Amazon is coming for the apparel sector and those retailers already reeling had better brace themselves.
In a panel titled, “Retail Revolution: The Rise of Amazon’s Domination” at Cowen and Company’s Future of the Consumer Conference Tuesday, there was no shortage of praise for the e-commerce kingdom Amazon is creating.
For one, John Blackledge, Cowen managing director and senior Internet research analyst said, “They are building what we think is the most cost efficient fulfillment infrastructure we’ll ever see. I don’t think they’ll be caught.”
What’s more, 70 million American households already buy on Amazon every month. Thirty million of those households aren’t even members of Amazon’s Prime program, so the opportunity for conversion there is substantial.
The reason Amazon continues to win is because of the ecosystem it continues to build—and what they did can be likened to the iTunes model.
As Philip Stolt, founding partner of Ortega Group, which consults companies on selling via Amazon, explained, Amazon took a page from Apple’s book. Apple got users in through iTunes as simply a music download platform and then got those music lovers hooked in the ecosystem and using Apple products.
“From Bezos down, it’s really about getting people onto the platform and never having them leave the platform,” said Stolt, who also spent years managing the Team Sports category at Amazon. “As they continue to evolve that ecosystem and add innovative products…that Prime membership becomes even more valuable.”
Will Amazon really be the number one retailer in apparel?
The answer—despite those crossing their fingers that it wouldn’t be—is very likely yes.
Cowen called for Amazon to be the number one retailer in apparel by 2017, and by the looks of it, according to Blackledge, that’s still set to happen this year.
And for Amazon, Stolt added, “Apparel is really in its infancy, which is the scary part…there’s still a lot of room for improvement when it comes to how they’re doing apparel, so it’s really shocking that they’re already doing so well.”
Buying apparel on Amazon still leaves something to be desired. The platform isn’t as visually pleasing as other apparel-only sites, the imagery isn’t as high quality and the sheer number of skus to sift through can be overwhelming for the shopper who doesn’t already know exactly what she is looking for.
But none of that matters much.
Consumers who count on Amazon know they’ll find things there, get them in a short amount of time and have little hassle in returning them, so they’ll buy. And they’re buying brands they already know, with sizing they already know and fit they can count on.
What’s likely to give way to further domination in the apparel space though, is Amazon’s private label business.
“They will use all their data to see what people are clicking on and make that product themselves,” Stolt said.
What’s to become of Amazon’s physical presence?
Amazon has prided itself on doing things differently, as evidenced, among other things, by its Amazon Go stores with no lines, no checkouts, and where shoppers could pay for their goods via their smartphones.
But the question really is: why go physical when online is seeing such success?
“I think you have to look at it vertically,” Blackledge said. “At a high level, we think it’s to remove the friction points to gain more market share. There are clear structural issues [with e-commerce], people cannot try on clothes and they cannot return them in stores.”
Of course, if Amazon does venture further into stores for apparel, it will be in its own Amazon way.
“They want to take a piece of the share of brick-and-mortar, but they don’t want to just build a brick-and-mortar store. They want to innovate,” Stolt said. “If they were to open an apparel store, it’s not going to be a typical apparel store.” That Amazon apparel store would likely be capable of taking a 3-D scan of a shopper’s body, saving it to their Amazon profile and pulling clothes that would work for that body type, Stolt said.
What’s on deck for Amazon?
Drones. Before long at all, drones will likely be delivering goods to consumers in as little as 13 minutes. But beyond just drones, Amazon will be pushing the boundaries in all things automation.
“There’s going to be ways they use automation, even if it’s not to the customer, it will be in their fulfillment centers,” Stolt said. “They want to be that supply chain, they want to be the logistics provider. More efficient and more automated than even FedEx or UPS.”
What that means for the rest of the retail market in other words is: watch out.
“Overall, I look at Amazon as becoming more and more competitive and I think that’s very difficult for manufacturers,” Stolt said.
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