Amazon Entering Health-Care Realm
The e-tailer is starting to take hold of online apparel shopping, but now it’s looking to reform health care, too.
Amazon is projected to be nearing the $200 billion annual sales mark, largely aided by growth in sales of apparel, according to a new study, but the e-tailer is also expanding its purview to health care.
Research firm One-Click Retail found that Amazon’s direct and third-party sales of apparel and shoes last year exceeded $8 billion in the U.S., with apparel making up the bulk of that number with $5.5 billion in sales. That’s an increase of 25 percent over 2016.
If the e-tailer continues to grow at its current rate, One-Click said it’s “likely to become the largest clothing seller in the U.S. by the end of 2018.” That title is held by Macy’s Inc.
One-Click vice president Nathan Rigby noted that while apparel is “one of Amazon’s strongest product groups,” its penetration of the sector is still relatively low and “there remains a major opportunity for growth.”
There’s also room in Europe, as Amazon in Germany is estimated to have last year sold 950 million euros in apparel and 170 million pounds in the U.K.
But Amazon is still largely a destination for basics that pose less of a return risk for shoppers, with T-shirts, jeans and underwear making up the most popular items. Luxury fashion is still largely out of its purview.
“Buying clothes is a browsing activity. Most clothes shopping takes places in stores where consumers can browse through a selection of items looking for something that catches their eye and then — and this is important — can try it on before they buy it,” Rigby said. “Amazon’s sales figures reflect these habits.”
While Amazon is attempting to troubleshoot this with last year’s launch of Prime Wardrobe, a program that allows Prime members to pick out items for delivery and not be charged until they try on and decide to keep an item, its success is still unclear.
A representative of Amazon declined to comment on One-Click’s findings. The company is set to release fourth-quarter and full-year financials on Thursday.
One-Click’s figures also show that Amazon is more popular for apparel shopping among men, which Rigby said supports the age-old idea that men “take a more utilitarian approach” to shopping.
“Men’s apparel is both significantly larger and growing at a faster rate than women’s, suggesting that women still prefer to do their shopping in stores,” Rigby added.
Children’s apparel is also a solid area of growth in apparel as well, and One-Click attributed this largely to Amazon’s “core audience” of Millennials starting to have children. In true Millennial fashion, children’s apparel led Amazon’s Handcrafted marketplace last year.
But that’s not to say women’s items are not selling on Amazon, they may just be more interested in things that are harder to find in stores. One-Click said the site’s top women’s apparel item was actually a constructed “full-figure” bra by Lilyette, a brand that offers a wide range of larger sizes, constructions and styles.
Shoes are also a sizable sector for Amazon, with $3.7 billion in sales last year, and like apparel, One-Click said there’s room to increase that number exponentially. Amazon seems aware of this, too, and last year released its first private label shoe line, The Fix. Not long after that, Nike agreed to start selling some of its shoe styles on the marketplace and athletic shoes remained Amazon’s biggest shoe category in 2017.
One-Click noted in its report that sales growth in shoes is “significantly slower than in apparel.” Women’s shoe sales for last year are estimated at $1.7 billion, with men’s close behind at $1.6 billion and children’s estimated at $400 million. Again, showing the roadblock of shoppers wanting to try things on, the top-selling women’s shoe last year was Sanuk’s Yoga Sling flip-flop.
With all of its knowledge of shoppers’ search queries and purchasing habits, Amazon has been increasing its arsenal of private brands, and increasing its promotion of them is seen by research firm L2 as starting to overshadow third-party brands that are popular on the site, like Nike, Adidas and Under Armour.
But just as Amazon is starting to make serious inroads with a consumer market it’s been focused on for years, the company is adding health care to the growing list of industries it will be putting a stake in.
Joined by Warren Buffet’s investment firm Berkshire Hathaway and JPMorgan Chase & Co., Amazon revealed Tuesday that it will be part of a new joint venture focused on “addressing health care” for their employees in the U.S.
Speculation of Amazon’s entrée into the health care industry, known as much for exorbitant costs as being a human necessity, has been rife over the past year, and while the three companies are focusing on their own employees, it seems to be already presumed that whatever developments come from the partnership will likely be a disruptive force in the market and have far-reaching effects.
Moody’s vice president Mickey Chadha said the mere existence of competition will likely cause waves. “There hasn’t been a new competitor with this magnitude of resources in the employee health care space for a very long time,” she said, adding that the industry is notoriously burdened by heavily regulations that will prove difficult for a newcomer.
Buffet, Amazon founder and ceo Jeff Bezos and JP Morgan chairman and ceo Jamie Diamond sounded ready for the challenge, but made clear they’re at an early stage in the partnership.
“The health care system is complex, and we enter into this challenge open-eyed about the degree of difficulty,” Bezos said. “Hard as it might be, reducing health care’s burden on the economy while improving outcomes for employees and their families would be worth the effort. Success is going to require talented experts, a beginner’s mind, and a long-term orientation.”
Buffet added that the group “does not come to this problem with answers” — the problem being rising health care costs that he characterized as “a tapeworm on the American economy.”
Diamond seemed most optimistic. “The three of our companies have extraordinary resources, and our goal is to create solutions that benefit our U.S. employees, their families and, potentially, all Americans,” he said.