After years of toe-dipping into the fashion space, Amazon is reportedly jumping feet first into luxury goods.
The mega-retailer has been courting premium and high-fashion brands to take part in a new and exclusive selling platform, industry sources told WWD this week.
An Amazon spokeswoman declined to comment on rumor or speculations.
The new marketplace reportedly will give labels full autonomy when it comes to prices, discounts, and the look and feel of their virtual storefronts. Unlike the Amazon platform, where sellers are subject to strict guidelines, the new site will operate on a concession model, allowing labels to preserve their brand voices and signature aesthetics.
While Amazon is known for its massive assortment of gadgets, electronics and homewares (like the famed Instant Pot), luxury players may be enticed by the tech titan’s unparalleled logistics arm and growing network of Prime members.
The company’s well-oiled platform for fast, free shipping could provide a competitive advantage over luxury sites like Farfetch and even traditional retailers like Nordstrom and Bloomingdale’s—and luxury brands might see that as a reason to buy in.
However, some experts are skeptical about whether the platform actually has the capacity to go live, much less make waves.
Paula Rosenblum, managing partner at RSR Research, believes it will be difficult for Amazon to draw in a critical mass of brands. There may be some “wannabes,” she said, but not the high fashion houses that truly define luxury.
And she’s firmly in the “no” camp when it comes to Amazon’s capacity to disrupt the space.
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“I just don’t think the luxury shopper wants to buy his or her clothes on Amazon,” she said. “They may be fine with buying basics, but I’d be hard-pressed to see someone showing off a new outfit and saying, ‘I bought it on Amazon.’”
Rosenblum isn’t the only industry watcher scratching her head over the company’s dogged pursuit of a seat at the high fashion table.
“The truth is that most luxury brands—the really good ones—have no need for Amazon. There are some struggling ones that will likely embrace this, but that creates what is called in economics, ‘adverse selection,’” Sucharita Kodali, vice president and principal analyst at research and analytics firm Forrester, said.
“You know the quote, ‘I don’t want to be part of any club that will have me as a member?’ That’s sort of the way that most truly luxe brands will respond to Amazon,” she added.
The new platform’s offerings will never feature top labels like Rolex or Chanel, said Kodali, who believes that Amazon’s definition of luxury is likely a loose one.
“Is it Coach, or is it Prada? I’m curious as to what they’re calling ‘luxury,’” she said.
Besides the platform’s unglamorous rep, issues of rampant counterfeiting, illicit selling, and general bad acting have proliferated in recent years.
Because of these problems and the company’s ever-souring reputation, Rosenblum is “unsure that brands are willing to expose their customer bases to Amazon” at all.
“The timing for this couldn’t be worse,” Kodali agreed. The reports of illicit selling have reached a fever pitch, and they’re likely to make CEOs uneasy, she said.
Plus, brands are increasingly investing in E-Control, or the thoughtful, strategic management of their digital presence. Brands are looking to tightly manage their authorized resellers, Kodali said, and cut out any entities that don’t comply when it comes to pricing, sales and overall brand values.
“That will make any luxury showing for Amazon much more difficult except for desperate, financially challenged brands,” she said. Luxury players will make up for the retail relationships they’ve severed by investing more heavily in their direct-to-consumer operations—which will yield higher margins, anyway.
One of E-Control’s primary functions is to limit promotions and establish a global pricing standard, “so that items don’t end up on the grey market through enterprising consumers,” Kodali said.
Brands that do end up partnering with Amazon will want to keep a firm grip on inventory management, echoed Rosenblum. Doing so is the only way to make sure that grey market goods—which are bought through unofficial channels and sold to customers for lower-than-market prices—don’t enter the marketplace.
“I actually think the grey market issue is bigger than the pure counterfeit issue,” she argued.
The risks of working with Amazon (which was recently dumped by footwear titan Nike for its subpar response to manifold instances of of illicit selling and counterfeits) are simply not worth the reward, Kodali said.
“Savvy shoppers have also come to realize that too much online presence for luxury retailers suggests that a brand may be on the downtrend, which means that the purchase won’t hold its value long term,” she said. “That can be a vicious, negative cycle. That’s why some brands like Burberry would rather destroy goods than have them show up in secondary markets.”
While the industry is rife with skeptics, others believe there are obvious benefits for luxury brands looking to partner with the world’s largest retailer.
“Luxury brands working with Amazon could capitalize on the convenience of Amazon to drive brand devotion,” Nicole Amsler, vice president of marketing for AI-powered marketing platform Formation.ai, said.
The convenience factor inherent in Amazon Prime membership can’t be overstated, Amsler believes. “One of the main benefits of the program is enhancing convenience through two-day shipping and free returns. With Prime membership, Amazon aims to save its customers time,” she said.
The purported concession model of the rumored new luxury site will give brands control over their consumer’s experience, eliminating the deep discounting and undercutting practices that have come to define Amazon. Luxury players will be able to harness the power of the company’s back-end logistics, “without the challenges of Amazon’s current platform,” she said.
If luxury brands do decide to play ball, Amsler said, consumers will likely still be looking for differentiators from Amazon’s current, issue-laden marketplace.
“It will depend on how separate this luxury vertical is from the larger Amazon platform. If brands are just leveraging the back-end side of Amazon for solutions like logistics, then it’s fairly separate from the current Amazon marketplace,” she said—and that would be a good thing.
The concession arrangement could also stand to benefit luxury brands that don’t have a “larger, in-store experience built around them,” she said. Building a virtual storefront on the new platform could actually help to solidify, rather than detract from, some brand’s identities.
“Partnering with luxury brands like this will likely be where Amazon finds the most success, and creating a separate vertical could be a great way for Amazon to curb some of the issues it’s had with fashion brands on its main platform,” Amsler said.