Amazon Targets New Space

Amazon Targets New Space

Amazon Targets New Space

Amazon.com (AMZN) is renewing focus on its apparel, shoes and accessories segment. The company started out as the largest online retailer of books and has now diversified into multiple other markets that make it one of the most popular online shopping destinations.

In a letter to apparel sellers earlier this month, Amazon outlined a new feed system designed to bring in more data from sellers that could make the clothes search easier. Amazon's current system is already pretty user-friendly (judging from experience at its Denim store), but the data collection at this time is targeted at items that could be a bit trickier to sell than jeans.

Amazon also acquired Zappos last year, which added a top online retail company focused on the shoes segment, immediately bringing on board relevant expertise and patrons. Zappos continues to sell shoes and clothes, although possible additions could be other fashion items, like accessories and handbags.

Amazon is targeting the 2010 holiday season, when it anticipates to make a splash in the apparel/shoes/accessories category. The company intends to gather sufficient data by October, which is expected to enhance the entire user experience from ease of choosing to quick close of sales, which would definitely help drive traffic to its stores during the busy season.

As things stand now, Amazon's technology is still well ahead of its key competitor, eBay Inc. (EBAY), which is also sprucing up its efforts in the segment. Things definitely look better for Amazon than eBay right now and we expect the company to take share in this emerging category.

According to Forrester Research, apparel, shoes and accessories will make up one of the 3 biggest drivers of online retail sales over the next five years. The other two segments are anticipated to be consumer electronics and consumer hardware/software/peripherals.

The research firm expects total U.S. online retail sales to grow at a compound annual growth rate ("CAGR") of 10% from 2009 to 2014. Several western European countries are expected to see a CAGR of 11% during the same period.

While the overall online retail growth rate does not appear to be that exciting, the top three categories (which currently make up 40% of total online retail sales) will no doubt grow faster.

We are neutral on both Amazon.com and eBay Inc.

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