Monday, May 14, 2012

Amazon Turns its Sights on High Fashion

Chances are this is the first, and last, time high fashion will be discussed on this blog. But it’s a story that bears watching since Amazon is using its “go big and spare no expense” philosophy on the fashion industry.

“It has the latitude to set prices and charge whatever it wants,” Sucharita Mulpuru, an analyst for Forrester Research, said of Amazon in The New York Times. “That is a huge threat for brands.”

Sound familiar?

Amazon’s investment of millions into high-end fashion has the potential for much higher gross profit dollars per unit than books or CDs. The company is hiring photographers to produce 3,000 images a day for shoppers to browse. It’s also offering free shipping and returns on apparel to attract online customers to its online storefront. Amazon is working to recruit high-end fashion firms, such as Michael Kors, and was even a sponsor for the Costume Institute Benefit at the Metropolitan Museum of Art.

Many in the industry worry they will not be able to compete with Amazon’s purchasing power and its willingness to undercut traditional retail markups. Amazon CEO Jeff Bezo has said his firm will not take the low-price approach it’s used to disrupt other industries on its high-fashion project, but most are unconvinced.

“A manufacturer does not want to kill a business, and the best way to kill a business is to have the same product selling for less on Amazon,” said Ron Friedman, a retail accountant at Marcum LLP.

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