Amazon: Friend and Foe
If you’re looking for something scratch your head over, take a look at Amazon’s recent leap into fashion. On the one hand, it’s going great. Amazon has ridden its Prime membership to quickly overtake Walmart as the No. 1 clothing retailer in the US. It has also made no secret of its desire to dominate fashion by designing its own line of brands, and it already has plans to roll out even more. Given the company’s long track record of disrupting industries, it’s easy to see why some of its competitors might be hitting the panic button.
That said, fashion brands have some breathing room. A recent survey found that while 84 percent of online shoppers purchase clothes from a digital retailer, only 20 percent of those shoppers do so at Amazon. Rather than worry about the relentless growth of Amazon, brands and retailers need to look at all of the possibilities for growth in online commerce and see where their own advantages lie.
Essentially, apparel brands have four major avenues to sell online: online retailers, marketplaces, social media platforms, and direct to consumer (DTC). Each has compelling advantages and disadvantages —and none of them should be ignored.
Let’s start with DTC, which is a brand’s own direct-to-consumer channels, including websites, apps, and integrations with other platforms. The disadvantages of DTC are plain: they cost money and are outside a company’s core competency — which is a big reason why some brands are reluctant to have them.
The advantages are less evident, but increasingly vital. DTC offers the ability to collect valuable first-party data and provide a great branded experience. The former is key in the race to deliver the personalization consumers increasingly demand; the latter allows the brand to differentiate itself and create value. In a world where Amazon is ascendant, these provide an important defense and the ability to compete.
The next channel is a brand’s online retail partners. Here the advantage lies both in the increased reach and, unlike with Amazon, the on-brand experience. Most brands work hard to show up first in Amazon search, where it’s difficult to have a more compelling presence than their competitors, but pay little attention to other retailer sites such as Target or Nordstrom. As a result, brands could see outsized returns on investment if they optimized their presence on Walmart instead of Amazon.
For most brands, marketplaces means Amazon, but they could also include Jet.com or even eBay. It’s relatively straightforward to make the case for going on Amazon: it dominates product search; it greatly reduces the complexity of going online; it provides service that is as good as or even better than any brand offer; and in many geographies, it is the only way most brands can reach a consumer in two days or less.
What’s more, you can be on Amazon and still retain some control over your customers’ experience. For example, Amazon has worked with companies such as J.Crew to create branded spaces inside of Amazon.com. If you go to the J.Crew store on Amazon, most of the Amazon content disappears once you scroll down, leaving you in a J.Crew world.
The downside? Amazon is a walled garden. It keeps your data and can, at any time, use that data to launch its own new brands that compete directly with yours. If you go 100 percent with Amazon, they may end up knowing your customers much better than you do.
A final, emerging platform is social media. Instagram has recently enabled shopping within its sites and apps. Given the heavy role the platform plays in fashion, this could be a massive new avenue for clothing brands to sell online.
So, what can you conclude?
1. Inspire growth on all platforms. It’s important to be on all of them. You need DTC for data, you need retail partners for reach, Amazon for sales and visibility, and social media because that’s where your customers are.
2. Do not ignore Amazon. Amazon is far too disruptive and successful to do that. Brands need to gain experience with the platform and keep tabs on it so as not to get swept away by an unexpected development.
3. Know your brand and what it stands for. To create great branded experiences online, you need to know who you are. That’s why DTC is a great place to express your brand and turn casual shoppers into loyal customers.
4. Look for growth in social. Social media buying represents the biggest future avenue for growth for clothing brands. You should launch social commerce on Instagram as soon as possible and be aware that Snapchat and Pinterest won’t be far behind.
In the end, the biggest question isn’t whether Amazon is a friend or foe. It’s how you grow and thrive in a varied and challenging e-commerce landscape. The brands that take an omnichannel approach with a close eye on social will likely come out ahead. Those that keep doing what they’ve been doing are sure to be left behind.
Anthony Reeves is Chief Creative Officer of Wunderman Thompson Seattle.