PRETENTIOUS MOI?

Are there no limits to the expansion and developments plans of Amazon? This company has been rightly hailed as one of the major “game-changers” of the past fifty years or so. It arguably has made the most significant contribution to changing the way in which businesses engage with customers, anticipate and shape their demands and expectations and come up with a value proposition that addresses the needs of many of us.

Five years ago if you carried out a vox pop with people on the typical “high street” and asked them what do they associate with Amazon, the vast majority would respond by mentioning terms such as “books” and “CD’s”. Clearly both Amazon and the perceptions that people hold about them have moved on considerably since then.

I was forced to revisit the case of Amazon (a company that features extensively in previous blogs of mine) recently when I learned about their move into the area of fashion, specifically womenswear and menswear.

While this has not necessarily surprised me (when will Amazon move into the challenge of getting people to planet Mars?), I thought initially that might be a step too far. Why? Well its success has been built on selling products that are not involved in the “emotional” space in the mind of the shopper. Buying books and electronic items does not have the same emotional resonance as buying fashion items. To use an analogy, if Manchester United set up a basketball team to compete in the European Basketball league, people might raise doubts in their minds about the credibility of such a move. However on a deeper appraisal, many would come around to the conclusion that their financial resources would enable them to develop a capable team reasonably quickly.

The same possibly applies to Amazon. With their considerable financial reserves and muscles is it not reasonably to expect that they can become a major player in the fashion clothing sector?

Let us examine their entry into this space more fully.

In September 2017 Amazon announced its move into fashion by launching a concerted marketing communications campaign via billboard advertising, digital marketing and on its own webpage across the United Kingdom, Germany, Spain France and Italy.

This campaign was built around its new own-label fashion brand Find.

Its basic value proposition is based on the principle that it will offer around five hundred womenswear and menswear items that are “trend-developed” i.ee that closely follow current fashion trends and “street styling”. A red, floral wrap dress and hot pink sock boots featured prominently in its initial “visuals” in its communications strategy.

Prior to the major launch in September it launched some basic and cheap items in April to allow them to put the “toe in the water”.

Jeff Bezos, the founder of Amazon sees the September launch as a “learning process” in the company’s quest to generate overall revenue of over $200 million from the fashion sector in due course/

This is no idle boast or threat. As indication of the intent of Amazon, it recently acquired Europe’s biggest photography studio in London with the specific aim of being able to produce state-of-the-art “visuals” of its fashion collection on its websites and digital communications platforms.

Earlier this year Amazon launched Amazon Echo Look, the first AI (artificial intelligence) fashion assistant. This device captures pictures and videos of clothing and provides advice to the shopper about their suitability and compatibility. The pictures and videos are “fed into” a “lookbook” and this device generates the “advice”.

In addition to the Find brand it launched another one called “Iris & Lily, which focuses on lingerie items.

In the North American market it has been much more active in the past couple of years: launching seven own labels including: Goodthreads, Amazon Essentials, Paris Sunday, Mae, Elle Moon, Buttered Down and Lark & Ro. All of these brand are targeted at their Amazon Prime customers. As discussed in an earlier blog, such customers pay a monthly subscription and receive a number of benefits included free delivery of selected items.

Who is it targeting?

In the online fashion retail space its main protagonists would appear to be Asos, Boohoo, Missguided, Yoox and Zalando.

In the case of Manchester-based Boohoo it has generated much success recently, recording a 97% increase in profits as of March 2017 of £30.9 million, with overall sales rising from £100 million to 294.6 million. It also recorded an increase of 20% on its active customer base (5.2 million users).

Missguided also experienced an increase in sales of 75% to £206 million in 2017. Interestingly, in a genuflection to the concept of omni-channels, it opened a flagship store in Stratford (21,000 square feet).

In the context of “bricks and mortar” retailers, Amazon is positioned somewhere between Primark, H&M, Topshop and Dorothy Perkins, with its prices ranging from £8 to £64.

On what basis therefore is it reasonable to assume that Amazon can make a serious dent in the fashion sector?

Firstly it has arguably a captive initial market in its Prime customers. Same-day free deliveries provide an incentive to buy own brands such as Find from Amazon.

It has a very strong footprint in the areas of customer service and delivery and thus has strong credibility in the all-important challenge of delivering value to shoppers.

Brand credibility in the fashion sector is arguably more problematic. While it is one thing to sell books, food and electronic products, selling fashion requires something else.

It also runs the risk of antagonising key fashion brands such as Ted Baker who use Amazon to sell their products. Over 350 branded collections make use of the Amazon channel to engage with and sell to their customers. If it starts to undercut some of these brands on price, it runs the risk of them pulling away from using Amazon. Can it run the risk of using its own channel to promote its brands, thereby disadvantaging other brands? It risks losing the commissions it earns from these sales.

International supply chains are in some cases suffering from pricing issues, shortages and delays. Amazon has a strong ability to control its own production, design and marketing. This leaves it in a strong position.

Online fashion retailing continues to grow. Many sceptics initially felt that it would be too difficult to overcome the need that many shopper have to touch, feel and try on items. One-quarter of all sales takes place via online channels. Arguably rises in inflation may also encourage shoppers to consider online shopping in order to potentially benefit from lower prices.

Amazon is not selling clothing items at the “cheap and cheerful” end of the market. As stated earlier it is launching “trend-led”, fashionable items.

As a further sign of its intent in this space Amazon was awarded a patent in the USA in 2017 for an on-demand automated clothing factory. This would enable it to create custom-made garments to the exact fit and specification of an individual shopper. The patent extends to textile printers, pattern cutters and assembly lines.

Let’s see how this foray into fashion pans out for Amazon. I am not betting against it failing to succeed! Is it a pretentious strategy? Not in my view.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s