The e-commerce giant’s latest service, which lets consumers try on items at home before they buy them, prompted a slump in shares of Macy’s and Nordstrom, as well as European online specialists Zalando, Boohoo.com and Asos. It was a rerun of what happened to supermarket shares when Amazon announced a $13.7bn (£10.8m) deal for Whole Foods.
The Seattle giant’s Prime Wardrobe service, introduced on Tuesday, is “another potential nail in the coffin for the department-store sector”, Wells Fargo analyst Ike Boruchow said in a note.
Amazon is ramping up its fashion offering after expanding its beachhead in physical retailing by gaining more than 400 Whole Foods stores. The move comes as apparel companies ranging from Ralph Lauren in the US to Next in the UK struggle to keep up with fickle consumers and online competition heats up with new investments by fashion chains like Inditex SA’s Zara and Hennes & Mauritz AB.
Amazon may also begin selling Nike shoes directly through its site, according to a person familiar with the situation. The prospect sent shoe-retailer stocks tumbling, with Foot Locker plunging as much as 11 per cent, Finish Line 5.9 per cent, and Dick’s Sporting Goods more than 9 per cent on Wednesday. European sellers Sports Direct and JD Sports were down less than 1 per cent each in early trading on Thursday.
Prime Wardrobe aims to eliminate one of the major drawbacks of online clothing shopping - the moment when customers realise they’ll never be able to squeeze into those new jeans that looked great on a website. Shoppers have been able to get around that hassle by buying several pairs in different sizes, but that means having to return those that are too big or small for a refund.
Asos, which fell as much as 4.8 per cent Wednesday, could be one of the most exposed because of its “thinly spread global network,” Credit Suisse analyst Simon Irwin said in a note. The London-based online retailer targets young, price-sensitive consumers with mass-market brands like Adidas and Abercrombie & Fitch, a market that Amazon could take on with its global heft.
“The competition will feel Amazon’s move,” said Matthias Hanke, a consultant at Roland Berger. “Especially in the lower and medium-priced segment, retailers and brands without a polished strategy to sell through all channels will have a harder time making money in the future.”
Berlin-based Zalando fell as much as 6.1 per cent on Wednesday before bouncing back. The company’s fashion focus, underlined with magazine-style editorial photo spreads and commentary, has given it a competitive advantage over more general online retailers so far.
“Fast fashion is not an easy category for brands to sell on Amazon as brands have to pay a lot or earn their way to achieve a prominent position on Amazon but this doesn’t work so well with fast-turn products,” RBC Capital Markets analyst Richard Chamberlain said by email.
Zalando, Asos and Boohoo.com, which targets young women by speeding designs from fashion runways to its online outlets, all reached record highs in early June. Zalando, with a 1 per cent share of the European fashion market, has said profit margins may shrink this year as it spends on countering slowing customer growth.
Online fashion retailers in Europe are already facing increasing competition from bricks-and-mortar incumbents such as Spain’s Inditex, which offers online sales in 43 countries, while Sweden’s H&M sells on the web in more than 30.
Competition is heating up at the luxury end of e-commerce with a new shopping website from LVMH and a partnership between online retailer Farfetch and Vogue magazine publisher Conde Nast. China’s JD.com on Thursday said it had acquired a stake in Farfetch for $397m (£313.5m).
For now, Amazon is testing Prime Wardrobe in the US, where some European online players like Asos have made incursions but apparel e-commerce has been dominated by the websites of department-store chains like Nordstrom.
For department stores, Amazon’s new service is a big threat because users “gain access to a broad assortment of real brands, presumably broader than any single department store in one place, at an already familiar point of sale, with minimal friction and free delivery and returns", Mr Boruchow wrote.
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