The Growing Domination of Amazon
The build-up to and buzz around yesterday’s Prime Day, which analysts predict will potentially pull in $3.6 billion in sales, has added to the flood of articles in recent months and weeks examining Amazon. These articles speak to the company’s profits, and the price increase for its much-loved Prime membership. They discuss the company’s innovative delivery options. They review Amazon’s voice-enabled virtual assistant Alexa, and its smart speaker Echo. And they analyze the company’s growing list of acquisitions and collaborations. Recently, they have reported Amazon’s initiative to 3-d body scan select Prime customers and gather personalized fit data. The articles have been informative, and endless. What more can we learn from Amazon? Short answer: there is one point these articles seem to miss.
Amazon has a comprehensive, user-friendly e-commerce, customer interface. Unquestionably, its fulfillment and last-mile delivery are unrivaled. Amazon has extended its footprint to include bricks and mortar retail, and Amazon delivery lockers within its Whole Foods stores. The company excels in anywhere, anyway, anytime. There is no question Amazon’s retail domination is growing across platforms, product categories, and worldwide geography. Amazon is the go-to shopping destination for most people I know, regardless of age, income, price point, or where they live. Some observers ask, however, whether they can be as successful in apparel as they are in entertainment, books, and other consumer goods. After all, clothing involves a fast- and ever-changing array of style, timeliness, trends, fabrication, size ranges, price, quality and fit.
Apparel. In the face of economic downturns, shifts to online purchasing, faster fashion, and heightened price sensitivity, other major apparel brands and retailers have reduced staff, discounted product, courted a revolving door of new influencers, and chased consumers with a deluge of e-mail blasts pushing the next must have item at the now even bigger reduction in price. In so doing, they have lowered consumers’ perception of the value of clothing, and they have greatly degraded the consumer experience.
There are exceptions. It was a true pleasure when I ventured into Nordstrom’s new men’s store in Manhattan a few weeks ago. The doorman greeted me with a genuine smile. Sales associates shared back stories about specific brands, products and designers. They oriented me to the range of services the store offers (self-serve return kiosks). One employee told me the story behind a visual display, relating it to the company’s heritage in the forested American Northwest. The displays were attractive. The product was interesting and well-curated, and full price. But sales associates were easy to find, knowledgeable, and attentive while not intrusive. It was such an unusual shopping pleasure, I went back again the next day to purchase more, even though I needed nothing new. It was a stark contrast to most of my bricks-and-mortar shopping experiences during the past few years, in which the customer experience has been collateral damage.
In the apparel space, Amazon has carried branded clothing for several years. But Recode.net reported that as of April 2018, Amazon has more than 60 private-label apparel brands. They include intimates and hosiery, athleisure, casual wear, denim, special occasion, and workwear. In April 2017, the Wall Street Journal and others reported widely that Amazon patented an automated, on-demand clothing factory. Not only can Amazon sell clothing and deliver it, but it has designed a proprietary system to make it. The company is becoming the epitome of a vertically integrated apparel value chain: adding value to the customer experience from concept to consumer. It is poised to deliver clothing not just better, faster, cheaper, but customized the way the consumer wants it. The way each consumer wants it.
Questions and Answers. Apparel brands, retailers, and industry analysts are asking themselves how anyone can compete with the juggernaut of retail. What they need to be asking instead, is what is the one overarching thing Amazon has done right, that has propelled the company to its stratospheric success. And they should ask what one overarching thing Amazon is doing that will propel it well beyond its current success. The answer to both questions is simple.
Data-Driven Experience. Amazon has used data to delight it customers and build loyalty by giving the customer what s/he wants. It has used data to deliver the shopping, product, delivery experience consumers crave. Since its start, Amazon has been collecting data. Where its customers live. What they search. What they buy. What they return, and why. Through data analytics, they know what we want. They know how fast we want it delivered, where and how. Moving well beyond classic MBA metrics, they know us as a whole living, dancing, dressing, eating, sleeping, and shopping person. Amazon has learned the clothing we buy, the books we read, the videos we watch, the music we like, the food we eat and when we shop. With carefully crafted algorithms, Amazon knows us better than we know ourselves.
As I was researching for this article, I found that Amazon is reportedly gathering precise details of key customers’ size and shape, not just at a point in time, but every two weeks over time, to inform its apparel size and fit decisions. Combine that with what it already knows about the shopping and consumption habits of the collective we and the individual me; add sophisticated weather and economic data; and Amazon will know what to make, when, in exactly what quantities, colors, size and fit. What’s not to love about a brand delivering exactly what I need, when, how, and where I like it, with a fit that is customized for me, at a price that reflects economies of scale? Through its data, Amazon has listened and responded to the customer in a way no one else has.
Amazon’s Intelligent Future. At its core, Amazon is neither an apparel company nor a retailer. It is a data company, using numbers to source, make, and sell the product consumers want, when, where, and how we want it. Combine Amazon’s platforms, data, artificial intelligence, and machine learning, with its interactive Alexa smart device, and Amazon will be able to develop, produce, sell, and suggest clothing we can conveniently buy from Amazon — based on our closet, lifestyle, budget, and even our local weather. Amazon will provide a seamless consumer experience that delivers comfort, convenience, and real value in a way no other retailer can.
The Point. The story of Amazon’s success is not just about what Jeff Bezos and his team have done. People think of Amazon as a retailer. Increasingly consumers and companies alike are thinking of Amazon as a clothing store. But in its heart and soul, Amazon is not a brand, retailer, manufacturer, or sourcing or selling platform. It is a data company. The point is, Amazon is a numbers-driven firm that gathers data, analyzes the numbers at aggregate and individual levels, then uses that data to identify and remove friction points in the value chain, to deliver a product, shopping, and use experience that gives the consumer what s/he wants.
The point is equally about what others have and have not done. While Amazon leveraged data to satisfy its customers’ needs, most retailers reduced staff, lowered quality, and relied on ever greater and earlier discounts to sell merchandise, reduce costs and drive profit. While others worked harder and achieved less, Amazon worked smarter, and delivered more. Others may not have the deep pockets, infrastructure, economies of scale, and data Amazon has, but they can still deliver a consumer shopping experience that delights, if they choose. If others want to survive and thrive in the age of Amazon, that is what they must do.
Margaret Bishop is a global consultant to the apparel and textile industry and she teaches at New York City’s leading fashion universities. She is also a member of the International Advisory Group at Worldwide Responsible Accredited Production (WRAP). She can be contacted at [email protected].