Let's say you have a nice occasion coming up. A wedding, perhaps.
Where would you go to find a dress? The mall? Rent the Runway? What about Amazon?
That last choice might just be a good bet. Now, Amazon, the ruler of all things internet shopping, is branching out into high fashion.
Get started with a free financial assessment.
Get started with a free financial assessment.
You know who isn't happy? Upscale designers who haven't signed onto Amazon, and the retail community at large. Read on to find out why retailers are so worried, how Amazon could dominate the space and what it means for your shopping habits.
The Math: Good for Amazon, Not for Others?
As the Times points out, "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,' Mr. Bezos said."
Put it this way: If it costs Amazon $20 (we're just speculating as to the price) to ship you the complete fourth season of True Blood that you bought for $41, they get about $21 dollars out of that deal, which they likely then split with HBO. If it costs them the same $20 to ship you a $1,000 Michael Kors dress, they get $980 to distribute among its partners. High fashion, therefore, could be more lucrative than DVDs.
And it's hard to compete with that kind of power. Many retailers quake at the implications of a successful high-fashion business on Amazon, which can afford to offer brands favorable terms, like keeping unsold merchandise instead of returning it to the fashion house and not charging "markdown money," a fee paid to the distributor when the merchandise doesn't sell. They fear that the site will quickly outstrip their own businesses due to the number of consumer eyes that Amazon courts daily.
“It has the latitude to set prices and charge whatever it wants,” Sucharita Mulpuru, an analyst for Forrester Research, told the Times. “That is a huge threat for brands.”
(Amazon's power in setting prices for e-books, which spurred a huge backlash, could be a cautionary tale for the fashion industry. Other book sellers feared its $9.99 price point for all e-books would make consumers unwilling to pay any more than that for an e-book, and make Amazon, which sells about 60% of all e-books, dominant in the industry.)
Though some fashion labels would undoubtedly benefit from Amazon's generous terms, not all are embracing the retailer, which could broaden their audience and boost their profits. Certain brands disdain the site because it looks too "commoditized" and not luxurious enough to display their wares. They even doubt Amazon's potential to succeed in this arena because Bezos isn't experienced, or particularly interested personally, in fashion.
What 'Going Luxe' Looks Like
Most people would be surprised to know that Amazon loses hundreds of millions of dollars each year by offering free shipping and some free returns. But they happily take the loss to make sure their customers keep coming back, and they'll apply a similar strategy to launch their newest endeavor.
The site is making a "significant " investment in fashion, according to Bezos. (And when talking about a company that has $5.7 billion available to spend, the word "significant" can be just that.) They're laying out cash for things like a state-of-the-art photo studio in Kentucky that produces up to 3,000 images per day to convince high-end designers to join the team.
So far, Michael Kors, Vivienne Westwood, Catherine Malandrino, Jack Spade and Tracy Reese have signed on, but Amazon is hunting for more collaborators, using tactics like both sponsoring and live-streaming the very upscale Metropolitan Museum of Art costume ball.
The Times describes more of these tactics: Aside from "going luxe" by changing its web interface and featuring dynamic models and measurements to help with sizing, the site is also making the most of its cash reserves by hiring stylists for the models, upgrading their shipping packaging and including shopping advice on the page like whether sizes run small.
What Does This Mean for You?
Will you be stocking your closet from Amazon.com this fall? We can already see evidence of Amazon's ambitions in MyHabit, where pieces are on sale from Chloe, Vera Wang and Derek Lam, and where the site says its fashion-related intentions are destined to live.
It will take some time to see if the strategy pays off and Amazon becomes a major resource for fashionistas and laypeople alike.
But as much fun as it may be to receive both True Blood and a Catherine Malandrino dress in the same package, the name "MyHabit" reveals a deeper risk: The convenience and free shipping isn't an excuse to buy designer fashions just because you're picking up an e-book, and $400 is still $400, no matter where you spend it.