Agenda-setting intelligence, analysis and advice for the global fashion community.
SEATTLE, United States — For Amazon, 2018 will be the year of fashion — but not luxury.
The e-commerce giant sold 5 million items in apparel on Prime Day last week and appeared to use its discounts to push private label offerings, in addition to well-known brands like Under Armour and Levi’s.
The sale supported predictions by some analysts that, with over 60 private label lines as of last year, Amazon is slated to become the largest apparel retailer by 2019. Its success, particularly in cheap basics, threatens mass-market players such as Macy's and Banana Republic.
Amazon apparel sales will reach $40 billion by as early as the end of this year, according to Gartner L2 associate director Oweise Khazi. “On Prime Day, their biggest push was in private label,” he told BoF. “This propensity toward private label backs the notion that fashion will be their main vertical in 2018.
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The majority of its private label lines are priced on the lower end of the spectrum and skew toward menswear, Khazi said, although there are more womenswear lines. On Prime Day, Amazon offered deals across these brands, such as $32 shirts from its menswear line Buttoned Down — down from $49. D.A. Davidson analyst Tom Forte noted that sizes were sold out on Prime Day for certain shirts, suggesting that demand was strong. But not every private label item was discounted, he said, which means the items sell well perennially.
Amazon’s best-selling items demonstrate that its forte is in cheap, practical products. The best-selling men’s apparel product is a six-pack of Dickie’s moisture control crew socks. Its best-selling women’s product is from a private label line, Daily Ritual — the $18 jersey short-sleeve V-neck T-shirt dress.”
While Prime Day discounts incentivised Prime Wardrobe, its home try-on service that launched in June, the vertical has yet to gain traction, Khazi said. Competing with the likes of Stitch Fix and Nordstrom's Trunk Club, Wardrobe aims to reach a more fashion-oriented consumer with free shipping and returns after testing the fit of items.
But mid-market apparel and designer-driven fashion are two separate spaces. While Amazon Prime Day is a "seismic event for retailers" like Macy's and the Gap, luxury fashion players are hardly affected, according to David Lamer, a consultant at Core Brand Advisors. Since launching its inaugural fashion ad campaign in 2012, Amazon hasn't found much success in luxury. Partnerships with upscale brands are minimal though Amazon does have wholesale partnerships with brands like Calvin Klein and Nike.
“Amazon’s weakness in fashion is the lack of discovery,” Lamer said. Even though it dominates search — over 60 percent of all product searches begin on Amazon, not Google — Amazon doesn’t offer the experiential element of finding a treasure in the luxury category. And while convenience is a major incentive for Prime customers, the nature of luxury consumption doesn’t prioritise it.
“If Amazon is going to dominate apparel, it’s going to have to be private label because luxury players are not going to Amazon, at least not yet,” Lamer added.
Amazon could use its success in private label so far to convince other brands to sell through the site, said Wolfe, or at least to get existing vendors to advertise more. As for penetrating the luxury space, he’s optimistic that Amazon will get there, citing Tmall in China. Tmall is Alibaba’s e-commerce platform for clothing that offers both low- and high-end labels.
Brands like Burberry and Tod's sign on to online retailers like Tmall because they're afraid of the grey market and counterfeit merchandise, Forte said, "and that fear is very much alive in Amazon." While Amazon has yet to address grey goods in a way that's attractive to luxury brands, it could very easily do so by offering them control over pricing and presentation and ensuring that their products won't have to compete with third-party vendors.
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“Fashion brands are wary of [Amazon’s] tendency to cut prices down in an effort to squeeze profit margins, so that’s naturally a big area of concern,” said Olivia McLean, a cultural strategist at marketing agency Sparks & Honey.
When asked about its efforts in courting upscale brands, Amazon said the focus is on providing a "broad selection" of indie designers, well-known brands and private labels.
Forte believes that in a few years, luxury brands will work with Amazon, at least in a liquidation capacity, offering the cheapest assortment of goods. Retailers could also turn to Amazon in desperation, he added, pointing to Walmart’s partnership with Hudson’s Bay Company-owned Lord & Taylor.
Amazon, after all, owns ShopBop, a luxury online retailer that competes with Net-a-Porter and Matches Fashion, as well as Zappos. Its two-day shipping logistics are already integrated across its assets and further synergy is anticipated.
In the near future, nonetheless, Amazon will be riding out its success in private label apparel, Khazi said. “The fact that they’ve moved so aggressively into private label that are priced at lower price points makes it easy to say that while Amazon will go after luxury brands, it’s focused on mid-market apparel right now.”
Editor's Note: This article was revised on 26 July, 2018. A previous version of this article misstated that Tom Forte's name is Tom Wolfe. This is incorrect.
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