While Amazon is known for selling a seemingly boundless universe of products at highly competitive prices, one area it has lagged is fashion, particularly higher-end brand names that aren't known for heavy discounting. But that is beginning to change, and fashion could be poised to offer Amazon a major new area for growth, as the Wall Street Journal reports:
Amazon.com Inc. has crushed rivals by offering cut-rate prices on everything from books and electronics to diapers. But to attract fashion brands, it has employed a new strategy: promising full price.
With that pledge, the Internet retailer is making headway attracting a crowd that for years had rebuffed its approaches. Dozens of brands now sell directly to Amazon, including department store stalwarts such as Nicole Miller, Calvin Klein, Kate Spade, Lacoste and Levi Strauss.
Fashion has been one of the last e-commerce holdouts because the fit and feel of clothing is important to shoppers. But just like so many other traditional shopping habits, clothes shopping is yielding to the ease of the Internet. While the change means more choice and convenience for shoppers it is yet another blow to traditional department stores and the malls they anchor.
Amazon has made steps in recent years to build up its fashion strategy, such as the acquisition of shoe seller Zappos and the establishment of a photography studio for making more appealing online imagery for fashion items, as the Journal reports. More recently, it has begun selling private-label fashion items of its own, and even launched an online, QVC-like television program centered around fashion.
Some brands, such as Nike, are resisting Amazon's entreaties and won't sell their products through the site. Still, the threat Amazon poses to brick-and-mortar fashion retailers is significant. Citing Cowen & Co., the WSJ report states that Amazon's apparel business will grow from $16 billion this year to $52 billion by 2020 (those figures include third-party sales done through Amazon), and that it will become the U.S.'s largest apparel retailer, moving past Macy's, by as early as next year.
Analysis: Amazon's Sartorial Strategy Is Worth Watching Closely
Amazon's move into fashion is just "another indication of their relentless drive to own all of retail," says Constellation Research VP and principal analyst Guy-Frederic Courtin. Doubters need only look at Amazon's success selling replenishment-based products such as toilet paper and baby wipes as evidence it can make less likely bets pay off, Courtin adds.
Meanwhile, brick-and-mortar clothing sellers are having difficulty transitioning to the world of online sales. Nordstrom recently reported growth in e-commerce sales but a drop in profits due to excess inventory and other challenges related to serving online orders (read our full report here).
In any case, one problem Amazon still has to work on with selling apparel, particularly when it comes to higher-end items, is the online buying experience. "It's very efficient, but very cold," Courtin says. "It doesn't give you that contextual relationship like when you go to Vineyard Vines' or Cole Hahn's website. There you get much more of a luxurious experience. Can Amazon match that experience? Can they pivot and start providing the boutique experience separate from traditional Amazon?"
It's possible Amazon does exactly that in the near future, such as with a specially branded new site for high-end fashion shoppers—say, Amazon Black.
Another sure challenge Amazon will grapple with as its fashion sales grow is how to handle returns efficiently and cost-effectively. Its reported plans to open hundreds of brick-and-mortar stores could play a key role in this regard, and not just with clothing items, as our recent report noted.
Finally, there's one high-level takeaway from Amazon's foray into fashion. "Every retail conversation at some point involves Amazon and i don't see that subsiding in the near future," Courtin says. "They're redefining the way retail is handled."
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