Source: Amazon Echo Look video
Amazon is making a power move on Nike and other sportswear brands
Amazon.com has contacted Taiwanese vendors that manufacture apparel for Nike, Lululemon Athletica, Under Armour and others about producing small lots of private label athletic wear.
The development, first reported by Bloomberg, would give Amazon a presence in a category that has been hurt by the business failures of large trading partners such as The Sports Authority and led brands such as Nike to increasingly focus on selling directly to consumers online and in stores.
This summer, Nike joined Amazon’s brand registry program, which allowed the brand to sell directly to the e-tailer while maintaining control of its messaging and gaining access to purchasing data. While Nike has had a relationship with Amazon-owned Zappos, it had not previously sold any of its products directly to Amazon.
If Bloomberg’s reporting proves true, it would mark another move by Amazon into apparel. The company currently sells lines of menswear and accessories, women’s clothing and bags, and children’s wear under a variety of private labels. A growing number of analysts, according to The New York Times, have pegged 2017 as the year that Amazon will push past Macy’s to become the largest seller of apparel in the U.S.
Amazon has also used its Alexa digital assistant technology to help bolster the company’s apparel efforts. In April, the e-tailer introduced Echo Look, a voice-activated device that comes with a camera, built-in LED lighting and computer vision-based background blur to help users create their own personal lookbooks, which can be shared with friends and Amazon. The device includes a Style Check app that uses “advanced machine learning algorithms and advice from fashion specialists” to provide feedback to users on their various looks. If a person can’t decide on what to wear, they can submit two photos using Style Check. The app then provides an opinion based on criteria including fit, color, styling and current fashion trends.
Whether Amazon makes a push into athletic apparel or not, just the mention of its intentions is enough to affect potential rivals. Bloomberg’s reporting of Amazon’s plans last week helped drive shares of Lululemon down almost five percent in trading on Friday. Under Armour’s stock declined 2.8 percent. Nike’s share price, which initially declined, recovered to end up 0.3 percent at the end of trading last week.
- Amazon Is Getting Into Sportswear – Bloomberg
- What will a Nike/Amazon deal mean for the brand and other retailers? – RetailWire
- Can Amazon dominate apparel with its own private labels? – RetailWire
- Amid Brick-and-Mortar Travails, a Tipping Point for Amazon in Apparel – The New York Times
- Will Amazon’s Echo Look be a clothes selling machine? – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: How do you think Amazon is likely to approach the athletic apparel category? How might Amazon’s actions affect its relationship with sportswear brands? Where would this move fit with Amazon’s other ventures in the apparel retailing?
Poll
BrainTrust
Brandon Rael
Strategy & Operations Transformation Leader
Ken Lonyai
Consultant, Strategist, Tech Innovator, UX Evangelist
Something is very strange that on the heels of the widely announced Nike-Amazon relationship, Amazon (as it’s reported) has its foot in the back door of some of Nike’s vendors. For Nike, that’s not a good place for them to be. Paraphrasing Tom Petty, somewhere, somehow, somebody is going to kick Nike around some. That somebody turns out to be Amazon.
It seems as though Nike is damned if it does and damned if it doesn’t deal with Amazon, so if I were them, I’d be looking at new initiatives for more lucrative relationships other places. However, Nike’s brand cachet is still very strong (Millennials notwithstanding) and it will likely take Amazon a long time to have real street cred with athletic brands it dreams up unless major athlete spokespeople are in the offing.
Amazon has decided to make a push into apparel, just as it has created private label products in other categories. It makes sense. There’s more money in private label and consumers are spending more on athletic apparel than ever before. This is a natural extension of Amazon’s other apparel ventures.
To all those that thought it was smart that brands open up to Amazon, it’s proof that they’re going to mine the data to undermine those very brands. I still don’t get those who refuse to see this company as becoming a far-reaching monopoly.
Amazon continues to explore new ventures and that will not stop anytime soon. They continue to be successful when exploring different categories and concepts, and private label athletic sportswear may be another one. Only time will tell. First, we’ll have to see how far Amazon goes in developing a relationship with Taiwan, what products they will have and what they will offer customers on their site. They don’t have to worry about investing significant dollars in testing it, so it makes sense. Whether or not it would be successful will be determined by what they sell, the quality of the merchandise, the price they sell the items for and if customers respond favorably.
With these types of partnerships, Nike and other speciality athletic brands are caught in a bind, as they are almost forced to enter into the Amazon marketplace, yet it comes at a price. Amazon now has an entryway into the inner workings of Nike’s supply chain, vendor partnerships and potentially their rich consumer insights, which will further drive personalization and customization to their loyal Amazon Prime members.
Rather than going the acquisition route, as demonstrated by the Whole Foods model, Amazon with their Nike collaboration has demonstrated their interest in potentially exploring the apparel and specialty athletics segments. Clearly Amazon has proven to be omnipresent across the many retail and consumer products verticals, and this partnership with Nike and others may prove to be a competitive advantage against Walmart.
Amazon will knock off the best-selling styles of the sportswear brands selling on Amazon.com. Retailers do it all the time. As far as contacting the factories Nike and others use in Taiwan, that’s nice to have. But unless Amazon hires someone with a vision and technical expertise, mushy, clumsy athletic apparel will be the end result, no matter how good the factory.
As an aside, I understand Amazon’s women’s private brands (not underwear, socks, t-shirts) did $10 million last year. Small potatoes. Building great apparel product brands is not a sideline. Selling mushy, clumsy apparel is …
Amazon has publicly voiced its intentions to expand its presence in apparel with its own private label brands and heavily recruiting more brands to join its marketplace. I believe Nike and others are eroding their brand by joining the marketplace for short term gains and this will just hasten disintermediation of the category. Let’s face it, just like Walmart was a category killer, Amazon is following the same playbook by embracing these brands/segments and then devouring them. The next logical move will likely be to either buy an apparel chain with physical stores or open their own stores. They are covering all bases to maximize their revenues.
Sports apparel has gone through some turmoil lately and is ripe for the picking. Amazon’s connections with sporting apparel manufactures is an obvious signal that they plan to disintermediate the brands and develop their own line of sports apparel.
Watch out – Amazon is making more bold moves. What’s next?
Given Amazon’s approach to date in apparel, this is a logical extension to pursue. Private label is where you find the highest margins, so of course Amazon will look to add athletic wear to their apparel products. The question is, how far can they go — will they just have knock-offs of popular brands (for which they already have the data on which products/styles/designs are most successful!) or will they introduce their own designs? I’d be looking to see what new hires Amazon has in the near term to answer that question.
It’s also no longer a valid question to ask if their brand is strong enough to support meaningful sales in a category like athletic wear — of course they do. Amazon is all about consumption and making it easy to buy anything. Amazon’s loyal Prime customers will no doubt try any of these products if they sell for the right price and are easy to buy (can we say “Alexa”?), I’d suggest every retailer read Scott Galloway’s book on the Four (Amazon, Apple, Facebook, Google) for more insight into how to watch out for Amazon. It’s inevitable!
Amazon strategy to private label is very clear and they are learning every day. They go after the basics/elements sectors in categories where they see opportunities. Batteries, baby wipes, under shirts and now Whole Foods 365 food products. Sportswear is an obvious next place and I expect them to dominate the basics sector of this category. I think high quality brands like Lululemon, adidas and Nike have less to worry about than low cost activewear brands like Russel, Athleta or Fabletics.
No doubt. Amazon has now put its eye on this retail sector and long-time recognized brands like Nike and Adidas might be safe if and only if they focus on enhancing the value that their brand uniqueness brings to their customers. Amazon will disrupt and potentially “eat” those (small, new) sportswear companies that do not own this uniqueness and customer intimacy with the brand.