Amazon is having a stellar summer. The online retailer reported better than expected earnings at the end of July, turning an unexpected profit. Its stock price is up over 70 percent on the year.
And while Amazon's Prime Day in mid-July drew complaints because it was only available to Prime customers, it brought in more business than Black Friday.
Rebecca Borison, a tech reporter at The Street, says Amazon's retail business has been on a steady incline, and now makes up nearly 70 percent of the company's total revenue. That steady incline is about to vault Amazon into new territory.
The financial services firm Cowen predicts that Amazon will become the top clothing retailer in the U.S. by 2017, moving ahead of Macy's. Cowen expects Amazon's apparel business will bring in just over $16 billion this year, jumping to $28 billion in 2017, then practically doubling to $52 billion by 2020.
Meanwhile, Cowen expects Macy's to hover around $25 billion for years to come.
So what's the secret to Amazon's success? Shipping is a huge factor. Borison says fulfillment plays a huge part in Amazon's apparel growth. Amazon has gotten two-day shipping down pat. Now customers have come to expect that kind of service.
Selection is another major selling point. According to Cowen, Amazon offers around 19 million apparel related items right now, many of them from third-party sellers. Shoppers buy directly from those third-party retailers on Amazon's website, which brings Amazon more cash.
Borison points out that Amazon has a unique position: it offers its own products and third-party products. That lets Amazon increase its selection without running up too much cost, because the margins are much higher with third-party sellers.
Prime has also been a big boost. Amazon says its Prime Day last month -- a sale only for Prime customers -- did better numbers than Black Friday. Prime membership is also bringing customers back to shop again and again. Borison says Prime is really increasing stickiness with consumers. Shoppers who sign up for Prime are more likely to return to Amazon repeatedly, rather than going back to other retailers.
In an effort to compete with Amazon, Macy's just announced that it's expanding its same-day shipping services. Same-day shipping from Macy's and Bloomingdale's will be available in the outer boroughs and western Long Island by the end of this month. It's expected in Manhattan by October. Macy's already has same-day shipping up and running in Northern New Jersey.