How Amazon Could Become The Next Saks Fifth Avenue
The online retailer is pouring money into its new Gilt-esque division that specializes in high fashion clothing. Despite being better known for selling everything from gardening tools to cat trees, it has the fashion industry on edge.
Amazon will spare no expense to enter the high-fashion marketplace. The retailer is better known for selling everything from ebooks to the kitchen sink (and gardening hoes, cat trees, and bellybutton rings) than clothes that carry four-figure price tags. But CEO Jeff Bezos hopes that in time, you'll go to Amazon first for Michael Kors pantsuits and Prada pumps — and it is willing to bleed a bit of money for the long-term gain of luxury goods' insanely high profit margins.
Amazon recently launched a flash sale site called My Habit, which functions in the manner of Gilt Groupe, and has already hosted sales of items by designer darlings like Valentino and Thakoon. Using patent-pending technology, they shoot 3,000 images a day at a photo studio in Kentucky. As an avid online shopper myself, I'd say the results are well worth it: instead of a static model you see a girl moving in the clothes, elevating what could be a flat image into something that instantly tells you a lot more about whatever item you might buy than many online shopping sites do in a single click. For its efforts in the fashion space, Amazon is losing hundreds of millions of dollars a year on free shipping and free returns.
Though it's not making Amazon any profit (yet), MyHabit is serving an extremely valuable purpose: it allows the site to build relationships with notoriously finicky high-end brands that would otherwise probably not want to work with them. You don't find Michael Kors slacks on a rack next to discounted coffee-makers — you find them in Saks Fifth Avenue, on Net-a-Porter, in Bergdorf Goodman, amongst things of its ilk. My Habit, a splinter site with a much sleeker design than Amazon, challenges designers' perception of the company.
Also, Amazon can afford to make the prospect of selling goods on My Habit attractive to designers' bottom lines. Unlike many retailers — which took big hits in the recession — Amazon does not return unsold merchandise or ask for money from designers when things don't sell. They simply absorb those costs, because keeping labels happy is key to their success in this space.
Amazon made another extremely shrewd investment to solidify itself as a burgeoning fashion titan: it sponsored last night's Met Ball. The Met Ball is perhaps the single most important fashion industry event of the year. Thrown annually by Vogue, designers dress their favorite celebrities in their most fabulous gowns, and everyone goes to the Metropolitan Museum of Art in New York and gets a first look at the Costume Institute's new exhibit. The event delivers the best red-carpet watching of the year (better than the Oscars and Golden Globes combined), and thanks to Anna Wintour and Vogue hosting the whole thing, not optional for the fashion industry. Wintour is the most influential person in the business, and Bezos was incredibly smart to put his money behind her beloved, spectacular party. As Vogue documentarian R.J. Cutler once said of Wintour,"[Y]ou can't succeed in the fashion industry without Anna Wintour's blessing."
Wintour is sure to return the favor of Amazon's sponsorship by encouraging some of her favorite fashion talent to sell on the site. While it will probably take longer for Amazon to build up the muscle in the fashion industry that it has in the publishing industry, it does seem clear that they won't stop until they're the number-one retailer for everything. But if Amazon ultimately succeeds in fashion dominance, mom-and-pop fashion boutiques could go out of business. And even farther down the line, Saks could be the new Barnes & Noble, Bloomingdale's could be the new Borders, and designers could not have the option of selling on Amazon if they want to sell at all.
But your favorite stores won't collapse around you tomorrow. So let's just enjoy the photos of celebrities all dressed up from last night that Amazon paid for us to have.