5 Challenges Facing Amazon’s New Luxury Stores
Can Amazon jump the chasm to delivery a luxury experience?
Last week Amazon soft launched their new and highly anticipated Luxury Stores. You haven’t seen it? That’s probably because these stores are available only to Amazon Prime in the Amazon mobile app in the United States, and supposedly by invitation only. Here’s a tip: As a Prime member, I was able to sign into my Amazon mobile app, type in the words “Luxury Store” into the search bar, and guess what! It came up!!! P.S. My invitation arrived minutes later.
The first thing you notice is the color change and the music, to a softer side of Amazon. As you may have guessed, there is currently only she-shopping available, with a pleasing, pale color palette, video of the clothing in action, all done with a great artistic flair and a point of view high-end websites such as saksfifthave.com and niemanmarcus.com are styled. I was very impressed with the initial visual presentation. To aid in imagining what a garment looks on your body, multiple models of various body types spin around in the key Rolan Mouret dress for the season. The Fall 20 Oscar de la Renta runway show plays as you scroll down. Overall, the depth of the content is really very nice even though there are only 2 designers up and running today, Oscar de la Renta and Roland Mouret.
Mouret and de la Renta’s assortments are intriguing, with some items listed as exclusives to the Luxury Stores. There are various categories of clothing ranging from a blouse, to a suit, to a ballgown, along with the handbags and accessories to finish the looks. I must say it is quite interesting to see true designer product selling on Amazon like the $8,990 stunning Oscar de la Renta gown that would make Carrie Bradshaw proud. But what will likely be the biggest seller of the initial launch will be the “Essence of the Oscar woman” perfume, Volupte Tendre Eau de Toilette selling for $98 providing everyone a taste of the designer world without breaking the bank.
It should be noted that there is a note at the bottom of the page mentioning that there are more designers arriving very soon.
While I wish Amazon every success in this new effort, there are 5 challenges that Amazon will need to navigate to make the Luxury Stores a true success.
Challenge #1: An Amazing Sales Connection and Experience
Never ever under estimate the power of an amazing sales experience. And that experience starts with the sales team.
The welcome, the ambiance, the assistance finding just the right items, the offer of a cocktail, the tailor consultation, the store bag hanging on your elbow as you leave, this is only the beginning of a long relationship, complete with a direct cell phone number to your new source for all things fabulous from this design house.
Next comes the personal thank you letter, the call to come in for a final try-on once the tailor is finished with all adjustments to the garments, the follow-up call to see if everything works, invitations to events, help with gift lists, and offers to help your spouse update their look.
How is Amazon’s Luxury Store going to do this critical piece of the luxury experience without a human component?
Challenge #2: Tailors
If the goal is really to sell clothing, and not just accessories and perfume, a tailor is very often needed to get the fit just right, unless you are in the shape of a classic fit model, this garment will not fit just right. It never does. You see, these are not tee shirts (at least not yet). These garments are also not made to measure each client. So, to look your very best, the tailor is the one who will make this magical piece fit you just right. After all, when you spend thousands on a garment, it has to fit perfectly.
But what do you do if you are at home, with this garment that almost fits? No problem, you go to your local tailor.
Think about the fear of a local tailor, no matter how good they are, for them to open up an $8,000 gown to fit it perfectly to you. Besides the possibility that they cannot fix what you need to have fixed for your body type, there is always the possibility of a mistake or simply not what the customer wants. There are always mistakes. Are you going to ask for the tailor to buy you a new one? How long before a local tailor refuses to make the more complicated adjustments? Will a garment ever fit properly if all a tailor is willing to do is hem?
If you had bought this garment a brick and mortar store, there would be a tailor there to assess if the adjustments are even possible before you bought the garment. And if the garment still didn’t fit as you wished, the remedy for a mistake would fall on the store who bought it at wholesale, so the risk is already 50% less risky to the store, and 100% less risky to the tailor.
In a future article I will address the disappearance of tailors in America…. Suffice it to say, no outside Amazon tailor wants to mess up your $8,000 dress.
Challenge #3: Returns
As mentioned above, the mere fact that you cannot try on the garment before it arrives at your home creates a greater opportunity for the need to return the purchase. Historically, I have personally witnessed 50% return rates in women’s event dresses and a 30% return rates in men’s suiting. As you move into non-sized items the return rate moves lower and lower.
But what is Amazon going to do with these returns? Typically, Amazon gives the wholesaler/designer the option to take the garment back, or to have it disappear into Amazon with a deducted charge to the designer invoices at the approximated loss sustained from the returns. These are the kind of charges that can bankrupt a designer working on thin net margins, and not prepared for the charges.
Years ago, when working with Zappo’s (an Amazon company using Amazon Fulfill), it was discovered that any tailored clothing returns were not able to be handled and repackaged appropriately for resale. There needs to be a quality check for cleaning, often re-steaming done, re-bagging, re-folding or re-hanging that will make the return “like new” and salable again. A physical store can do this…. We haven’t seen Amazon Fulfill be able to do this yet and it is a necessary step for success.
Challenge #4: Marketing Budget to Create Content
While you may assume that the designer labels draped in all that luxury are beyond the need of worrying about a marketing budget, you would be wrong. Quite often, these stellar, and very famous designers, are not sure how they will fund and complete their collections, much less spend hundreds of thousands of dollars on digital content. Every penny is spent on the runway show, and the collection, with very little left.
The exception to this rule is a designer that has a perfume.
I challenge you to find one designer commercial that is not a designer perfume…. Okay, Calvin Klein underwear…. But really not anything else. The perfume market has so much margin, that is accounts for the bulk of the advertising you see around any designer.
It is not Amazon creating this visual content…. And even if Amazon helps create the digital shop, the designers still need to come up with the creative, the models, the shoots and the looks that embody the content of a luxury online store. This work load rivals that of a Vogue September issue. The expense could cripple those designers that do not have a mass products that can drive volume and large advertising budgets such as perfume, underwear, accessories, sunglasses, handbags. This barrier to entry will take many new and emerging talent out.
Challenge #5: High Tech Hires in a High Fashion Office
The key to success with Amazon is to have a team on staff that’s sole responsibility is to manage the Amazon store. Updating images, updating product relationship, advertising, pricing, questions from customers, adding new items, removing the old, updating stock, and the list goes on and on. While each “to do” seems easy enough, it is the level of detail, and the constant review that can only really be masterfully handled by experienced IT managers that solely work on the Amazon store. These critical people are few and far between since this is a relatively new job. The work can be tedious, a love a spreadsheet and being very technically accurate is required. Staff with fantastic spreadsheet skills spending the day behind a computer are not often found in luxury design offices.
Even the billion-dollar companies in NYC fashion are not all appropriately staffed for this effort. To expect that a much smaller, highly specialized design house would be staffed in this way will be a big limiting factor as well.
Amazon teams have historically helped get companies they find important enough up and running with tutoring support, but there usually comes a time that you need to be able to run it yourself. That is where the trouble can come in.
While I am not offering answers today, nor am I aware if some of these issues have been addressed by the Luxury Stores team, we should understand what it means to run a successful luxury retail operation.
The jewelry, handbags and perfume will be the items that make this venture worth wild. The clothing will likely be only a window dressing to sell that which can truly be serviced well.
I just don’t know if Amazon can jump the chasm to make the final full luxury experience what it needs to be for long range success. I can see this becoming a great place to learn about a designer, and perhaps buy a handbag.
Of course, this article is written in reaction to the launch of Amazon’s Luxury Stores, however this feedback is 100% the challenge any retailer would encounter bringing true luxury online. Brick and mortar lux stores have the added advantage of being able to solve some of these issues after the piece of fashion art arrives to the customers home by inviting them back to the store.
As a final thought, we all know that Amazon has resources that are beyond any other players in the category. It just depends if they are willing to close the loop… today.
