Friday, November 9, 2018

Apparel Brands Reexamine Distribution Strategies As Amazon Puts Fashion Forward

Amazon is pushing into the apparel/fashion category with vigor. They’ve launched private label brands, special Prime member benefits, and a new focus on fashion. Department stores, the traditional cornerstone of the apparel industry, are losing ground. Analysts say Amazon is on track to overtake Walmart and become the leading US apparel retailer in 2018.

The effect Amazon is having on the industry is causing apparel and fashion brands to reexamine their online sales strategies. Big brands like Calvin Klein and Tommy Hilfiger are taking notice -- questioning their reliance on department stores, and rethinking their past resistance to Amazon.

A Tommy Hilfiger Group fashion store in Helsinki. Photographer: Tomi Setala/Bloomberg© 2014 Bloomberg Finance LP

What Amazon is doing

Amazon is making no secret of the fact that it’s looking to move beyond basics and into fashion more broadly. They’ve launched an army of private label apparel brands: 127 private label apparel brands, to be exact.

Amazon appears to be purposefully releasing items that fill gaps in the existing product assortment, especially at the low end. For the most part, these products are inexpensive versions of products shoppers are searching for.  

While most of Amazon’s private label offerings are on the less expensive end of the spectrum, Amazon continues to woo big-name brands with its visibility and shopper loyalty. J.Crew recently joined the ranks of high profile brands to sell directly on Amazon. Ironically, these brands now see embracing Amazon as a way to protect their image. Selling on Amazon directly gives them more control over pricing, content, and important elements of the shopper experience. Without a direct presence, product display pages and product pricing are at the whims of an army of resellers and distributors, happy to snap up inventory through other channels and sell it off at whatever price they can.

At the same time, Amazon is leveraging its pool of 100 million Prime subscription holders to bolster sales of its private label brands - and vice versa. Many of Amazon’s house brands are only available for purchase by Prime members.

Rethinking sales strategies

As Amazon’s influence in the fashion and apparel space grows, brands are finding new value in joining or increasing their involvement with the platform.

The Sash Bag started selling on Amazon to take advantage of the retail platform’s massive, international infrastructure. Already successful in the U.S. and Canada, The Sash Bag wanted to branch out into other markets. The cost and risk involved in such a step made Amazon, and it’s vast fulfillment services, an attractive prospect for a brand that was looking to grow.

Although some brands are fearful that Amazon’s push into apparel and fashion will ultimately hurt the industry, others are finding ways to sell on Amazon while maintaining their department store presence.

Luxury accessory and apparel brand Surell Accessories had historically focused on major department stores like Saks, Bloomingdales, and Macy’s. Until recently, they used Amazon only as a way to sell-off old inventory.

Dominic Meattey, co-owner of Surell Accessories, says that the company didn’t want to compete with their brick & mortar retail channel. So they found a way to keep everyone happy: developing an Amazon-exclusive product line in various colors.  

After investing in the channel in earnest, the company started seeing immediate strong results - doubling in revenue the first month and quadrupling within several months.

Not right for everyone

Some high-end luxury brands believe that shopping is best done in person. When customers can see, touch and try on the clothes they forge a stronger connection with the brand. These brands are committed to the department store channel and eschew Amazon as a sales channel.

Misha Kaura, owner of a luxury fashion brand by the same name, cites three reasons why her brand has chosen to stick with department stores over Amazon. First, she says, Amazon has a track record of copying designs and promoting them as private label products. Second, Amazon does not give her brand data on consumer purchases via vendor and third party platforms. Finally, she wants to maintain relationships with department store retailers because these stores, “take much better care of designers than Amazon Fashion which tries to compete on price.”

Other brands have found that partnering with Amazon is actually the best way to support brick and mortar retailers. International sock brand Gumball Poodle decided to embrace Amazon as a way to clean up unauthorized resellers who were eroding their pricing. These resellers were offering Gumball Poodle products at unsustainable pricing, creating impossible to beat competition for brick and mortar retailers.

Because Amazon wants to deliver the best experience possible to buyers, it’s in Amazon’s best interest to get rid of unauthorized resellers who errode pricing and hurt a brand’s image. Since joining the platform, Gumball Poodle has seen an increase in sales numbers for their retail partners authorized to sell on Amazon and a massive decrease in customer complaints.

To embrace or not to embrace

There’s no one size fits all answer for whether fashion brands should partner with Amazon, but all players should at least consider how Amazon’s push into private label might affect their positioning -- and bottom line.



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