Chicago In retail, showrooming has not hit shirts yet.
Showrooming, the retail term for shoppers who try a product, then buy it cheaper on Amazon.com (AMZN.O) or other websites, has driven retailers to the point of hiding barcodes, improving their own websites and coming up with methods to get people to complete their purchase in the store.
But brand-name clothing retailers have an advantage over companies that sell items you can buy anywhere, like televisions and home goods.
"Specialty apparel retailers are some of the least affected by showrooming since the more exclusive the product is, the harder it is to showroom," said Joel Bines, managing director of the retail practice at advisory firm AlixPartners.
That, in turn, has helped retailers like Gap Inc (GPS.N) and Lululemon Athletica Inc LLL.TO find favor with investors.
A survey of 2,010 adults conducted by AlixPartners showed consumers who shop for apparel were among the least likely (35 percent) to go to other websites after they liked an item at a store, compared with 42 percent of electronics shoppers and 41 percent of those looking for accessories like watches and jewelry.
"If you look at some of the most successful (clothes) companies in the past few years, they are those that have that moat around them," said hedge fund manager Shawn Kravetz, who runs Esplanade Capital in Boston.
He cites yogawear maker Lululemon and Gap as good examples of how it can help to have clothes that are not sold elsewhere.
If a shopper wants to buy a Banana Republic or Nordstrom (JWN.N) shirt from the latest season, they have to buy it either from their stores or online shop.
Discount retailers like Zappos, Amazon and others stock brand-name products, but the merchandise is often not from the current season or limited in colors and sizes.
"I don't need to see if a television fits my body shape when I buy a TV," said Joe Megibow, senior vice president of omni-channel e-commerce at American Eagle Outfitters (AEO.N). The teen clothes retailer has seen better sales than its peers over the past year.
"I can get a sense of the TV and I'm good. Clothing is different. Does it fit me, is it my style, do I like the quality of the material and how it is put together. There's so much more with apparel that matters," he said.
That is the part of the reason, analysts say, why online-only clothing companies like Bonobos and Gap's Piperlime have started opening brick-and-mortar stores or tied up with retailers to sell their products in physical locations.
Choice and easy availability are the two most important aspects of shopping, especially during a holiday season that has lost steam after what looked like strong Thanksgiving sales.
Estelle Tran, an "impulsive" shopper in her twenties, agreed.
"If I want to buy books, tech items, DVDs, I would definitely buy online. For clothes, I would rather (visit stores) as it is also a fun experience to try on clothes," said the Chicago-based finance auditor.
Tran said she would definitely check prices online if she was spending more than $100.
Luxury and high-priced items can be more susceptible to showrooming, because pricing is what drives the behavior, said Marshal Cohen, chief economist at the consultancy NPD Group.
"With electronics and certain consumer goods it is very easy to compare specific brands across multiple websites. But (showrooming is) happening and it will be growing. If a (clothes) retailer isn't taking it seriously, they are going to fall behind," said Bolette Andersen, principal in KPMG's retail industry practice.
ROOM TO GROW
Some investors are betting on apparel stocks because of their relative insulation from the threat of showrooming.
While the S&P Apparel Index .15GSPRETA has returned a sizzling 27.71 percent year to date, according to Reuters data, far outperforming the S&P 500 .SPX, which is up 14.80 percent, more gains may be coming.
"We still think there's plenty of room to grow," said Brian Peery, co-portfolio manager at Hennessy Funds. Its growth fund, heavily weighted in apparel and consumer discretionary goods shares, is up 30 percent over the year.
"As we look into the sector 12-18 months, we continue to buy the discretionary area. Two of our heaviest investments would be Foot Locker Inc (FL.N) and TJX Companies Inc (TJX.N)," he said.
Discount chains like TJX and Ross Stores (ROST.O), which sell branded clothes at low prices, have benefited from the surge in bargain-seeking shoppers.
Even the stocks of retailers like Gap and American Eagle that have staged or are staging turnarounds have gotten a good boost over the year. Gap has soared 69 percent and American Eagle is up 31 percent.
R. Shawn Neville, president of Avery Dennison retail branding and information solutions, said another reason that apparel and to a broader extent other consumer discretionary stocks do well is because of their sustainability.
"In uncertain times, investors look towards market segments that have strong underlying demand which are more stable, like the apparel industry," Neville said.
Moreover, in times of economic uncertainty, shoppers can still afford clothes and shoes, as opposed to a new car, home, or expensive vacations, helping apparel stocks do well, he said.
"Though Amazon is clearly stealing some share in various categories, clothes retailers, say Abercrombie & Fitch (ANF.N) isn't going anywhere. They're not being run out of the shopping mall," said Esplanade's Kravetz.
(Editing by Jeffrey Benkoe)
Trending On Reuters
Pakistan, Indonesia, the Palestinian territories, Bangladesh, and Nepal attract the highest rates of attempted malware attacks, according to Microsoft Corp. Full Article