eCommerce: Fashion Market

U.S. Online Fashion Stores: Key Insights

• Upward Market Trend: The online fashion market in the U.S. grew most notably during the pandemic, with online net sales of US$88.8 billion in 2019, reaching US$139.4 billion in 2021. Online revenue growth slowed in 2022, but is expected to remain positive.

• Shein and Amazon Take the Lead: Two online stores have a leg up on the others: shein.com and amazon.com. Both draw customers with large product assortments and low prices.

• Generalist Retailers Vie for Top 5 Spot: With changing rankings, Walmart, Kohl's and Macy's are competing for a spot in the top five ranking. As all are established brick-and-mortar retailers with an additional online presence, their online fashion sales are very similar, but Walmart is starting to differentiate itself.

Fashion accounts for more than 21% of ecommerce sales in the United States and the market is expected to grow steadily in the coming years. While consumers have largely returned to physical stores after the pandemic, the benefits of online shopping in the fashion industry remain. Key players in the field operate with a hybrid business model, integrating the best of both worlds to enhance the consumer experience.

Proof of this can be seen in the leading online fashion players in the United States. Even Shein, which started out as an online-only player, is expanding into physical stores. Although Amazon ventured to open its own fashion boutique in 2021, stores were closed again last year.

This insight looks at which strategies are working in the U.S. online fashion market, and how the remaining players in the top five have adapted their businesses to market preferences. 

U.S. Online Fashion Sales Plateau After Pandemic

But first, a broader look at revenues in the U.S. online fashion market:

In line with typical market developments, online fashion net sales experienced a surge during the pandemic, growing from total revenues of US$88.8 billion in 2019 to US$139.4 billion in 2021, representing a CAGR (2019-2022) of 25%. This means that, on average, the market grew by a quarter of its initial value each year during this period. 

After the pandemic, when consumers had the chance to return to physical venues to shop for fashion, online sales slowed accordingly. While the development was still positive, growth was marginal through 2022 and projections for 2023. However, from 2024 onwards, revenue forecasts predict a return to growth for the online fashion market. This encompasses an increase from revenues of US$167.9 billion in 2024 to US$212.5 billion in 2027. For the entire post-pandemic period, this represents a CAGR (2022-2027) of 8%.

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U.S. Fashion Market: Generalist Retailers Are Successful

Utilizing our ECDB data to determine the dominant players in the U.S. online fashion market reveals some unexpected findings. First, Shein holds the top position as a pure online fashion retailer. In contrast, all other stores in the top five operate as generalist retailers, offering a broader range of product categories beyond fashion.

Another notable observation is that three of the top five online platforms for U.S. fashion are established brick-and-mortar retailers with an online presence: walmart.com, macys.com, kohls.com. The presence of these retailers among the foremost online stores reflects the importance of omnichannel business strategies.

Shein Ranks First With 2022 Revenues of US$10 Billion

The leading fashion retailer in the U.S. is Shein, which reached online net sales of US$10.3 billion in 2022.

The basis of Shein’s business model is an acceleration of the fast fashion business strategy, which means that customer demand is instantly relayed to adjust production capacities, bypassing the need for extensive inventory planning and warehousing space.

This method keeps costs down, reduces waste from excess inventory, and speeds up the production cycle. But it is also the source of growing criticism.

Criticism: Worker’s Rights, Design Copyright, and Tariff Evasion

With instant consumer feedback technology, more products can be offered quicker and at lower prices than in the traditional model.

But there are less obvious costs elsewhere: To ensure high-volume production at low cost, workers produce garments in conditions widely considered inhumane, working long hours for very little pay. Also common among low-cost fashion brands are allegations of copyright infringement, meaning that designs are taken from larger brands and lesser-known designers without crediting them.

Growth Despite Criticism

Shein’s global online net sales grew at a compound annual growth rate (CAGR 2019-2021) of 133.7% during the pandemic, meaning that the company increased its revenue by more than 1.3 times its starting value each year during this period.

After the pandemic, growth continued, but at a slower pace. Starting in 2022 with online net sales of US$26.2 billion, shein.com still managed to increase revenues by more than one third its value each year, at a CAGR (2022-2024) of 35.5%. Taken together, this represents a CAGR (2019-2024) of 80.7% for the entire period.

How does Shein manage to grow so consistently? It is due to the company's retail strategy, which lures consumers with low prices, as well as extensive discounts and giveaways, alongside a highly trend-driven product assortment that swiftly changes and adapts to consumer demand in real time.

Almost Half of Gen Z Online Shoppers Have Purchased Items from Shein.com 

The company is particularly popular among young consumers, as evidenced by data from Statista's Consumer Insights. Below is the frequency of awareness and usage of shein.com among U.S. consumers, broken down by generational cohort.

The data shows an inverse relationship between age and familiarity with Shein. Younger consumers, especially Gen Z, exhibit higher recognition and usage than older users: 83% are aware of Shein, with 41% having made a purchase. While 77% of millennials recognize Shein, only 29% have shopped there. Recognition drops to 58% for Gen X, with a 19% purchase rate. For baby boomers, 39% are aware and just 12% have bought from Shein.

Shein's business model and extensive social media marketing is responsible for the brand's tremendous success with younger users, and has propelled it to the top of the U.S. online fashion market. In fact, Shein has surpassed the top-selling online retailer in the West in terms of fashion revenue, demonstrating its success with consumers.

Amazon: Fashion Revenues Bested by Shein

Amazon’s online fashion revenues used to surpass Shein’s until 2021. But in 2022, Shein took the lead, generating US$10.3 billion to Amazon’s US$8.4 billion in online fashion revenues.

And that trend is set to continue. While Shein’s U.S. online net sales are forecast to reach US$14.3 billion by 2023, Amazon’s online fashion growth is set at a lower rate, totaling US$9.3 billion. Finally, the gap is expected to widen even further in 2024, when Shein’s U.S. online net sales are expected to exceed Amazon’s by a difference of US$8.9 billion.

While Amazon has opened two Amazon Style fashion retail stores to complement its online offering in a hybrid bid, both stores were shuttered again at the end of 2023. The move came amid a wave of store closures in the books and devices segment, as well as layoffs to cut costs. The closure of the Amazon Style locations shows that while the stores were praised for their innovative setup and new technology, consumer response was not enough to expand the store concept.

Recent collaborations, such as with luxury secondhand online store Hardly Ever Worn It, show that Amazon is recalibrating its approach to succeed in online fashion, despite temporary setbacks and market shifts. Three other retailers on the list are also working to find a balance between online and offline sales.

Three Generalist Offline Stores With an Additional Online Presence

Walmart, Macy’s and Kohl’s are three generalist retailers that operate primarily offline, but their online offerings are increasingly supplementing their overall revenues. This growth has been particularly evident since the pandemic, but the chart below shows that fashion online net sales for these three retailers are stagnating.

As of 2022, walmart.com is projected to distinguish itself from the other two online stores. Consequently, Walmart's expected online net sales growth through 2023 corresponds to a proportional decline in sales for macys.com and kohls.com, demonstrating their interchangeability and consequent competitiveness.

Recent initiatives by Walmart, Macy's, and Kohl's to appeal to a younger demographic coincide with Shein's rise in the global fashion market. As Walmart is the retailer that stands out for integrating modern features such as live shopping, this points to the importance of adapting one's offering to consumer preferences and market trends.

Closing Thoughts: U.S. Online Fashion

A discussion of the five best-selling online stores in U.S. fashion shows that generalist retailers are leading the way, with four out of five stores having a generalist product assortment. The online store that is outperforming all others, however, is low-cost competitor Shein, which exceeded online net sales of US$10 billion in 2022 in the U.S. alone.

Shein's meteoric rise in the U.S. market reflects the importance of a trend-led product assortment and effective marketing, with younger users driving the trend through social media activity and low price points.

Sources: About Amazon: 1 2 – CNBC: 1 2 3 4 – Fashion Network – Forbes – PYMNTS – Reuters