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E-commerce

Find is a hot new fashion brand – and Amazon’s newest private label line

Amazon officially launched its own fashion line, Find, in the UK earlier this month, receiving a warm reception from some of the industry’s most influential voices. Harper’s Bazaar UK called the collection “fashion forward”, while Cosmopolitan UK deemed it “pretty damn cool”.

With men’s and women’s fashion and footwear ranging from around £35 (A$60) for jeans and £52 (A$88) for boots, Find is looking to attract the type of customer who currently shops at ASOS and Topshop. 

The brand is not only noteworthy for its surprisingly stylish apparel offering, it is also emblematic of Amazon’s huge, and increasingly sophisticated, investment in private label products across a vast range of categories.

“In the past two years, Amazon has rolled out upwards of 20 private label brands in categories spanning from clothing to baby to bedding. Some of these brands, like AmazonBasics and Amazon Elements, have Amazon in the name, but most of the new brands don’t, like Happy Belly and Lark & Ro,” Julia Millot, a market research analyst at 1010data, writes in a blog post about Amazon’s private labels in July. 

“With an 80 per cent [year-on-year] growth rate, Amazon’s private labels pose a real challenge to traditional brands across hundreds of categories,” she notes.

Overall, Amazon’s private label products accounted for just two per cent of total units sold in the first half of 2017. Nevertheless, the company’s rapid expansion of private label brands – in number, category and sales – has some retailers worried, since they may end up competing directly with the e-commerce giant. 

Batteries, baby wipes to bras

According to 1010data, Amazon’s biggest private label line, and its oldest, AmazonBasics, brought in over US$200 million in sales during the first half of 2017. The brand, which sells nearly 2,000 products from batteries to pots and pans, reportedly is responsible for nearly a third of all online battery sales in the US.

The company’s own brand electronics, including Kindle e-readers, Echo smart speakers, Fire TV and Kindle Fire, saw sales of over US$75 million in the first half of 2017. These products comprise 55 per cent of all Amazon private label sales.

Amazon Elements, which started selling baby wipes in 2014 and this year expanded to a variety of health-related items including supplements, earned US$9.5 million during the first half of 2017.

While Amazon’s top ten most popular private label products today are all technology-related, more than half of their private label brands now sell clothing, according to 1010data. Indeed, these are some of Amazon’s fastest-growing private label brands.

Children’s clothing line, Scout + Ro experienced the most aggressive year-on-year growth, shooting up over six-fold in the first half of 2017. Meanwhile, Franklin & Freeman, a men’s shoe line, and Lark & Ro, a women’s clothing line, also experienced healthy growth, increasing sales by 153 per cent and 84 per cent, according to 1010data.

US market research firm, L2, agrees that Amazon’s private label fashion brands have been gaining traction, particularly men’s dress shirt brand Buttoned Down, which currently has products ranking in the top 20 ‘best sellers’ for the category.

L2 noted in a July article about Amazon Prime Day that the company almost exclusively featured its own private label brands, including Buttoned Down, women’s lingerie brand, Mae, and men’s casual clothing brand, Goodthreads, in the fashion deals section.

The flywheel

 

However, it’s not just the sheer number of Amazon’s private label brands that has Australian retailers worried, according to Mihir Kittur, co-founder and CEO of analytics firm Ugam Solutions.

It’s Amazon’s ecosystem of devices, like Alexa, and services, like Prime Wardrobe, a try-before-you-buy service currently being trialled, which make the company’s private label proposition so hard to beat.

“Conventional retailers look at private label as an assortment and a way to attract customers through the value of private label. But Amazon is not doing private label in the conventional sense,” he says.

Instead, he refers to the company’s strategy as a “flywheel”, a mechanical device that stores energy as it rotates, so it can keep spinning without requiring much additional energy.

“They give you great value and make it very convenient and you give them so much data that they are able to provide a tremendous amount of relevance.”

Looking at Prime Wardrobe, Kittur says Amazon will use the Trunk Club-like service to get insight into buying patterns. It can refine its understanding of what sells and what doesn’t by nudging customers with specific images and products, and feed the findings into its manufacturing process.

“It helps [Amazon] become smarter with anticipating the market. How they then blend it with the supply chain will be interesting to see,” Kittur says.

It’s not Amazon, it’s you

Kittur’s company is currently working some of Australia’s largest retailers, including e-commerce companies, that want to understand the potential impact of Amazon on their business.

“Take an important category like homewares or electronics. [Retailers] want to understand how much of their assortment will be similar to Amazon. Is there a gap in their range or price point? Are they over investing in some area?,” he said.

“We realise that customers are drawn to private label, so we’re asking if a retailer needs to do more or less. Or if they need to be smarter about pricing.”

According to Kittur, however, Australian retailers should first and foremost be thinking about how to improve their own business for their customers’ sake, rather than worrying about Amazon.

“A lot of Aussie retailers realise they’re lacking in certain capabilities around decision making. They understand they have to move faster in terms of customer experience improvements. Is product easy to find on their website, how good is their returns policy, how can they be smarter about the way they price, which may not be very data driven,” he said.

“We’re working with retailers not to play Amazon’s game, but to truly understand what their customers need and want.”

A version of this article first appeared in issue 2157 of Inside Retail Weekly. To subscribe, click here. 

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