If you can’t beat ‘em, join ‘em.
That’s the reality many fashion brands are facing in light of Amazon’s dominance of e-commerce and entry into the space. Since Amazon’s business model is built around high volume and low prices, some brands are being made to choose between lowering prices to fall in line with Amazon’s pricing model, or joining the site as a third-party seller.
Trading Exclusivity for Access
Brands like Tommy Hilfiger, Calvin Klein and Michael Kors have already begun peddling their wares on Amazon’s cavernous virtual marketplace, but many higher-end brands are hesitant to make either choice, unwilling to dilute their brand’s exclusive appeal in exchange for access to Amazon’s distribution model (which, according to eMarketer, brought in a whopping $95 billion in e-commerce sales in 2016 alone, representing 53 percent of all U.S. online sales growth.)
Just as it’s done with shipping (Amazon Prime), smart home (via Amazon Echo), and home grocery delivery (via its recent purchase of Whole Foods), Amazon has aggressively entered the fashion space through its Prime Wardrobe and Echo Look service offerings. Prime Wardrobe lets customers try on clothes for free and easily return whatever they don’t want, and Echo Look is attempting to become an always-on, in-home virtual personal shopper and fashion consultant. These offerings should and do worry fashion brands who are reticent to adopt what essentially amounts to a wholesale model.
Calvin Klein Store on Amazon
Tommy Hilfiger Klein Store on Amazon
Whose Relationship is it Anyway?
According to Glossy, one major downside of partnering with Amazon is ceding of control over the customer relationship. Retail partners only get access to the demographic and conversion data that Amazon deigns to release, but otherwise tightly controls the flow of information otherwise available when brands themselves control their own marketplaces.
For luxury brands wary of losing their luster by selling directly through Amazon, but also unnerved by being boxed out completely, many have adopted Amazon Pay, which allows in-platform purchases through Instagram, for example. But the downward pricing pressure from Amazon is ever-present, and creates a ripple effect industry wide.
Some oft-imitated brands, like Nike, have ultimately partnered with the e-commerce giant to reduce the prevalence of counterfeiters. Amazon tightly exerts control over branding, and therefore unlicensed sellers have a harder time pushing their products on the platform. Becoming a wholesale partner of Amazon’s like Nike has is a way for brands to take the reins over who is selling their products.
When a retailer becomes as ubiquitous as Amazon, it has the power to make or break competitors. As a result, many fashion brands are facing the difficult choice of partnering with Amazon and consigning the visibility of their products to the hierarchical structure of brands Amazon decides, or going it alone, and risking being left out in the cold as it tightens its grip on yet another industry.
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