Amazon is becoming Macy's biggest threat

Amazon fashion shoesReutersRacks of shoes wait to be photographed at Amazon’s Fashion Studio in the Brooklyn borough of New York. Opening physical retail stores could help Amazon’s fashion business.

Amazon’s apparel business is booming.

The retailer will overtake Macy’s as the top apparel retailer in the US by 2017, according to a recent note by Cowen.

Amazon is especially thriving in accessories like handbags and jewellery, according to the analysts at Cowen.

The company is ramping up selections and offering department store brands like Kate Spade, Tommy Hilfiger, and Levi’s.

Because Amazon doesn’t have to pay overhead costs for retail stores, it can often afford to offer apparel for lower prices.

The increased competition from Amazon comes at a bad time for Macy’s.

Americans are spending less on clothing, and that’s scary news for department stores.

Apparel spending declined 1.5% in June, while department store sales have fallen from a year ago.

Sales would have likely declined more if sportswear and shoes were factored in, according to Clark Schultz at Seeking Alpha.

Baby boomer shopping macy's Keith Bedford/ReutersPeople shop in a Macy’s store in New York.

Macy’s, JCPenney, and Kohl’s have all reported mediocre results in recent months.

The companies have blamed a variety of temporary factors — such as delayed inventory shipments, bad weather, and fewer international tourists — for the slowdown in business.

But Americans are increasingly spending less on clothes and home furnishings, a trend that could hurt the companies’ businesses for years to come.

While lower gas prices mean consumers theoretically have more disposable income, the Commerce Department recently reported that US retail sales were flat as shoppers have other priorities.

A recent report by Morgan Stanley shows that millennials are spending more on expenses like rent, mobile phones, and personal services than young people a decade ago. This leaves less money for buying clothes.

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