Amazon is at Macy's heels

Macy's relationship with its biggest competitor was once summed up by the line: "Would Macy's Tell Gimbels?"

Now Macy's may soon be overtaken by . . . Amazon.

Just two weeks ago, Cowen & Co. analysts predicted that retail's 800-pound gorilla - Amazon.com - will topple Macy's as the top clothing retailer in the United States in about two years. Just four years ago, Macy's apparel sales were five times greater than Amazon's.

But this year, Cowen expects Amazon's apparel business to reach $16.34 billion, compared with $22.2 billion for Macy's.

And Amazon's share of the U.S. apparel market is projected to jump from 5 percent this year to 14 percent in 2020, the Cowen report concluded. The online company's apparel sales will more than triple to $52 billion during the same five years. The threat helps explain why Macy's announced Monday that it will be adding nine markets - including Philadelphia - for same-day delivery of merchandise purchased on macys.com and bloomingdales.com.

Eight Macy's stores and two Bloomingdale's in the Philadelphia area will have the option starting Aug. 25. Shoppers will be able to order an item that morning and have it within hours at home or at work.

The online ramp-up takes the total number of markets with same-day online service to 17 for Macy's.

The suggestion that a purely online player such as Amazon could surpass Macy's, a retail Goliath with 885 stores and more than $28 billion in sales last year, was once unthinkable. That's no longer the case.

The retail war has shifted to online, and Macy's is clearly feeling the heat.

"Macy's is competing with Amazon," said retail and investment banking consultant Howard Davidowitz in New York, "but also reinforcing its own gravitas as an e-commerce player. They are leveraging their store base, and offering the service in markets where they have a significant store presence.

"They may have something of an advantage in this instance since the stores are located in the local market areas," he said, "versus the distribution-center orientation of Amazon and other pure online players."

The cost for same-day delivery for Macy's is equivalent to standard ground shipping, plus a $5 fee.

Online customers on Amazon may qualify for free shipping with a minimum $35 purchase. Amazon's same-day delivery is available to selected zip codes, with rates different for Prime and non-Prime members.

Rule No. 1 in competition: Never name your rival unnecessarily. When asked about Amazon's impact on the industry, Macy's wouldn't even use the "A word."

"We are focused on our shoppers, not competitors," company spokeswoman Deanna Williams e-mailed Wednesday.

Temple student Rachel Pease, 20, prefers doing most of her shopping online and plans to use same-day delivery from Macy's. "It's convenient," she said Wednesday as she entered the Macy's at 1300 Market St. in Center City Wednesday for a robe, which she had to try on. Buying is "getting a lot less social - just pick up whenever and wherever you want."

Although Macy's touts giving consumers more choice, it has to do better with online, said Barbara Kahn, a marketing professor at the Wharton School at the University of Pennsylvania.

"There is no question that Amazon has altered the retail landscape. "To stay competitive, Macy's has to offer this option . . . to more effectively compete."

Ike Canty, 31, of North Philadelphia, bought a dress shirt at the Center City Macy's on Wednesday. But he, too, has bought items on Amazon, including joysticks for his computer games. He likes that Macy's will now offer same-day delivery in the region.

"It's just the way of the world now with all the technology," Canty, a machinery operator for Philadelphia Gas Works, said as he left the store with iPhone plugs in his ears. "Everything is 'boom, boom, boom.' "

In chasing e-commerce dollars, analysts say speed will make or break the sale.