Amazon Making Moves to Rule Fashion World
Strike the Amazon pose. That’s Jeff Bezos and company getting ready to rock and rule the upscale fashion world.
According to a report from The New York Times, Amazon.com is doing what it always does when it wants to become a driving force in any category in which it competes — "go big and spare no expense."
While Amazon has had some success in fashion with Zappos.com, Endless.com, MyHabit.com and Shopbop, it has yet to achieve the level of dominance that it has in other product categories it has targeted.
MyHabit (Amazon’s response to daily deal sites) has received rave reviews for quality of goods and execution. Amy Odell, writing on BuzzFeed, offered this assessment: "Using patent-pending technology, they shoot 3,000 images a day at a photo studio in Kentucky. As an avid online shopper myself, I’d say the results are well worth it: instead of a static model you see a girl moving in the clothes, elevating what could be a flat image into something that instantly tells you a lot more about whatever item you might buy than many online shopping sites do in a single click."
In a RetailWire poll last May, 88 percent of respondents said MyHabit would be somewhat or very successful for Amazon.
According to the Times, Mr. Bezos has said that Amazon already makes money on the fashion items it sells and the addition of higher profit, less price-sensitive lines of clothing is worth pursuing.
Designers, the argument goes, see an upside to dealing with Amazon. It is willing to place larger orders than many other retailers. Amazon also doesn’t ask, at least not yet, for markdowns or to return items that do not sell.
Amazon has also pledged to refrain from the aggressive price cutting it has followed in other categories to gain market share.
"There’s a sophisticated markdown cadence in the fashion industry that we think makes sense and we’re basically following that established approach," Mr. Bezos told the Times.
Discussion Questions
Discussion Question: How big a player do you think Amazon will become in the high-end fashion category? How do you expect retailers in this space to respond to Amazon?
There is a big difference between upper-moderate, better and designer price points, but it wouldn’t be a surprise to see Amazon going after any and all of these market segments. Clearly the CFO of Macy’s takes Amazon seriously in this business, since she mentioned them in her earnings call yesterday. There is upside for Amazon here, perhaps even more on the margin side than the market share side.
I went to Nordstrom to buy a Robert Graham shirt for my birthday. They only had a bunch of “safe” designs at a suburban location in their flagship store in Seattle. I tried their “app.” Nothing. Figuring Amazon wouldn’t have something, I checked anyways. They had one and it wasn’t cheap. Why Nordstrom and the rest don’t take more chances and sell both in-store and online is a mystery.
How Big? Very Big!
How will other retailers respond? (1) Denial, (2) store closings, maybe a few bankruptcies and finally (3) chasing Amazon’s taillights.
What should they do will be the question we will be discussing as they approach arrival at #2.
These questions are difficult to answer at such an early stage of myhabit.com — there are too many ifs.
If they adhere to their claimed policy and don’t “go big and spare no expense,” they will have to make it on the viability of the fashions, site, and product presentations.
If they don’t use amazon.com and zappos.com to drive traffic to this site, they will have to use the same marketing and advertising methods that any other competitor uses.
If they do all of those things, the competition will only have to keep an eye on them and not be too concerned about yet another fashion web site.
However, this is Amazon. The likelihood that they will play nice and aim for a modest target is laughable. They may start out relatively unaggressively, but that is inevitably going to change. They’re not making this effort and its associated splash to be an also-ran. Look-out fashion retailers, they are gunning for you.
People may find this hard to believe, but back in the early ’80s there was a Harvard Business Review article titled “Retailing Without Stores.” Moving images like Amazon is using here were discussed in that article, along with a discussion of a pre-internet TV set-top box test deployed in Columbus, Ohio.
On a broader basis, I have said that Amazon can pretty well graze the retail world, eating anyone’s lunch that they please. That is a direct consequence of their very advanced understanding of SELLING, in this case, digitally mediated selling — not “personal” salesmen, per se.
I think a lot of people here are aware that sales rule the world. As the old saying goes, “Nothing happens until someone sells something.” In the self-service retail world, retail management is pretty well clueless about selling, being merchant warehousemen, NOT salesmen. Amazon, IS a “salesman.”
With Bezos reasonably having another 20 years in his career, it’s “Katie, bar the door!” 😉
Amazon is having a similar impact on retailing as Walmart did when they entered the scene decades ago. They are committed, aggressive, and execute brilliantly. As a friend says, they are eating the retail world. This particular category also offers something they are not used to — high margins and instant profitability. The only puzzling thing is why it took so long to get here. The only negatives are that, first, truly high-end fashion is, by definition, distributed on a very limited basis. Gant is hardly high-end fashion. Secondly, fashion is still a tactile business.
Amazon will no doubt do to broad-based apparel what it has done to other categories — take a giant bite out of the overall market. As in other categories, the only way to compete with this is to have great products that are not distributed broadly.
If anyone can make it selling apparel online, it will be Amazon. That said, selling apparel online and not having it returned, is the illusive Holy Grail.
No apparel buying decision is made until an item is tried on by the customer in the fitting room of an apparel store or in the comfort of the customer’s home. The brick and mortar retailer has a better chance of making the sale stick because they can get the customer into the fitting room and get them into the clothes on the spot. If the items meet the customer’s buying criteria, they have a better than 70% chance of making a sale, and only about a 10% chance of having it returned.
The online retailer is handicapped by fantasy versus reality; “it looked great on the size 2 model in the picture, but it didn’t look great on size 12 me”! Online fitting systems are trying to make a dent in the 50% return rate problem, with little success.
The brick and mortar apparel retailer will win this one if they embrace their fitting rooms and provide the experience and service that their customers want. The fit and feel of clothing is the deciding factor in the apparel retail purchase and you just can’t fake it.
High end fashion, call it “Best”, takes a bit more of the “try it on / feel of the fabric”. Success in this area will be dependent upon how Amazon handles returns. If they have learned lessons from Zappo’s, they could peel off some market share.
In the “Good” and “Better” categories, Amazon is a force that will capture a share of wallet from consumers.
High end fashion is a tough one, and with the liberal return policy from Amazon, the wear it once with the tag on it crowd will send back plenty of stuff, just knowing they’ll get their money back. It may be a small minority, but who pays for that??
Also I think Amazon will do well with fancy shoes and accessories, as these items can be used in a variety of ways, with less chance of returns. Amazon is a huge nightmare for the small business and department store folks, and I cannot underestimate their desire to be successful in this new venture.
Amazon will likely come to dominate the e-commerce side of the high fashion category. However, brick-and-mortar retailers have several advantages. Buyers of this type of clothing expect a perfect fit and are more inclined to want to try them on. In addition, high-end stores are often destinations in themselves, offer intensely personalized service and attention, and offer a cachet as a place to “see and be seen.” E-commerce has a place, but not as much as it does in many other categories.
I don’t think Amazon will become the next Saks Fifth Avenue. There is no glamour in their shopping experience. However, they may find their place in the fashion pantheon, because they can offer selection, convenience and price. As yet, there is no substitute for the fitting room and a good saleswoman.
I think they can be effective since their brand image is one of good value with a huge base of shoppers addicted to their “easy to buy” approach to customer interaction, which crosses segments. As long as they deliver the selling proposition for designers, and shoppers trust the amazon merchandising selections and customer service, it will work for Amazon. Fashion brick and mortar retailers will respond like any retail segment targeted by Amazon, adapt or perish.
I think we have a terminological issue here: a number of respondents have analogized to Nordstrom, Zappos, even Walmart, while I’ve been thinking of Prada, Rolex, Jimmie Choo … in short, the bizarre world of haute couture where logic has little sway, and the goal (to some) seems to be to spend as MUCH money as possible; I don’t see Amazon becoming a star in this particular firmament.
It depends on the designers. They control to whom and what they sell. They do value current customers, but also love money. I would expect the second level designers to move to Amazon more readily than the old houses. I don’t think the designers having to worry as much about returns as Amazon. What is Amazon going to do the day after prom when all the sweaty, wrinkled gowns come flowing back in via FedEx because they didn’t fit right? Good luck with that!