Amazon's Strategy for Fashion Expansion

The Wall Street Journal

7 Apr 201603:12

Summary

TLDRAmazon has ventured into the fashion industry with a live fashion show, featuring brands like Nicole Miller and Calvin Klein. Unlike its usual low-price strategy, Amazon promises full pricing to attract fashion brands. This move comes as online apparel shopping is on the rise, with only 15% of purchases made online last year. Traditional department stores face challenges as Amazon's US apparel business is projected to reach $52 billion by 2020, potentially surpassing Macy's. While some brands like Nike and Tory Burch remain skeptical, Amazon's Prime membership and data analytics offer significant advantages.

Takeaways

📈 Amazon has launched a live fashion show to attract fashion brands to its platform.
👗 Brands like Nicole Miller, Calvin Klein, and Kate Spade are now selling directly on Amazon.
💰 Amazon is offering full pricing to fashion brands, a shift from its usual low-price strategy.
🛍️ Amazon's move into fashion is part of a broader strategy to capture a larger share of the ecommerce market.
📊 Only 15% of apparel was purchased online last year, indicating a significant growth opportunity.
📉 Traditional department stores are struggling with sales, while Amazon's North American sales rose by 25%.
🏬 Amazon's apparel business is forecast to grow significantly, potentially surpassing Macy's as the largest apparel retailer in the US.
🚫 Some high-end brands like Nike, Tory Burch, and Rag & Bone are hesitant to join Amazon due to its perceived downscale image.
🛒 Amazon Prime membership benefits like free two-day shipping and free returns make online apparel shopping more appealing.
📊 Amazon uses data analytics to help brands understand regional preferences and optimize pricing for different styles and sizes.

Q & A

What is Amazon's latest initiative in the fashion industry?
-Amazon has launched a live fashion show, combining elements of a QVC shop-at-home broadcast with MTV-like celebrity guests to highlight fashion items sold on the site.
Which brands are now selling directly to Amazon?
-Brands like Nicole Miller, Calvin Klein, Kate Spade, Lacoste, and Levi Strauss are among those selling directly to Amazon.
What strategy is Amazon employing to attract fashion brands?
-Amazon is offering full pricing to attract fashion brands, which is a departure from its regular strategy of offering low prices on a wide range of products.
How has Amazon been building its fashion business over the last decade?
-Amazon has been building its fashion business by acquiring companies like shopbop.com and Zappos, launching flash sale sites like myhabit.com, and hiring industry professionals such as Cathy Beaudoin from Gap.
Why has fashion been one of the last ecommerce holdouts?
-Fashion has been a holdout because the fit and feel of clothing are important to shoppers, making the online shopping experience less appealing compared to in-store purchases.
What percentage of apparel was purchased online last year according to Forrester Research?
-Only fifteen percent of apparel was purchased online last year, according to Forrester Research.
How is the shift to online clothes shopping impacting traditional department stores?
-The shift to online clothes shopping is a significant blow to traditional department stores, as they face sluggish sales and are closing stores and cutting staff.
What is the forecast for Amazon's US apparel business by 2020?
-Amazon's US apparel business, including sales by third parties, is forecast to rise to fifty-two billion dollars in 2020, up from sixteen billion the previous year.
Which brands are holding out from selling on Amazon?
-Brands like Nike, Tory Burch, Rag & Bone, and many European luxury goods players are holding out from selling on Amazon.
What advantages does Amazon offer that traditional retailers find hard to match?
-Amazon offers advantages like Prime membership with free two-day shipping and free returns, and uses its technology expertise to mine analytical data, helping brands target shoppers and optimize pricing by region.
How does Amazon's live fashion show aim to enhance the online shopping experience?
-Amazon's live fashion show aims to enhance the online shopping experience by providing a more interactive and engaging way to showcase fashion items, akin to walking through an aisle at a favorite store but in the comfort of one's own home.

Outlines

00:00

👗 Amazon's Foray into Fashion

Amazon has launched a live fashion show as part of its strategy to establish a stronger presence in the fashion industry. The online retail giant is combining elements of a QVC-style home shopping channel with celebrity guest appearances, similar to MTV, to showcase fashion items. Brands such as Nicole Miller, Calvin Klein, Kate Spade, Lacoste, and Levi Strauss are now selling directly on Amazon. Unlike its traditional approach of undercutting prices, Amazon is offering full pricing to attract fashion brands. This move comes after a decade of CEO Jeff Bezos building a fashion base through acquisitions like shopbop.com and Zappos, and launching flash sale sites. Despite resistance from some brands due to Amazon's perceived downscale image, the company's Prime membership benefits, such as free two-day shipping and free returns, along with its data analytics capabilities, make it an attractive platform for fashion sales. This shift is significant for the retail industry, as it indicates a growing trend of apparel being purchased online, which poses a challenge to traditional department stores that are already facing sluggish sales and closures.

Mindmap

Keywords

💡Amazon

Amazon is an online retail giant and technology company known for its vast array of products and services. In the context of the video, Amazon is making significant strides in the fashion industry by launching a live fashion show and offering a platform for fashion brands to sell directly to consumers. This move is part of Amazon's strategy to expand its market share in the fashion sector, which is traditionally dominated by brick-and-mortar stores.

💡Live Fashion Show

A live fashion show is an event where fashion brands showcase their latest collections through live models walking on a runway. The video script mentions that Amazon has launched such a show, which is a novel approach for an online retailer. This initiative is aimed at making the online shopping experience more engaging and similar to the in-person experience of a fashion show.

💡QVC

QVC stands for 'Quality, Value, Convenience,' and it is a television network and online retailer known for its televised home shopping shows. The script compares Amazon's new program to a QVC broadcast, indicating that Amazon is adopting a similar model by integrating shopping with entertainment to enhance the customer experience.

💡MTV

MTV, which stands for Music Television, is a cable channel that was initially known for its music videos and has since expanded into various forms of youth-oriented entertainment. The video script mentions MTV-like celebrity guests, suggesting that Amazon's fashion show will feature celebrity endorsements and appearances to attract viewers and customers, much like MTV's programming.

💡Nicole Miller

Nicole Miller is a renowned fashion designer known for her women's clothing line. The mention of Nicole Miller in the script highlights the caliber of fashion brands that are now selling on Amazon, indicating a shift in the perception of Amazon as a platform for high-end fashion.

💡Direct Sales

Direct sales refer to the practice where manufacturers or brands sell their products directly to consumers without going through traditional retail channels. The script indicates that brands like Calvin Klein and Kate Spade are selling directly to Amazon, which is a significant change from the traditional retail model and suggests a growing trend of brands leveraging online platforms for sales.

💡E-commerce

E-commerce, short for electronic commerce, refers to the buying and selling of goods or services using the internet. The video's theme revolves around the growing trend of e-commerce in the fashion industry, as Amazon is positioning itself as a major player in this space, challenging traditional retail models.

💡Fit and Feel

In the context of clothing, 'fit and feel' refers to how well an item fits the body and the tactile experience of the fabric. The script notes that these factors are important to shoppers, which is why the fashion industry has been slow to adopt e-commerce. However, the ease and convenience of online shopping are changing consumer behavior.

💡Department Stores

Department stores are large retail establishments that offer a wide variety of products, including clothing. The script discusses how Amazon's entry into fashion e-commerce is a 'big blow' to traditional department stores, which are facing challenges such as sluggish sales and the need to close stores and cut staff.

💡Amazon Prime

Amazon Prime is a subscription service offered by Amazon that provides members with benefits such as free two-day shipping and free returns. The script highlights how Amazon Prime makes buying apparel online less risky by offering these services, which are particularly beneficial for fashion items where fit and return policies are crucial.

💡Data Analytics

Data analytics involves examining, cleaning, transforming, and modeling data to extract useful information, draw conclusions, and support decision-making. The script mentions that Amazon uses its expertise in technology and data analytics to help fashion brands target shoppers more effectively by analyzing which styles and sizes sell best in different regions.

Highlights

Amazon launches a live fashion show, integrating QVC-style shopping with celebrity guests.

Amazon's strategy includes offering full pricing to attract fashion brands, deviating from its typical low-price approach.

Top fashion brands like Nicole Miller, Calvin Klein, and Kate Spade are now selling directly on Amazon.

Amazon's fashion strategy includes acquisitions like shopbop.com and Zappos, and launching myhabit.com.

Cathy Beaudoin, former Gap executive, was hired by Amazon in 2006 to lead its fashion business.

Only 15% of apparel was purchased online last year, indicating a significant room for growth in e-commerce for fashion.

Amazon's entry into fashion e-commerce poses a threat to traditional department stores as online shopping becomes more convenient.

Amazon's North American sales grew by 25% to $60.37 billion, contrasting with declining sales at Macy's and modest growth at Kohl's.

Amazon is projected to surpass Macy's as the largest apparel retailer in the US by 2020, according to Cowen & Co estimates.

Some brands like Nike, Tory Burch, and Rag & Bone are hesitant to join Amazon due to concerns over Amazon's image and pricing.

Amazon Prime membership, with benefits like free two-day shipping and free returns, reduces the risk of online apparel purchases.

Amazon uses technology and data analytics to help brands target shoppers effectively by identifying best-selling styles and sizes by region.

The convenience of Amazon's fashion platform is likened to a magical clothing rack, offering a personalized shopping experience.