Amazon’s foray into fashion

December 31, 2015 09:50 AM Inc.’s marketplace business that lets other merchants sell to Amazon customers was only two years old when it afforded Amazon an entry into the fashion world. The e-retailer launched its Apparel & Accessories Store in 2002, boasting products from more than 400 brands made available through marketplace sellers that included Nordstrom Inc., Target Corp., Gap Inc., Lands’ End Inc., Foot Locker Inc., Eddie Bauer LLC and Marshall Field’s (a department store chain later acquired by Macy’s Inc.).

“Our goal is to provide a complete apparel selection and offer it the Amazon way—with easy navigation, a single shopping cart, your ordering and payment information already on file and lots of helpful information,” said Amazon founder and CEO Jeff Bezos at the apparel store’s launch.

Fast-forward to today and it can be said that everything, and nothing, has changed. Nothing, in the sense that Bezos’ comment about Amazon’s goal holds true, as witnessed by the e-retailer’s dogged pursuit of the apparel business in the intervening years (see timeline, page 22). It has acquired companies, tested formats, paid for high-profile sponsorships and built out a fashion division peppered with industry veterans.

Everything has changed in the sense that all of the aforementioned retail chains, save Eddie Bauer, have cut ties with Amazon, which has become a feared competitor. And while Amazon now sells apparel itself, buying items wholesale from clothing manufacturers and designers, some high-end brands refuse to sell or have stopped selling to Amazon as they seek to protect their prestige image and appease the tony boutiques and department stores that are their primary clients. Experts say fashion buyers at high-end stores routinely check whether Amazon sells goods they are considering carrying and choose not to buy those items if they are. Whether Amazon can become a high fashion destination will depend on its success in convincing fashion houses their goods should be available at Amazon.

Below the heights of fashion, there’s no question Amazon is becoming a dominant clothing retailer, one that’s likely on its way to being the No. 1 apparel merchant in the United States. Much of the apparel for sale on Amazon is from outside merchants who buy wholesale from suppliers and view Amazon as another sales channel, along with their own websites and in some cases physical stores. Others are buying overstock goods and selling them at a discount on sites like Amazon and eBay.

Those merchants pay Amazon a cut of each sale, and the Amazon Marketplace is a big business. Goods sold by marketplace sellers from all product categories accounted for 46% of units sold on Amazon during the third quarter of 2015. Amazon early last year said 40 million consumers had bought apparel products on, although it didn’t break out whether those consumers were buying six-packs of socks or pricey pumps. Meanwhile an estimate from investment banking firm R.W. Baird & Co. says the number of clothing and accessories SKUs on grew 87% from Q3 2014 to Q3 2015, accounting for 6% of all products available on the site.

In fact, Amazon is on track to become the largest apparel and accessories retailer in the United States in a few years, according to Cowen Group, an investment advisory firm. It estimates the gross merchandise value of U.S. apparel sales transacted through Amazon in 2015 at $16.34 billion and 5% of the overall U.S. apparel market—and forecasts Amazon’s clothing sales will grow to $27.78 billion in 2017, the year Cowen predicts Amazon’s apparel business will surpass that of the current No. 1, Macy’s. Cowen estimates that in 2020, Amazon will do $52.08 billion in apparel and accessories sales in the United States and have 14% of the market, compared to Macy’s $25.81 billion and 6.9% market share (see chart, above).

But those are sales of clothing of all kinds, from a lace party dress to a pair of jeans. Despite the big dollar volume, retail industry insiders say Amazon hasn’t won the war for apparel sales leadership, at least not yet. There are questions of perception—will consumers really buy a cocktail dress in the same place they buy a socket wrench?—and of the weight Amazon pulls as a fashion buyer. This is particularly true with upmarket fashion brands, many of which refuse to sell wholesale to Amazon or as a marketplace seller through Amazon because they say they don’t want their goods showing up in search results next to the aforementioned wrench or next to listings from marketplace sellers selling their brand at cut-rate prices.

“Amazon today is viewed as a commodity entity, not a purveyor of fashion,” says Marshal Cohen, retail industry analyst at NPD Group Inc. He says that Amazon, because of its vast selection, isn’t structured the way fashion consumers want to shop. “Amazon’s future will be about changing that. It has to do a little makeover here and there to do that.”

However, given the growth of both Amazon and e-commerce, Cohen cautions fashion brands to think carefully before dismissing Amazon as a sales channel. “The perception of Amazon today is not what it will be in the future,” he says, noting that apparel makers may be selling their businesses short if they do not look to sell at least some of their products through Amazon. “Do I think Amazon will overtake Macy’s by 2017? No. Will it be close? Yes.”

There is evidence that Amazon is making changes to make shopping for apparel and accessories on more appealing, and the e-retailer has shown time and again that it is willing to experiment. It is also working with fashion brands to bring them onto Amazon directly, although the results of these efforts appear mixed. Amazon declined to comment for this story. It is safe to say, however, that Amazon is collecting all the elements it needs to operate a thriving apparel business in the modern retail environment. What it needs to do now is to stitch it all together into an appealing pattern.

Amazon, through the selection it sells directly and through goods listed in its marketplace by other sellers, has the widest selection of apparel items of any U.S. retailer, online or off (see chart, below). That’s both a blessing and curse, experts say. “Amazon can sell across the value spectrum, from cheap T-shirts to luxury items, with impunity,” says Carol Spieckerman, a retail strategist. “And Amazon is mad-efficient, but it is not a sexy shopping experience,” in the traditional sense of merchandising apparel. Whether that matters, Spieckerman says, remains to be seen. “It is very efficient, and for consumers, that can win out.”

But in fashion you can’t “be everything to everybody,” contends Syama Meagher of retail consultancy Scaling Retail. “With a high-low mixing of brands and the high-low price points, it’s hard to give consumers a focus.”

It also makes for a tougher pitch to brands, particularly those in the luxury end of the market. “The problem is Amazon can’t get anyone to distribute with them,” says Mabel McLean, director of Commerce IQ at L2 Inc., a research company covering the digital space. “Consumer packaged goods guys have wholeheartedly embraced Amazon. For them it is a really great outlet. But anyone with concerns about brand equity, well, they won’t play with Amazon.”

An L2 analysis of 32 luxury fashion brands on Amazon in 2014 found only 16% officially distributed with Amazon, and most of those came from the lower end of the luxury spectrum, such as Calvin Klein and Tommy Hilfiger. McLean says more brands have entered into wholesale relationships with Amazon since, but the pace is slow.

Meagher, who advises fashion brands on how to grow their wholesale and direct businesses and previously was a merchandiser for Gucci and Barneys New York, says she tells brands to test selling to Amazon and then revisit the contract after a season or two. “You see some brands staying for a couple of seasons, but they are not necessarily generating the revenue because Amazon is not attuned to higher price-point brands.” She says one client told her she felt her products got lost on Amazon because there are so many products available for sale.

Numerous upmarket brands contacted for this story, including outerwear brand Canada Goose and designer apparel brand DSquared2, said that while they previously had wholesale agreements with Amazon they no longer sell to Amazon.

In a presentation at the Women’s Wear Daily Apparel & Retail CEO Summit last October, Jeff Yurcisin, vice president of Amazon Fashion and CEO of its fashion-focused subsidiary Shopbop, said Amazon has wholesale buying relationships with more than 1,000 apparel brands and has a team of apparel buyers making deals with brands as other retailers do. He said he was “confident” that Amazon could successfully sell apparel to Amazon’s mass audience.

Other brands say Amazon is a good channel for them. BCBG Max Azria Group LLC, which operates a collection of globe-spanning e-commerce sites and 570 stores, and sells its collections to retailers including Saks Fifth Avenue and Bloomingdale’s, has a wholesale relationship with Amazon in the United States. It is looking to expand that relationship with Amazon in Europe and elsewhere, says Alex Golshan, the company’s vice president of global e-commerce and omnichannel. “We would like to enable our customers to shop through any channel she chooses or is convenient for her and don’t view those as competitive channels,” he says.

Vivienne Westwood, a designer of men’s and women’s apparel and accessories, has been selling direct to Amazon for about four years, says Jennifer Sidary, the brand’s president of sales, America. She says Amazon buys the whole collection—about 400 Vivienne Westwood products are currently listed for sale by Amazon—and the best-performing categories for the brand on Amazon are menswear, jewelry, watches and footwear. Amazon’s buying teams have visited the brand’s U.S. headquarters in Los Angeles and in New York to work on buys, and Sidary’s team has also visited Amazon in Seattle to sell them, she says.

“Amazon has been really easy to work with, and I don’t think Amazon is competing on price as much as it did in the past,” she says, addressing an often-voiced concern from brands. “Amazon really understands luxury players, and when we prefer for it to break sale. We haven’t had any issues.” Breaking sale refers to when brands decide to mark down goods for the season.

Sidary would know, having worked on the buying and sales side of the fashion business. That includes seven years at Amazon subsidiary Zappos Inc., where she was the head of Zappos Couture, a microsite that sells luxury brand goods, mostly shoes and accessories but some clothing as well. The microsite was developed in part to help Zappos recruit luxury brands to sell wholesale to Zappos by showing them that their brands would be merchandised next to similarly high-end brands. Having the dedicated area of convinced brands like Salvatore Ferragamo to sign on under Sidary’s tenure at Zappos, although it doesn’t sell through the site, excepting some fragrance and accessories like sunglasses, which are licensed by other companies that then sell to Amazon wholesale.

The vast majority of the more than 3,600 products that appear after running a search for “Salvatore Ferragamo” on Amazon are sold by marketplace merchants. For Vivienne Westwood, only about a quarter of the SKUs that show up in search results are sold by Amazon. Dozens of other sellers, mostly unknown to the brand with marketplace storefronts with names like “Tokyo Pop Freaks” and “RB Fashion Online,” also sell the brand’s goods.

While Sidary says gaining control of the brand’s distribution on Amazon isn’t a focus for Vivienne Westwood, other brands cite similar seller clutter as a reason not to work with Amazon. Others, such as Burberry Group plc and Levi Strauss & Co., have negotiated with Amazon to restrict or block listings for some of their products by marketplace sellers in exchange for selling some products wholesale to Amazon. McLean says she expects Amazon to make more such deals with brands it wants to distribute.

The L2 report says brands not officially distributing with Amazon have an average of 1,170 products available listed by marketplace sellers. “Amazon isn’t getting rid of the open marketplace anytime soon,” McLean says, “but just because brands are distributing doesn’t mean third parties aren’t.”

Because of Amazon’s growth trajectory in apparel, Cohen at NPD says brands shouldn’t be deterred from selling at least some products through Amazon by the fact that their goods are showing up as listed by marketplace sellers. “Anytime your product is reaching a wholesale market without your being responsible for it is a very scary thing, but this isn’t new,” he says. He notes brands frequently see their goods pop up in outlets they don’t work directly with, such as off-price retail stores.

Spieckerman points to another reason to consider selling to Amazon: it’s growing rapidly, while fashion outlets are not. “Companies are looking for growth, and that’s hard to come by because there has been so much attrition and consolidation in apparel-friendly channels like department stores. Companies are not seeing a lot of growth with existing accounts.”

There’s also Amazon’s long global reach to consider. “If brands are thinking of expanding overseas, Amazon has the potential to be their ticket to global markets,” Spieckerman says. Amazon operates e-commerce sites in 13 markets outside of the United States. All of this is makes working with Amazon more attractive, she says.

Amazon, for its part, is trying to make its site more attractive to fashion brands and consumers. Over the last year or so it made numerous design tweaks that altered how fashion goods are displayed on the site.

To start, finding fashion on Amazon and its subsidiary sites has gotten easier. The Shop by Department drop-down menu on the home page includes a Clothes, Shoes & Jewelry option that, when selected, reveals an Amazon Fashion window with categories including Women, Men and Baby. There is also a “more to explore” prompt in the same window that links to Amazon’s Shopbop (women’s fashion), East Dane (men’s fashion) and MyHabit (luxury apparel flash sales) subsidiary e-retail sites. No other category on Amazon directs consumers to an Amazon subsidiary to shop.

The Amazon Fashion landing page within now also has a different look than other categories. It features large, clear photographs, gift guides and entry points to product groupings, such as “holiday party dresses.” Also recently added is a way for consumers to flag products they love—by clicking a small heart in search results or on product pages. Returning consumers can quickly call up products they’ve hearted in a header labeled “Your Fashion and Hearts,” and Amazon is also using those hearts to generate more individualized recommendations. Consumers also can “edit their sizes” and have Amazon store that information for them to show matching products in recommendations.

Apparel product pages for goods sold by Amazon typically include two still photographs and video of a model twirling to show off the garment. Those images and videos come out of one of two photo and video studios Amazon has opened in the last three years exclusively for the fashion business. Amazon opened a 40,000-square-foot studio in Brooklyn, N.Y., in 2013 that can take up to 19,000 photos a day; a 46,000-square foot studio opened in London last summer.

It’s also added more editorial on fashion trends intended to distinguish shopping fashion on Amazon from shopping for toasters on Amazon. For example, last year Amazon hired Caroline Palmer, an editor from Vogue—where Amazon Fashion routinely runs full-page ads—to direct its editorial and social content. She joins such other fashion-industry veterans as Catherine Beaudoin, president of Amazon Fashion who joined the e-retailer from Gap Inc., and Julie Gilhart, previously fashion director at Barneys New York who now consults with Amazon Fashion. As of mid-December, Amazon Fashion had 94 open job listings, most of them in buying and planning roles, and in marketing.

Amazon’s growth in apparel sales stands in stark contrast to the struggles of many clothing chains and boutiques. Fashion brands may soon have little choice but to come to terms with the world’s largest online retailer.




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