MANILA, Philippines — Seattle— Amazon is so serious about its next big thing that it hired three women to do nothing but try on size 8 shoes for its Web reviews. Full time.
The online retailer is shooting 3,000 fashion images a day in a photo studio using patent-pending technology.
And it is happily losing hundreds of millions of dollars a year on free shipping—and, on apparel, even free returns—to keep its shoppers coming back.
Having wounded the publishing industry, slashed pricing in electronics, and made the toy industry quiver, Amazon is taking on the high-end clothing business in its typical way: go big and spare no expense.
“It’s Day 1 in the category,” Jeff Bezos, Amazon’s chief executive, said in a recent interview. Though characteristically tight-lipped on bottom-line details, Bezos said the company was making a “significant” investment in fashion as it tried to convince designer brands that it wanted to work with them, not against them.
The traditional retail world—and many major brands that want no part of Amazon—are gearing up to fight for their lives.
“It has the latitude to set prices and charge whatever it wants,” Sucharita Mulpuru, an analyst for Forrester Research, said of Amazon. “That is a huge threat for brands.”
Amazon has sold clothing for years. But recently it has focused on signing on hundreds of contemporary and high-end brands, including Michael Kors, Vivienne Westwood, Catherine Malandrino, Jack Spade and Tracy Reese, and it continues to prowl for more. On Monday, some of Amazon’s muscle was on display as the company sponsored, and live-streamed, the Costume Institute Benefit at the Metropolitan Museum of Art and the accompanying exhibit. Bezos, the event’s honorary chairman, said he was advised by Anna Wintour, Vogue’s editor, to wear a pocket square with his Tom Ford tuxedo (which is not available on Amazon). He did so.
Amazon’s decision to go after high fashion is about plain economics. Because Amazon’s costs are about the same whether it is shipping a $10 book or a $1,000 skirt, “gross profit dollars per unit will be much higher on a fashion item,” Bezos said, and it already makes money on fashion. While its MyHabit site, started last year, uses a flash-sale model to compete with Gilt Groupe, Bezos says the company’s new effort is not about selling clothes at deep discounts but at prices that ensure “the designer brands are happy.”
Amazon has not just size on its side but money. The company has about $5.7 billion in cash and marketable securities, and Bezos has long taken a stance that investing in the business is the best place to use it. The company can afford to do things that some competitors cannot, like hire a bevy of stylists for the website models or investigate replacing the plain brown shipping box with a fancier package for clothes.
Until now, fashion has been one of the few categories that Amazon has tried to dominate without success. In addition to its own site, Amazon bought the shoe site Zappos.com for more than $1 billion in 2009, started the shoe site Endless.com and MyHabit, and bought the boutique Shopbop in 2006.
But many brands stayed away because they said Amazon’s site often looked too commoditized. “It’s not a place where you look at it and are like, ‘Oh, my clothes look and feel really good,”’ said Andy Page, founder of men’s fashion brand Bonobos, which does not sell through Amazon.
Amazon hopes to fix that problem by going luxe. Bezos said Amazon.com’s initial forays into the high end had helped raise apparel sales by triple digits.
Amazon’s considerable computing capability, for example, has been turned to fashion and the analysis of enormous amounts of shopping data. The company has also made a “disproportionate” investment in photography, said Cathy Beaudoin, the president of fashion for Amazon. The photography studio, in Kentucky, can shoot more than two images a minute, allowing the company to post new items daily on the Web that were photographed hours earlier.
Most of all, the company is working to improve its presentation, so far most evidently on MyHabit, which Bezos said represented where Amazon wanted to go with all of its Web design for fashion.
Instead of static product images, for example, models spin and pose to show off the clothing. The model’s body measurements and the clothing measurements are provided to help with sizing. And shopper-friendly advice—does the size 8 shoe run big or small?—is prominent.
The ramp-up has created buzz as the company has hired models, stylists and makeup artists, started using customer data to personalize brand and size search results, and runs the first advertisement campaign ever, in print and outdoors, for the Amazon clothing store.
In the retail clothing world, fears are growing that few will be able to compete with a stepped-up Amazon.
For some brands, the company’s size alone makes an overture from Amazon difficult to reject. “The amount of eyeballs and traffic and retail dollars that are generated through their website” is impressive, said Alex Bhathal, co-president of Raj Manufacturing, which makes licensed swimwear brands like Ella Moss.
Amazon can also offer brands more attractive terms than many other stores. For instance, Amazon does not ask for “markdown money” when items do not sell, or return unsold product to a brand, said Ron Friedman, an accountant at Marcum LLP. who advises brands like James Perse and American Rag.
And to woo brands, Amazon is willing to make big buys. Jason Cauchi, creative director of Dallin Chase, had been selling some merchandise to Amazon’s Shopbop. Recently Amazon said it would buy items from the entire collection for the Amazon.com site, which Cauchi said was a rare offer and difficult to refuse.
A retailer like Amazon would typically pay brands a wholesale price for clothes, then set the retail price itself (although more powerful brands often mandate a minimum retail price).
While brands sell some of the same items to different stores, they are increasingly developing exclusive colors or styles to avoid price-comparison issues. “A manufacturer does not want to kill a business, and the best way to kill a business is to have the same product selling for less on Amazon,” Friedman, the retail accountant, said.
But Bezos said that, despite having taken a low-price approach in other industries, Amazon would not in fashion. “There’s a sophisticated markdown cadence in the fashion industry that we think makes sense and we’re basically following that established approach,” he said.
There are many disbelievers, given Amazon’s history in other industries. Bezos, moreover, has to deal with the fact that he is no fashion guy. Asked in the interview about the brands he was wearing, Bezos could not name the brands of his shirt or shoes. The jeans, he said, were Prada (not available on Amazon); his blue “Jeff” security badge was dangling from them. (NYT)
source: mb.com.ph
