7 HanesBrands Inc. 20.0%

8 Hourglass Angel LLC 50.0%

9 WebUndies.com LLC -7.1%

Women’s Apparel


1 Yoox Net-a-Porter Group 19.7%

2 Chico's FAS Inc. 2.0%

3 Nasty Gal Inc. 20.0%

4 Revolve Clothing 25.0%

5 The Talbots Inc. 19.0%

6 Kate Spade 44.1%

7 ModCloth Inc. 8.0%

8 The Real Real Inc. 35.0%

9 The Limited 18.2%

10 New York & Co. Inc. 18.0%

11 Bluefly Inc. 9.0%

12 Rent the Runway Inc. 40.0%

13 Forever 21 28.0%

14 AmeriMark Direct LLC 5.0%

15 David's Bridal Inc. 10.3%

16 AMI Clubwear 14.0%

17 Christopher & Banks Corp. 23.0%

18 bebe stores Inc. 19.8%

19 Destination Maternity Corp. 3.0%

20 Lafayette 148 New York 7.3%

21 Dolls Kill 35.0%

22 Reitmans 63.5%

23 Eileen Fisher Inc. 7.6%

24 PromGirl LLC 2.4%

25 BCBG Max Azria Group LLC 6.4%

26 Charlotte Russe Inc. 0.2%

27 Peruvian Connection Ltd. 1.1%

28 DVF.com 7.6%

29 The Wet Seal LLC -2.0%

30 Dailylook 30.0%

31 Skye Associates LLC 60.0%

32 The Red Dress Boutique 60.0%

33 Ulla Popken 13.6%

34 Francesca's 18.8%

35 Yoogi's Closet 5.2%

36 Lilly Pulitzer 15.0%

37 Le Tote Inc. 50.0%

38 WhatSheBuys 22.0%

39 Planet Blue 25.0%

40 Michael Stars Inc. 12.0%

41 BoutiquetoYou.com 15.0%

42 UsTrendy 10.0%

43 KatydidCollection.com 8.0%

44 Long Tall Sally 11.0%

Sportswear


1 Fanatics Inc. 15.0%

2 VF Corp. 20.0%

3 LuLuLemon Athletica Inc. 20.5%

4 Under Armour Inc. 30.0%

5 The Finish Line Inc. 22.6%

6 MLB Advanced Media 3.0%

7 National Football League 8.0%

8 The Orvis Co. Inc. 6.0%

9 Zumiez Inc. 14.0%

10 Road Runner Sports Inc. 6.0%

11 RevZilla 20.0%

12 Discount Dance Supply 17.6%

13 National Hockey League 14.0%

14 Title Nine 7.5%

15 NBA Media Ventures LLC 5.4%

16 Prep Sportswear 14.0%

17 Swell Inc. 10.0%

18 World Wrestling Entertainment 20.0%

19 Speedo USA 25.0%

20 Quiksilver Inc. 8.0%

21 Active Ride Shop 8.0%

22 LogoUp.com Inc. 12.0%

23 MMAWarehouse LLC 7.0%

24 Barstool Sports 71.4%

25 Massey's Outfitters 5.0%

26 Sports World Chicago 30.0%

27 StrongerRx Worldwide Corp. 7.1%

Flash Sale Apparel


1 Gilt Groupe -4.8%

2 RueLaLa.com 5.0%

3 Beyond the Rack 0.0%

4 JackThreads.com 30.0%

5 The Clymb 18.0%

6 DesignByHumans.com Inc. 10.0%

Children’s Clothing


1 The Children’s Place 16.0%

2 Carter's Inc. 18.6%

3 Hanna Andersson Corp. 6.0%

4 The Gymboree Corp. 10.0%

5 Tea Collection 14.0%

6 CookiesKids.com 11.6%

7 Lolly Wolly Doodle Inc. 35.0%

8 Children's Wear Digest Inc. 7.1%

9 BabyEarth 10.0%

10 Swap.com 320.0%

Custom Apparel


1 CustomInk 21.3%

2 Threadless.com 8.0%

3 Spreadshirt Inc. 0.0%

4 Indochino 40.0%

5 SunFrog Shirts 18.0%

6 DesignByHumans.com Inc. 10.0%

35

Uniforms/Tradeswear


1 Duluth Trading Company 15.0%

2 Dungarees.net 42.1%

3 U.S. Patriot Tactical 11.5%

4 Working Person's Enterprises 6.7%

5 Queensboro.com 30.0%

6 BareBones WorkWear 5.0%

7 ChiefSupply.com 12.0%

8 French Toast 25.0%

9 Slate Rock Safety LLC -0.5%

10 Historical Emporium Inc. -0.5%

Outerwear


1 Columbia Sportswear Co. 38.5%

2 LeatherUp.com 1.0%

3 Coolibar Inc. 16.0%

4 Ibex Outdoor Clothing LLC 5.0%

5 Rock/Creek Outfitters 5.0%

6 ScotteVest Inc. 7.0%

Specialty Apparel


1 Sheplers Inc. (Western) 6.0%

2 Betabrand Inc. (Crowdsourcing) 50.0%

3 Tipsy Elves LLC (Humorous) 80.0%

4 Inked Shop (Think Tattoos) 30.0%

5 Galls LLC ("Public Safety") 14.0%

6 Country Club Prep 80.0%

7 ShoptheTV.com 20.0%

8 Captain Dave's (Police) 20.0%

9 Express Design Group 1.0%

10 Ranger Up 25.0%

Fashion Accessories


1 Wild Attire Inc. 3.0%

2 Trend Nation LLC 25.0%

3 The Tie Bar 20.0%

Off- Price Apparel


1 TJX Cos. Inc. 6.4%

2 BHFO Inc. 4.9%

3 Stein Mart Inc. 70.0%

4 Burlington Coat Factory 12.5%

5 Steals.com 3.3%

Handbags/Luggage


1 Coach Inc. -60.0%

2 eBags Inc. 8.0%

3 Vera Bradley Retail Stores -13.2%

4 Tumi Inc. 15.0%

5 Bag Borrow or Steal Inc. 4.0%

6 Kaehler Luggage 5.0%

7 Fashionphile LLC 15.0%

8 Emilie M. Accessories LLC 80.0%

9 6 Pack Fitness 25.0%

10 Phoenix Leather Goods 12.8%

36

Jack LovePublisher, [email protected]

Stefany ZarobanDirector of [email protected]

Bill BriggsManaging Editor, Production & Special Reports, [email protected]

Kat FaySenior Data [email protected]

Copyright:

Copyright 2016, Vertical Web Media LLC. All rights reserved. All Content of the Internet Retailer Behind the Online Apparel Boom, whether in print or digital formats, and all content of the Top500Guide.com database version of this publication (collectively, the “Content”), is owned by Vertical Web Media and protected by U.S. Copyright and by applicable intellectual property laws worldwide. The Content is intended solely for the personal use of Purchasers or Authorized Recipients of said Content, which use is limited to viewing, analyzing and creating reports for internal noncommercial use only.

Purchasers and Authorized Recipients of the Content may share such usage with others within his/ her company, but may not copy, down-load, reproduce, republish, sell, make available, distribute, display, transmit, share, or otherwise distribute any part of the Content to any other persons or entities without the written permission of Vertical Web Media. Purchasers and Authorized Recipients of the Content, in any and all of its formats, may not modify, create derivative works of, reverse compile, disassemble or reverse engineer, republish, sell, license, lease, sublicense, assign, incorporate into published material or any information retrieval system, or otherwise transfer any of the Content without written permission of Vertical Web Media. The trademarks and service marks “Vertical Web Media”, “Internet Retailer®”, and “Top 500 Guide®”, and any logos, designs, slogans or other source-identifying devices, including combinations thereof (excluding any third party owned trademarks or service marks) (“VWM Trademarks”) displayed on print, digital and Top500Guide.com database research products are owned by Vertical Web Media. Behind the Online Apparel Boom print, digital and database research product is designed to provide accurate and authoritative information in regard to the subject matter covered. This research products is sold with the understanding that the publisher is not engaged in rendering financial, legal, accounting, tax or other professional service. Vertical Web Media makes no warranty as to the reliability, accuracy, timeliness, usefulness, adequacy, completeness or suitability of the Behind the Online Apparel Boom content.

Jonathan LoveAssociate [email protected]

Fareeha AliResearch [email protected]

Laura BerriganProject Manager, [email protected]

portal to e-commerce intelligence

In 2011, web sales of web-only e-retailers surpassed web sales by retail chains. The gap has continued to widen as the web sales of web-only retailers grow at a much faster rate than retail chains.


2010

Web-OnlyRetail Chains

CAGR = 13.8%

2011 2012 2013 2014

CAGR = 19.7%

0

30

60

90

120

150

2015 2010 2011 2012 2013 2014 2015

$137.7

$117.0

$105.7

$71.5$73.4

$55.7

$107.8

$96.6

$88.8

$64.6$64.6

$56.4

Retail Chains vs Web-OnlyThe growth rates of web-only retailers compared to retail chains.

INTERNET RETAILER & TOP500GUIDE.COM

Dat

aRANKINGSAnalysis

INSIGHTSon the Global Leaders in E-Commerce

http://www.top500guide.com/

behind the online apparel - internet...

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