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Amazon is on track to dominate apparel sales. What’s next for retailers?

In October 2016, Jean-Jacques Guiony, Chief Financial Officer of luxury conglomerate LVMH, got on a conference call and told his investors there was no way the company would do business with Amazon. Two years later, you can add a Louis Vuitton bag and Bulgari cologne to your cart alongside shampoo, a bike pump and a Halloween costume for your dog. Christian Dior sunglasses are even featured as a sponsored product.

The point isn’t that LVMH backtracked. The point is that everyone is doing business with Amazon as the ecommerce giant keeps forcing its way into fashion.

Amazon accounted for 7.9% of U.S. apparel sales in 2017, second only to Walmart with a share of 8.6%. Morgan Stanley forecasts Amazon taking the top spot by the end of this year.

“A lot of people believe that shopping for clothes is tactile. They want to see and touch the items,” says Audrey Eytchison, a marketplace channel analyst at performance marketing agency CPC Strategy. “But we’re going in such a fast-paced environment and we want things quickly.”

Trust and convenience: The Amazon advantage

Eytchison isn’t surprised at Amazon’s dominance in the apparel space, especially since earlier this year, CPC Strategy interviewed 1,500 consumers about just that. Over the previous six months, 52.1% of respondents bought the bulk of their clothes on Amazon. By comparison, 46.7% did most of their online shopping on individual retailers’ websites.

Amazon has the same advantages with apparel as it has with everything else, namely convenience and free shipping. Approximately three-quarters of the Internet’s online shopping carts are abandoned, with shipping fees being the most common catalyst. Given the proliferation of Prime members, that’s a non-issue for at least 100 million Amazon shoppers.

“Amazon has also created a sense of trust,” says Judge Graham, CEO of JudgeGraham.com, which helps small businesses scale. “No matter what, I know with confidence that I can cancel or return an order… or have it to my house within an hour.”

Ease of returns is another factor. When you buy clothes online, you can’t try them on. Maybe the blue looked different on the website. Whatever the case may be, online purchases are returned at a much higher rate than of in-store purchases.

online returns

“I’m so guilty of buying multiple sizes and sending back the ones that don’t fit. But the return process is such a hassle that if I don’t know how something is going to fit, I just won’t buy it,” says Eytchison. “With Amazon, you know that as long as there’s a little Prime badge, you’re golden.”

Private labels, Prime Wardrobe, personalization

It’s not just traditional retailers. Subscription box services like StitchFix, Frank And Oak and Boxed are having their moment in the sun, and Amazon is coming for them, too. Apparel makes up the bulk of Amazon’s private labels, of which there were about 80 as of June. The most listed, Lark & Ro, a fast-fashion brand comparable to H&M and Zara, doubled year-over-year.

Prime Wardrobe was in beta until June, when the program opened up to all members. Customers can order clothes, keep the ones they like and send the others back—in an accompanying resealable box.

As a consumer buys more clothes, the company will inevitably learn their sizes and tastes. Personalized product recommendations have long been a strength for Amazon. That’s important considering its inventory includes approximately everything that’s ever existed. (I just checked; they sell walkmans.) (Which you can get on Prime, obviously.)

Amazon- walkman

“Amazon has the data and the algorithms to take a deeper dive into utility like a digital personal shopper,” says Graham.

If you can’t beat ‘em, join ‘em

How can retailers stay competitive? They can focus on differentiating their brands by making their own customer experiences as perfect as possible. But that’s not a foolproof plan, as not even Google is immune to the Amazon effect. Last week, CNBC reported that some brands are reallocating half their Google Search ad budgets to Amazon’s increasingly successful advertising business.

For most retailers, the better bet is to have a presence on Amazon, but not necessarily selling everything on the platform. That gives them a chance to be where consumers are, without forfeiting all their own data and relationships.

Calvin Klein - Amazon shop

Amazon does well with basic items that have straightforward sizing, such as t-shirts and underwear. Calvin Klein plays into that well, having developed an underwear line specifically for Amazon. Levi Strauss & Co. also uses ads to drive traffic to its Amazon brand page, which increases organic visibility in Google searches.

“To make money, you have to spend it,” says Eytchison. “Going up against such a juggernaut, having full coverage is the way to solidify brand equity. You have to be everywhere: brick-and-mortar, online, and on Amazon.”

The post Amazon is on track to dominate apparel sales. What’s next for retailers? appeared first on ClickZ.

Reblogged 1 month ago from www.clickz.com

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