Affairs

Inverse relationship: As Amazon Fashion trends up, department stores trend down.

SEATTLE — Racked published a grand report on Amazon last week plotting the e-commerce giant’s ever-growing footprint in the luxury e-commerce space. Noticeable in Amazon’s progression is a key pattern: Amazon’s growth worryingly coincides with the continued slump Nordstrom, Bloomingdale’s, and other big name department stores currently find themselves in.

The highlights in this, the latest in Amazon’s ongoing luxury narrative:

Stemming back to 2013, Amazon has made their ambitions clear: Department stores are fully in their sights.

Here’s Amazon Fashion President Cathy Beaudoin in 2013: “We want to be a great department store, like Bloomingdale’s, Nordstrom, and Saks.” Said Racked: “It’s worth noting that while Amazon is on the upswing, those great department stores are in serious trouble.”

The key metrics in this.

“According to the U.S. Department of Commerce, department store sales shrunk from $67.56 billion in 2011 to $60.65 billion in 2015; meanwhile, Amazon’s clothing and accessories sales nearly quadrupled from $4.3 billion to $16.4 billion during that same period. Macy’s is currently the largest fashion retailer in the country, but according to finance firm Cowen & Co., Amazon will soon replace it, with a projected $28 billion in apparel sales this year.”

Since debuting Amazon Fashion in 2012, it’s kept its foot firmly on the pedal.

“Bezos and Amazon have not backed off their aggressive pursuit of fashion. Since 2015, the company has sponsored New York Fashion Week: Men’s. Last year, it premiered a 30-minute HSN-style shopping show called Style Code Live that airs live every weeknight on Amazon.com and picked up The Fashion Fund, the documentary-style show about the process behind the CFDA/Vogue Fashion Fund competition that previously ran on Ovation TV, and Hulu before that. These days it’s also sponsoring international fashion weeks, notably in India and Japan.”

Some motivations behind Amazon’s big fashion push:

  • Clothes are big business: “As Bezos told the New York Times back in 2012, ‘gross profit dollars per unit will be much higher on a fashion item.’ American shoppers spent $273.67 billion on new clothing last year, according to Euromonitor, of which Amazon currently has a 6.6 percent market share.”
  • Higher end luxury market is well within Prime members’ range, meaning in Amazon Fashion there’s an opportunity to leverage members’ Prime addiction even more: “’Apparel has some of the highest margins, and in luxury fashion, Amazon knows people who want something unique won’t mind spending a bit more for it,’ [said John Blackledge, a senior research analyst at Cowen & Company, a financial research firm]. It certainly helps that a whopping 70 percent of upper-income households in the U.S. (those earning more than $112,000 annually) are Amazon Prime members.”
  • Amazon really, really want “to be at the “center of every conversation”: “‘As they enter and take over literally every single industry, this is just another way of Amazon being relevant,’ [one former Amazon employee said]. ‘They know that a lot of shoppers don’t see them as a credible source for fashion, but they are taking this very seriously and trying to get designers on board so they can have another piece of the pie.’”

Brands are starting to join up, but mostly out of necessity:

“On the brand end, it’s not surprising that so many fashion companies are choosing to wholesale with Amazon. Amazon has logistics down, from top-of-line fulfillment centers to sophisticated backend tech, and these are companies that need to expand their own e-comm footprints, given the slowdown of in-store shopping. Better to get aboard the Amazon train than have to shutter hundreds of stores or declare bankruptcy like their peers.

‘These days, there are two ways to describe retail: a shit show, and Amazon,’ says Scott Galloway, an adjunct professor of marketing at NYU’s Stern School of Business. As Blackledge explains, ‘Amazon is the only one that’s not stuck in the vicious cycle of declining foot traffic that’s leading to declining sales that’s forcing stores to close. They are in a constant virtuous cycle.’

‘In many cases, fashion companies are turning to Amazon because it’s a life support at this point,” adds Mulpuru. ‘They see the dying retail environment, and then they raise their eyebrows when they see Amazon’s growth and eventually cave out of desperation.’”

It’s often a dirty secret, but can certainly be beneficial, if you’re strategic about it:

“’Everyone in fashion looks down on Amazon, and as a brand, you don’t want to be shouting that you are selling there,’ says Nivindya Sharma, a senior editor at trend forecasting agency WGSN. ‘There’s a balance between wanting sales and wanting exclusivity, which is why you’re seeing many brands offering a limited selection and selling premium products elsewhere. It’s all about perception.’”

And lastly, one for the road: The word on Amazon’s in-house brands:

“One of Amazon’s recent maneuvers in its multi-pronged approach to winning the fashion game involves rolling out as many as eight in-house labels, including at least five womenswear lines: Society New York, Ella Moon, Lark & Ro, James & Erin, and North Eleven. It also offers men’s suiting and children’s clothes, with athleisure, bras, and quite possibly plus-size on the way. These launches were informed by data the company collected about what customers are buying on Amazon; it decides which categories to launch private labels in based on existing consumer behavior.

The in-house labels have been met with little fanfare. They are hard to find on the site, and there have been plenty of complaints regarding quality and sizing. The marketing around the brands has been confusing too, with no clear indication as to what differentiates one from another. Lark & Ro merely offers that it’s for ‘women constantly on the move, who want to look stylishly pulled together from day to night,’ and the clothing for Ella Moon is apparently ‘globally inspired, everyday beautiful.’ The other women’s lines don’t have any brand descriptions at all.

‘While we’ve learned to never bet against Amazon, building a successful private fashion label is a challenge they have never faced,’ says Greg Portell, a partner at A.T. Kearney. ‘It takes years to build a brand and to figure out the precise marketing for it too. Do people even want to be seen in Amazon clothes? This is harder for them than it looks.’

The former Amazon employee says rolling out private-label brands based solely on data instead of design or merchandising expertise is a perfect example of how Amazon doesn’t understand the industry.

‘There are people at Amazon who actually love and breathe fashion and care about cool new things,’ the employee says. ‘But at the end of the day, Amazon is numbers-driven.’”

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