• The New York Times reports this morning that Amazon.com is leaping into what it calls “the high end of the fashion pool,” and is “taking on the high-end clothing business in its typical way: go big and spare no expense.” This means losing hundreds of millions of dollars a year on free shipping in its quest to make a splash in a category in which it currently does not have a major presence.
According to the story, “Amazon’s decision to go after high fashion is about plain economics. Because Amazon’s costs are about the same whether it is shipping a $10 book or a $1,000 skirt,” gross profit is higher on the fashion item.
The story notes that while Amazon has sold clothes for years, this is the company’s first concerted effort at making a dent in the high fashion world ... and it is an effort not entirely appreciated by top brands, which are afraid that Amazon will drive down prices and commoditize products.
According to the story, “Amazon’s decision to go after high fashion is about plain economics. Because Amazon’s costs are about the same whether it is shipping a $10 book or a $1,000 skirt,” gross profit is higher on the fashion item.
The story notes that while Amazon has sold clothes for years, this is the company’s first concerted effort at making a dent in the high fashion world ... and it is an effort not entirely appreciated by top brands, which are afraid that Amazon will drive down prices and commoditize products.
- KC's View:
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History would suggest that the high fashion industry has a lot to be worried about, since that is precisely what Amazon has done in every other category in which it has been successful. As we’ve said here before, online shopping is by its very nature more transparent, and transparency leads inevitably to deflationary pricing.
Amazon CEO Jeff Bezos says that in the long run, it will be better for the fashion industry to work with Amazon rather than against it. Whether or not that is true, history and momentum would suggest that high fashion retailers need to start thinking that how their customers define value and what differential advantages their stores are going to offer.
