Three years into its existence, Amazon Prime Day is good news for shoppers worldwide, but the implications of its success for traditional apparel brands and retailers look increasingly worrying.
As Prime Day puts a hole in wallets worldwide, we take a look at three key reasons why the fashion industry should be watching on with concern rather than admiration.
1. Amazon Can Reshape the Global Retail Calendar at Will
Three years ago, Amazon Prime Day was little more than a gleam in Jeff Bezos’ eye. Launched as a celebration of 20 years in business, the first year of Prime Day got off to a staggeringly good start. Despite some initial teething troubles, Amazon beat its previous Black Friday sales record straight out of the gate.
Fast forward a year and things got even better – 2016’s Prime Day shattered records and resulted in Amazon’s largest-ever day of sales by volume. 2017’s results are yet to come in but, judging by the breathless media coverage so far, further success looks like a safe bet.
The scale of achievement here is staggering. In three short years, Amazon has managed to create an entirely new global retail event (at a previously barren time of year) entirely on its own terms.
2. Fashion Brands Are Being Corralled Towards Wholesale
Amazon holds the keys to whatever happens inside its own kingdom. If brands want to benefit from the upside of events such as Prime Day, they need to play by Amazon’s rules.
Brands have the option of either selling to Amazon directly, via its wholesale model, or joining the company’s third-party marketplace as a seller. But brands and industry execs say Amazon’s rigged the game so that it’s not much of an option at all.
“Brands are feeling trapped by Amazon,” said Jim Fosina, the founder and CEO of Fosina Marketing Group, a Connecticut-based marketing agency. “As a wholesale partner, you’re falling victim to Amazon’s pricing model, which is a huge risk. But that’s the only way to unlock their distribution model. Fashion and Amazon are at a major crossroads.”
– ‘Trapped’: How Amazon Is Cornering Fashion Brands Into Wholesale
Nike’s recent partnership announcement shows that Amazon is prepared to negotiate to get the largest players into its ecosystem, but very few firms in the world have Nike’s wider brand leverage. The suspicion is that most brands will have to take what they’re given.
3. Amazon Has Assembled an Army of Ideal Customers
Let’s start with a sobering statistic: Amazon Prime has somewhere in the region of 85 million subscribers, and 22 million of them have come on board in the last year. Remember, these are people who’ve paid Amazon for the opportunity to spend more money.
Amazon Prime isn’t just a textbook example of masterful customer segmentation, it also gives the company an opportunity to target initiatives at eager early adopters with proven money to burn. In this light, the recent launch of Amazon Prime Wardrobe shows just how seriously Amazon is taking the apparel niche. Expect many future moves in this direction, all aimed squarely at capturing the top end of the market across purchase frequency.
The key point here is that Amazon isn’t just racking up record sales with Prime Day. It’s also using ideal customers to turn the screw on the fashion industry generally in terms of consumer expectation. To take just one example, Prime Day has been steadily getting faster since its inception, and many of this year’s offers worldwide will be delivered within a two-hour window via Amazon Prime Now. That’s a radical overhaul of the online shopping experience that fashion brands will eventually be forced to respond to.
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