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Amazon's assault on UK fashion

No longer content with selling books and DVDs, Amazon is intent on making waves in the fashion industry

Chiara at the Amazon Fashion studio

Chiara at the Amazon Fashion studio

Amazon Fashion appointed founder of blog TheBlondeSalad.com Chiara Ferragni as its European brand ambassador for spring 16

It is hard to keep up with Amazon. In the past few months alone, there has been mounting speculation about its plans to launch its own fashion labels in the UK, it has announced a tie-up with supermarket chain Morrisons to deliver groceries and released Chi-Raq, the first film originally produced by Amazon Studios. The US etailer seems determined to put its reputation as principally a book and DVD seller firmly behind it.

Until now, Amazon has failed to crack two of the most challenging retail sectors – fashion and food – but this could be set to change. Its fashion ambitions came under the spotlight last month when word leaked that it has hired former Marks & Spencer director of womenswear Frances Russell. Her job title had not been confirmed as Drapers went to press, but rumour has it she will spearhead the launch of a private-label fashion business.

It is the latest in a series of initiatives designed to make Amazon a serious player in the UK, European and global fashion marketplace.

“To become a $200bn company we have to become very good at selling clothing and food, because these are products our customers use every day,” explains Sergio Bucher, Amazon’s vice-president of fashion for Europe.

To become a $200bn company we have to become very good at selling clothing and food, because these are products our customers use every day

Sergio Bucher, Amazon’s vice-president of fashion for Europe

Amazon has been selling clothing in the UK since 2008. It now stocks thousands of brands, including Hugo Boss, Ted Baker, French Connection and Vivienne Westwood. Research firm Verdict forecasts it will have a UK clothing market share of 0.6% this year – compared with Asos.com’s 1.4% and Marks & Spencer’s 8.4% – but this is likely to grow rapidly. Bucher will not be drawn on its target market share, saying only that “we want to become the best place to shop for fashion online in Europe”.

He adds: “We know the UK consumer has very high standards in terms of product, quality, price and services, and we think we have a lot to offer.”

In general, Amazon is still not a place people think of for fashion. But Bucher points out that, over the past 12 months, it has sold more than 100 million fashion items.

“That indicates a lot of customers have been shopping for fashion on Amazon. It is one of the fastest-growing categories, and we wouldn’t be growing at that pace if customers did not like our offer.” However, he dismisses the suggestion that Amazon wants to become a dominant force in UK fashion: “That is not our intention – we just want to be a place for our customers to enjoy shopping.”

Nonetheless, the hire of Russell signals a renewed fashion push. There are several reasons for doing this now, reason industry experts, including the rapid growth of German fashion etailer Zalando and the advantages afforded by the UK’s discounting culture.

At €3bn (£2.3bn), Zalando’s turnover last year was a fraction of Amazon’s overall $107bn (£76bn). But this was 33.6% year-on-year growth for Zalando, which was founded in 2008 – the same year Amazon launched fashion in the UK. It stocks more than 1,500 brands including Topshop, Ted Baker and River Island. The German firm has earmarked €200m (£155m) to invest in its technology and fulfilment capabilities this year.

For his part, Zalando’s management board member, Rubin Ritter, brushes off any concerns around Amazon’s push into the fashion market.

“Although we have grown rapidly over the last eight years, we now have approximately 1% market share of the total fashion market in Europe,” he says. “You can compare that with 5% in our most mature market and most mature category, which is footwear in Germany, so there is lots of scope for further growth. We know how the fashion industry works for our fashion brands and we have our own labels. Our position is very strong, so we don’t have to be overly concerned about what the competition is doing.”

You often check something on Amazon to see if the price is lower, and I think that’s how they’ll get people

Kristine Kirby, multichannel consultant

But fashion retailers should not be so quick to disregard Amazon. It has a number of strengths, from competitive prices to almost unrivalled fulfilment capabilities.

“You often check something on Amazon to see if the price is lower, and I think that’s how they’ll get people,” says multichannel consultant Kristine Kirby. “They will do what they always do, give away margin, make a loss and gain market share.”

Independent retail analyst Richard Hyman agrees: “Because there’s a moratorium on making any money, it places them at a huge advantage over their competitors because they can generate sales at no profit.” Bucher confirms competitive pricing is a key strategy, but declines to comment on how this affects margins.

Amazon Fashion

Amazon Fashion

Amazon Fashion

Hyman points out that there has never been a better time for Amazon to make a play for fashion market share in the UK: “If you walk down the high street today, 78% of the UK high street is on sale. Amazon is the price-led retailer on the internet. The fact that everyone else is cutting their prices is progressively teaching the customer to be less loyal and shop around more, which stands Amazon in very good stead.” He draws parallels with happened in the food sector with German discounters Aldi and Lidl: “The major food operators underestimated them all along and they got caught out by what a different kind of player can do.”

Price aside, Amazon has a number of other strengths. It works closely with its brand partners and has almost unrivalled infrastructure, logistics and platform, meaning it can outperform most of its rivals when it comes to fulfilment. For £79 a year, customers can join Amazon Prime and enjoy free next-day (and in some cases same-day) delivery. For an additional £6.99 per item, customers in certain trial cities can have their goods delivered within the hour.

We understand we need to deliver the highest-quality content to customers, hence the fashion photography studio

Sergio Bucher, Amazon’s vice-president of fashion for Europe

“That is why people will go to Amazon,” says Kirby. “Everything is about this last mile: it’s not sexy but it’s where things will be won or lost.”

“We understand we need to deliver the highest-quality content to customers, hence the fashion photography studio [opened in east London in July 2015], but we understand aesthetics are not everything,” explains Bucher. “Customers want their orders delivered on time, for the whole purchasing process to be smooth. We put a huge amount of effort into making sure we can be trusted, making sure the website looks great – that every detail they experience is just right.”

“Sell-through seems to be improving – it’s better than it was this time last year – and they have a more professional buying team,” says Rak Anand, chief executive of young fashion brand Bellfield, which is stocked on Amazon. “You can see they’re taking it more seriously than they have done before – they’re laying the foundations to do clothing properly.”

In a bid to raise awareness with social media-savvy consumers, Amazon Fashion appointed founder of blog TheBlondeSalad.com Chiara Ferragni as its European brand ambassador for spring 16. Ferragni, who boasts 5.5 million followers on Instagram, shot the advertising campaign at the photography studio. Launched on March 8, it features contemporary brands including Gestuz, Selected Femme and Keepsake.

Never say never, but at this point we don’t have a private-label business here

Sergio Bucher, Amazon’s vice-president of fashion for Europe

There is also the potential to grow its own label business, which has a higher margin. It is clear this is an important strategy for Amazon, in the US at least. Over the past few months it has quietly launched seven private labels on its US website, with more than 1,800 SKUs. They comprise: men’s formal footwear brand Franklin & Freeman; men’s suiting and accessories label Franklin Tailored; casual womenswear line James & Erin; contemporary womenswear brand Lark & Ro; women’s accessories brand North Eleven; kidswear label Scout & Ro; and women’s dress and bag label Society New York. So far, only Lark & Ro and Scout + Ro have logos and range descriptions.

Bucher skirts around the question of whether a private-label launch in the UK is on the cards: “Never say never, but at this point we don’t have a private-label business here,” he says. But many agree this could propel Amazon into a new league in UK fashion.

“If Amazon develops its own label, there would be no shortage of customers,” says Kirby. “A large proportion of shoppers want on-trend clothing and will mix high end with high street. If they can get a product that is in style that season, they aren’t going to be massively fussed that it has come from Amazon.”

Indeed, few can understand what has been holding Amazon back. It is an efficient, trusted retailer that understands what its customers want. The fact that it seems to have set aside any desire to be profitable in the short term gives it the advantage when it comes to competing on price and delivery costs, and an own-label push would help it to cement a new reputation as a serious fashion retailer.

Whether it launches own label or not, hiring Russell is a statement of its intent to make waves in the fashion industry – and its rivals would be foolish to underestimate its power to do so.

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