Business
Amazon Leans into Tipping Point for Online Apparel
SEATTLE—If future anthropologists want to study the rubble of early-21st-century retail, a good place to start will be what Amazon.com did to apparel shopping in the few years before and after 2017.
The outlook for physical retailers is grim, the sector roiled by store closings, layoffs and bankruptcies. This year, Amazon will surpass Macy’s, which last year announced it would shut 100 stores, to become the largest seller of apparel in America, by several analysts’ estimates.
It is looking at ways to keep expanding, too. Amazon is exploring the possibility of selling custom-fit clothing, tailored to the more precise measurements of customers, and it has considered acquiring clothing manufacturers to further expand its presence in the category.If there are tipping points in retail — moments when shopping behaviour swings decisively in one direction — there’s a strong case to be made that apparel is reaching one now, with broad implications for jobs, malls and shopping districts.
Those moments often occur around the time that online shopping reaches about 20 per cent of total national retail spending in a category, the research firm L2 has concluded after studying the evolution of e-commerce. Online clothing and accessory shopping’s share of retail in the U.S. hit 21 per cent last year, according to estimates by Cowen and Co., a stock research firm.
“I do think this year is the year apparel e-commerce takes off,” said Cooper Smith, an analyst at L2.
Apparel has been something of an e-commerce laggard. In years gone by, buying clothing over the Internet was only for the fearless, with most shoppers unwilling to take the risk that a dress or a pair of shoes would fit poorly or look terrible on them.
It took time, but shopping habits for clothing are shifting profoundly.
Amazon’s solution was to improve clothing selection, pour money into photography to give Internet shoppers a better representation of garments and offer free returns on most apparel so customers could order untroubled by the thought of sending items back.
Pia Arthur, an Amazon spokesperson, declined to comment for this article.
Amazon is by far the biggest beneficiary of e-commerce growth, accounting for 43 cents of every dollar spent online in the U.S. last year, estimated Slice Intelligence, a company that measures online shopping.
But there’s little chance Amazon will come to have in apparel the crushing dominance it has established in, say, books, because of the way clothing sales are fragmented among so many retailers. Amazon accounts for half the country’s consumer book market on a unit basis, according to the Codex Group, a book market research firm.
Last year, the company’s gross merchandise apparel sales — Amazon’s direct sales of clothing plus the commission it collects on sales by independent merchants on its site — were $30 billion, or 6.6 per cent of the market, Cowen estimated. By 2021, the firm has forecast, Amazon will account for just over 16 per cent of apparel sales.
“We look at it as winner take most,” said John Blackledge, an analyst at Cowen. “That’s their game.”
Still, Amazon faces hurdles in its apparel business. Some apparel makers have been frustrated by the prevalence of counterfeit versions of their products on Amazon, peddled by independent merchants.
Last year, Birkenstock, the sandal maker, stopped selling its footwear directly to Amazon, becoming one of the biggest brands to cease doing business with the retailer. Since then, Birkenstock has warmed somewhat to Amazon, allowing authorized independent sellers to continue to sell its products on the site.
“We have seen improvements on the Amazon marketplace addressing our core issues of unauthorized sellers and counterfeit goods,” said Dania Shiblaq, a spokesperson for Birkenstock USA, adding that the company still does not directly sell to Amazon.
The idea of buying clothing without first trying it on is still a deal breaker for many shoppers, even with the security of free returns. Amazon executives look at such hurdles as “friction,” which they are constantly seeking to eliminate.
“Anytime you make something simpler and lower friction, you get more of it,” Jeffrey P. Bezos, the company’s chief executive and founder, wrote in a letter to shareholders in 2007, after the company made getting a book nearly instantaneous with the original Kindle.
One idea Amazon is considering to lubricate apparel shopping: custom-fit clothing. The company’s apparel team is exploring the possibility of offering “on-demand” clothing that would be made only after a customer submitted an order, using the customer’s precise measurements, according to a person briefed on the discussions who asked for anonymity because they were confidential.
The group has described its intentions as “five-day custom” in an internal presentation, the source said. In April, Amazon received a patent for on-demand apparel manufacturing, though that is no guarantee it will pursue the plan.
If it works, the plan could make shoppers happier by delivering clothing that looks better on them, while also addressing the ruinous consequences that returns can have on the profits of Internet apparel retailers. It’s not uncommon for shoppers to order three sizes of a shirt or dress and send back two.
About 35 per cent of all apparel orders are returned, said Stefan Weitz, chief product and strategy officer for Radial, a company that runs e-commerce operations for other brands and retailers.
“That has huge impact on customer experience and satisfaction and also on that retailer’s P and L,” said Drew Green, chief executive of Indochino, an Internet retailer of custom-fit suits, referring to profit-and-loss statements. Green said fewer than 1 per cent of Indochino’s orders were returned.
Amazon could use its growing private-label apparel business as the springboard for any custom-fit clothing it starts. It already sells cashmere sweaters, dresses and men’s suits under brands like Buttoned Down, Lark & Ro and Paris Sunday.
Amazon has also considered acquisitions to increase its apparel manufacturing expertise. According to the person with knowledge of discussions within the company’s apparel group, Amazon has considered buying Indochino. This person also said it had mulled a bid for American Apparel during its bankruptcy auction, which Reuters first reported in January. (A Canadian apparel company, Gildan Activewear, won the auction.)
Green declined to comment about whether Amazon had made an offer for Indochino.
There’s still the matter of how Amazon would get a customer’s precise measurements. Indochino’s answer has been to coach customers to do the measurements themselves, and to open showrooms where Indochino employees can do the measurements for them. (Its 13th store opened on Friday.)
Amazon has developed a camera and scanning software designed to automatically determine customers’ measurements and upload them to their accounts, according to the person familiar with Amazon’s apparel talks, who saw an early prototype of the device.
The source said the device resembled a camera product that Amazon announced last week, Echo Look, the latest in a line of gadgets powered by the company’s Alexa intelligent assistant.
Amazon has described the device as a kind of digital fashion adviser, allowing people to upload photographs of themselves to get style recommendations through a combination of software algorithms and human fashion specialists. The company declined to say whether the device would be updated in the future to capture clothing sizes for customers.
It is that time of the year for you to renew your mortgage and all you want to do is sign the papers and get done with it. However, you shouldn’t be in a haste to renew your mortgage without doing a little research.
A good fraction of Canadian homeowners—about 27 per cent of them—who carry a mortgage have automated their renewal process, according to a survey by Angus-Reid. While the aim is most likely to avoid any penalties or stress that comes with missing a renewal, this approach can prove costly. Automatically renewing your mortgage means you lose out on great opportunities to save money and take further advantage of any new products and features on your mortgage that may be advantageous to you.
Typically, mortgage renewals occur at the end of your existing mortgage term and the most popular period is usually 5 years—though it can range from 1 to 10 years. Depending on your mortgage type, with a fixed rate mortgage calculator, you can easily estimate your monthly mortgage payment and know how much you’re due on your next payment.
However, before you make your next mortgage payment, here are some important tips that would help you get the most out of your mortgage renewal.
1. Review your current goals
It is possible that your financial needs must’ve changed since you first applied for a mortgage. Therefore, before your sign that renewal slip, you may want to take another look at your financial goals.
For instance, if you’re currently on a five-year fixed mortgage, your renewal would likely come with another five-year fixed mortgage. If you’re certain you would be staying in your home for that amount of time, then renewing it would be great. However, if you have plans of relocating to a different city in a couple of years, then a shorter mortgage term would be best.
Other financial goals that you may want to consider is whether you want to refinance your mortgage or access some equity with Home Equity Line of Credit (HELOC).
2. Ask for better rates
Before your mortgage renewal is due, your current lender would most likely try to get you to renew early. Typically, you will receive a renewal letter from your lender 6 months and 4 months before your renewal date. While they may offer you a rate that is lower than what you currently pay, it is often not the best rate you can get.
The renewal offer given to you by your lender is often not the best deal and in an increasing rate environment, negotiating your renewal rate is even more important. Signing the renewal letter right away because of some discount offered by your lender might seem tempting but you are potentially losing out on a lot of savings by not considering other available options.
3. Shop early for better rates
Rather than just accepting your current lender’s renewal offer immediately, you can start searching early for other providers and comparing their rates to see which one is most favourable for you. If you begin at least four months before your renewal due date, you will be giving yourself enough time to make a switch, if necessary.
While there are no major penalties if you choose to switch providers, there are some charges incurred that are typically covered by your new mortgage provider. You may not be able to change your mortgage provider until the actual renewal date, but this would give you enough time to find the right product and sort out every required paperwork.
4. Take advantage of a renewal rate hold
A mortgage renewal rate hold allows you to lock in a particular mortgage rate before your renewal is due. Normally, rate hold can last for about 90 to up to 160 days, protecting you from increases in interest rates.
During this time, you can comfortably compare rates months before your renewal date just to find a better deal. If the interest rates increase during your rate hold period, you would have nothing to worry about. Also, should the interest rates decrease, you can still negotiate for a new lower rate with your lender.
5. Switch mortgage lenders
Cutting ties with your current lender can be difficult—at least that’s the impression most lenders give to home buyers. But don’t be afraid of switching lenders, especially when you’ve found a better rate elsewhere.
Remember, getting a better deal on your mortgage can save you few thousands of dollars. Switching providers might mean you have to go through requalification but that is not a problem as long as you begin the process early enough before your renewal date.
6. Add some extra on your principal
If you’re looking for the best time to make a bigger payment on your mortgage, then renewal time is the best since there are no limits on pre-payment.
Making a lump-sum payment can put a huge dent in your mortgage amortization and you would be saving a lot of money on your total interest cost.
7. Consider switching to a broker
If you’re not already using a mortgage broker, then renewal time might be the best time to consider making the switch. According to a study by the Bank of Canada, most homebuyers who used a broker got a much lower mortgage rate than those who used one of the big banks.
Mortgage brokers are a better alternative because they have access to several lenders who offer different competitive rates, unlike the bank. Therefore, if you’re looking to get the best deal on your mortgage, switching to a broker might be a great move.
The path to buying a house isn’t the cheapest nor the easiest. Since the COVID-19 pandemic began last year, there has been several opportunities and challenges for first-time home buyers in the Canadian real estate market.
For some, sudden changes to their lifestyle created better opportunities to improve their savings plan while for others, such plans were halted due to the economic impact of the pandemic and rising home prices in real estate markets across Canada. According to the Canadian Real Estate Association, over 550,000 properties were sold in Canada last year, a new record for the country’s real estate market and a huge boost for the Canadian economy.
If you are a prospective buyer, looking to purchase a home within the year or just planning for the future, having access to the right information, resources and support can be crucial during your home-buying process. Many people—especially first-time home buyers—easily fall into home debt due to a lack of proper research into the market.
There are some important factors to consider in ensuring that your mortgage works best for you by not only saving you time but money. However, before you start searching for a home to buy, you should have a good idea of just how much you’re able to afford for one.
Checking your credit score using a Canadian mortgage calculator before applying for a mortgage, would give you a realistic price range and equally inform you of your chances of getting your mortgage approved.
Here are some important mortgage tips to help you save time and money while house hunting:
1. Know the penalties on your mortgage
There are several reasons why anyone would want to sell their property. From changes in your financial or marital status to getting transferred to a new location due to either school or work. However, these circumstances could lead to you selling your home and breaking the terms of agreement on your mortgage.
If you’re on a variable-rate mortgage with one of the major banks in Canada, to successfully break your mortgage, you would need to pay about 3 months’ worth of interest. For a fixed-rate mortgage, the cost is much higher than 3 months of interest and there’s also the option of an interest rated differential (IRD). This is typically based on your remaining mortgage balance and current mortgage rates.
To avoid penalties on your mortgage, apply for a portable mortgage that allows you to transfer your existing mortgage to a new property and even combine it with another loan, if necessary. There’s also the option of an assumable mortgage, where you can transfer the mortgage to a qualified buyer instead of breaking it.
2. Inquire about pre-payment privileges
When buying a home, you need to understand how rising interest rates would affect your mortgage. Without having any pre-payment privileges, the larger portion of your monthly mortgage payment would go towards the interest against the principal—making it harder to complete your mortgage.
Once you have pre-payment privileges, you’re offered enough flexibility to repay a percentage of the principal on your mortgage before the amortization period is over—and without any penalty. In fact, some lenders may even offer you their best rate to avoid giving you the option of pre-payment over a fixed period of time. Therefore, it is important to ask your lender the specific kind of pre-payment privileges you enjoy on your mortgage.
The amount of money you save by taking advantage of pre-payment privileges is quite substantial. For example, if you took a $300,000 mortgage at a fixed rate of 3.29% over five years and is amortized over 25 years. By making a pre-payment of $2,000 annually, you would save about $21,787 in interest and finish paying off your mortgage almost 4 years faster—assuming the interest rate was fixed throughout the amortization period.
You can always use a mortgage calculator to check much you would be saving by making extra mortgage payments annually.
3. Know the benefits of making a less than 20% down payment
Typically, when house hunting, the recommended amount of down payment you need to make is 20% of the property cost. However, you mustn’t always pay that high to get the best deal.
Surprisingly, lenders offer the best interest rates to those who want high-ratio mortgage because they have less than the recommended 20% down payment. This because a high-ratio mortgage borrower has a low risk against losses.
Default insurance makes it a lot cheaper for lenders to easily fund the mortgage loan, allowing them to transfer some of the savings—in form of lower rates—back to the borrower.
It is important to always carry out thorough research before applying for a mortgage to know what the best rates are, if a broker is more advantageous than a bank, or simply how you can get the best credit scores.
BENGALURU (Reuters) – The outlook for major global housing markets is brighter than previously thought due to expectations for a broad based economic recovery and easy monetary policy, with only a low risk that a COVID-19 resurgence will derail activity, Reuters polls showed.
Over 100 million people have been infected by the coronavirus, leading to a healthcare crisis and deep economic recessions, but fiscal and monetary stimulus, and the rollout of vaccines, mean the global economy is set to recover this year.[ECILT/WRAP]
While already high unemployment caused by the pandemic is expected to rise further, the Jan. 15-Feb. 1 poll of over 130 property market analysts showed average home prices would rise this year and next in most countries polled.
That compares to largely pessimistic predictions made in September.
An economic rebound, loose monetary policy, government stimulus, pent-up demand and tight inventories were expected to boost housing market activity to varying degrees in Australia, Britain, Canada, Dubai, India and the United States.
“A solid economic recovery bolstered by more fiscal stimulus, still-low mortgage rates, and unmet demand should continue to prop up home sales and construction in 2021,” said Gregory Daco, chief U.S. economist at Oxford Economics.
“We expect some gradual moderation in price growth over the course of 2021 as home sales cool, but sparse inventory will keep a solid floor under home prices.”
Reuters Poll: Major housing markets outlook https://fingfx.thomsonreuters.com/gfx/polling/bdwvkybkqvm/Reuters%20Poll%20-%20Global%20housing%20markets%20outlook%20-%20Feb%202021.PNG
Three-quarters, or 77 of 102 analysts, said in response to an additional question that the risk of a COVID-19 resurgence derailing housing markets this year was low.
Although the U.S. economy on average contracted last year at its sharpest pace since the Second World War due to the pandemic, it had little bearing on housing market activity, an immunity the sector was expected to carry this year.
Despite the recent surge in coronavirus infections and renewed restrictions imposed in the United States, house prices there were forecast to rise over the next two years and activity was expected to continue on a strong course. [US/HOMES]
“The recent COVID-19 surge has not had any noticeable impact, with transactions near record high levels despite record high case growth,” said Brett Ryan, senior U.S. economist at Deutsche Bank.
“Pent-up activity from COVID-19-shutdowns earlier in the year will soon start to wane and transactions will likely normalize. More housing supply will come online as vaccination picks up at the same time that base effects will start to roll off.”
Reuters Poll: Global house prices outlook – Feb 2021 https://fingfx.thomsonreuters.com/gfx/polling/xklpylyqbvg/Reuters%20Poll%20-%20Global%20house%20prices%20outlook%20-%20Feb%202021.PNG
When asked about the primary driver of housing market activity this year, over 55% of respondents, or 57 of 101, chose an economic recovery and easy monetary policy.
Of the remainder, 20 analysts named a desire for more living space and 18 said a successful vaccine rollout, while six chose fiscal stimulus.
Australian and Canadian house prices were expected to rise significantly this year and next, helped by low mortgage rates and massive fiscal spending. [AU/HOMES][CA/HOMES]
When asked what was more likely for housing market activity, 58 of 100 respondents said an acceleration. The others expected a slowdown.
Those views were swayed by a somewhat modest outlook for the British, Dubai and Indian housing markets compared to the rest.
Indian house prices were expected to barely rise this year despite an economic recovery and supportive policies, and Dubai house prices were predicted to fall at a slower pace this year and next compared to the previous poll. [IN/HOMES][AE/HOMES]
British house prices were forecast to flatline this year.[GB/HOMES]
“While we expect a strong start to the year, we expect momentum to wane following the end of the stamp duty (property sales tax) holiday in April. Towards the end of the year the housing market should settle,” said Aneisha Beveridge at estate agents Hamptons International.
