Amazon Launches Its Own Clothing Label: What You Need to Know
News broke recently that Amazon is beginning to sell clothes under its own private label, which consists of seven brands. Amazon's proven ability to gobble up e-commerce market share is cause for concern for apparel brands and retailers, especially those that consider Amazon a competitive threat.
Could Amazon take over the apparel industry? Should you steer clear from selling on Amazon, or see what opportunities it can offer (from either a first-party or third-party relationship)? We caught up with Mark Vandegrift, vice president of product management for marketplaces at ChannelAdvisor, for his take on Amazon's new clothing label and how it could affect your business.
Why is Amazon launching its own private label?
A number of factors could be influencing Amazon's decision to build its own private label. Amazon has access to more data than most retailers because of its mass popularity and its third-party marketplace. Amazon has probably noticed a high number of search queries on its site for apparel items it doesn't offer. When Amazon identifies existing gaps like this, it finds ways to increase selection while at the same time establishing brands that can yield margin.
Many clothing brands and third-party retailers resist selling on Amazon because they view the company as a competitor, or they want to control their customer experience. This reluctance affects Amazon's ability to add selection, so creating a private label is a simple solution. Having its own clothing brands also allows Amazon to address price point issues in the mainstream apparel market by offering consumers similar clothing options at lower prices. Brands' reluctance to sell on Amazon has effectively created a huge competitor to their businesses.
Will Amazon have its own design department?
We don't have any visibility into the structure, but Amazon is clearly making the decision about which apparel items are flowing into this program. Amazon uses its pool of data to monitor trends and understand market needs and will position its brands to fill gaps.
Our assumption is that Amazon will do what is in the best interest of its customers and will help grow its business, so it's not outside the realm of possibility that Amazon could create its own design department.
Do you foresee Amazon opening apparel boutiques in the future?
We could envision that as Amazon opens more brick-and-mortar bookstores, it could offer a Bonobos-like model where shoppers can try on items and have them shipped to their houses. However, if Amazon wants to build a standalone brand, it would make less sense to include apparel items at their Amazon-branded bookstores, because both brands would ultimately become synonymous.
How will Amazon's logistics expertise give the company a leg up on the competition?
Amazon's logistics expertise and vast fulfillment infrastructure provide the company with a unique advantage over other online retailers. By building out its fulfillment network and opening its warehouses to third-party sellers, Amazon is able to offer consumers a convenient shopping experience through unique programs like Prime and Prime Now. "Fast fashion" is a buzzphrase often used in the clothing industry. Amazon makes fast fashion even faster through its two-day and same-day delivery capabilities.
What kinds of brands are included in Amazon's clothing label?
Amazon is targeting mainstream brands. If you sell luxury clothing items, I wouldn't be too concerned, yet. Some of the brands included in Amazon's clothing label: Franklin & Freeman and Franklin Tailored, James & Erin, Lark & Ro and North Eleven. These brands primarily sell women's apparel, with some children's and men's clothing as well.
Brands sell a feeling and an idea as much as they do a product, so the real question that will determine Amazon's success is, "How does the Amazon brand make people feel?" If Amazon customers feel they get a strong product at a decent price with a pleasant experience, it could be a dangerous situation for other apparel brands and retailers. Considering that Amazon grew by more than 24 percent over the 2015 Cyber Five holiday weekend, you have to think people are pleased with the Amazon experience and are relying on its website to do their shopping.
Should brands and retailers compete with Amazon head on?
It really depends on your market and clothing line. Traditional retailers usually don't have resources or the financial profile to invest in the same ways as Amazon. To compete with Amazon, you have to figure out what Amazon doesn't have, or isn't doing, and find a way to fill that void to make your brand unique. The problem with being an "everything store" is that Amazon can't focus on one single product category, so you have to create strategies to set your brand apart from Amazon in a way that resonates with consumers.
Retailers and brands have come a long way in offering omnichannel experience. Returns are a big challenge in the apparel space, so omnichannel retailers get a leg up in that regard. If you're differentiated from Amazon, you don't have to worry about its competitive threat as much. If you aren't differentiating yourself from Amazon, you're at risk of losing share.
Would apparel brands and retailers be wise to sell on Amazon, or is this another reason to stay away?
The famous Jeff Bezos quote says, "Your margin is our opportunity." If you opt out of selling on Amazon, the long-term impact is that you'll facilitate substitution. If Amazon sees demand for clothing items similar to your category, the company will go after it.
Whatever you do, get off the sidelines and control your own destiny. Amazon is the starting point for 44 percent of consumers searching for products and accounts for roughly 50 percent of all online sales growth in the United States. If your sales are flattening, Amazon could likely be where your target audience is doing their shopping.
Are you in the crosshairs of Amazon's apparel strategy? If so, you need to look at the pros and cons of selling on Amazon.
Mark Vandegrift, vice president of product management for marketplaces at ChannelAdvisor. ChannelAdvisor regularly provides Amazon analysis and same-store sales data on its company blog.