Amazon’s repeated misfires in luxury:
Shoppers Buy Clothes on Amazon for the Same Reasons They Buy Everything Else on Amazon -CPC Strategy
Challenges and Challengers
It is common knowledge that Amazon historically has had difficulty penetrating the luxury fashion industry. LVMH, the largest luxury goods company in the world, has openly and vehemently opposed any kind of partnership. Several other fashion giants have also publicly disavowed Amazon over its failings to protect their intellectual property on its site, says Julie Zerbo at The Fashion Law, a curated selection of insightful legal and business stories and catalogues. While it is possible that LVMH’s position might not always be an indicator of the luxury fashion industry’s trends at large, it is most certainly a major influencer. Amazon has made a significant effort in recent years to improve its standing in this area, releasing its third annual “Brand Protection Report” this week. They have added significant deterrence measures, like seller verification tools, and introduced programs to monitor the keywords that sellers use to advertise on their platform when those keywords involve luxury brand names. Overall, they blocked over 800,000 vendor attempts in the last year and worked with law enforcement to ensure six million counterfeit items were disposed of last year.
In spite of these challenges, Amazon has made serious strides, especially in the beauty sector. Since 2017 its virtual beauty counter has piloted sub-categorization and new functionality, referred to as “gating”, protects the brands’ products from being sold by third parties. Luxury skincare brands Mustela and CIRCCELL Skincare have directly benefited from an ability to control an otherwise grey market without having to acquire the legal resources and/or endure the battles. One year later Amazon’s sub-category “Luxury Beauty” had grown 57%. In that same quarter, beauty sales at Amazon had reached $950m (behind Ulta Beauty at $1.5b).
More recently, the trillion-dollar e-commerce mammoth has partnered with Vogue and the CFDA to support independent designers, particularly those adversely affected by the pandemic, which some believe could represent a long-awaited shift for Amazon into the luxury space. In addition to a significant cash investment in the “Common Threads” aid fund, Amazon is offering digital storefronts to the brands, noting many were subject to mandated (brick and mortar) store closures, which obviously can help move their existing inventory. Once the brand has access to Amazon’s huge “ready-made consumer base”, it will need a partner with the logistics and fulfillment capability to move that inventory. So the option to use the platform, and do so at little-to-no additional cost (typically 17%) as part of the initiative, can make a sizable difference.
Just prior to COVID-19, Amazon bet heavily on luxury fashion through its streaming entertainment channel. With a reboot, essentially, of Project Runway there has not only been the obvious cross-pollination opportunity in terms of advertising and marketing, but the program itself partnered with Amazon Fashion to feature the show’s collections in the digital storefront and pop-up stores. The marriage of these platforms and content streams has proved to be a truly innovative consumer experience.
But does Amazon offer a luxury shopping experience?
After a two-year relationship, Nike decided to part ways with the online retail titan. A refocus on the “consumer experience through more direct, personal relationships” characterized its departure. Retail experts note that Amazon’s approach is engineered and geared toward buying as an experience more so than shopping. And Nike, while not necessarily a luxury fashion brand, is established enough to command and demand better experiences for their customers. The global footwear and apparel brand is taking back some of that control, as opposed to submitting itself to an algorithm that might drive its customers to competitors and Amazon’s private labels. Similarly, luxury brands tend to be quite invested in the personalized and integrated customer experience.
This begs the question — is Amazon’s instant-buy culture aligned to the luxury brand experience? You can be sure of one thing… The algorithm and shopping dynamic, at Amazon AND any well-established brand, luxury or otherwise, is a reminder of just how much the retail experience is driven by smart systems and as much customer experience data as possible.