Amazon's New Wardrobe Service Is Latest Threat for Apparel Stores -- 2nd Update
June 20 2017 - 2:12PM
Dow Jones News
By Khadeeja Safdar, Suzanne Kapner and Laura Stevens
Amazon.com Inc. is giving shoppers another reason not to visit
stores. The online giant is rolling out a free service to let its
Prime members try on clothes at home, its latest attempt to crack
into the fashion world.
The new service, dubbed Prime Wardrobe, is a threat to
traditional sellers of apparel, especially department stores, that
are struggling to get shoppers to visit stores. It also challenges
online players, such as Nordstrom Inc.'s Trunk Club and startups
like Stitch Fix, which ship boxes of clothes for people to try on
at home. Shares of several retailers, including Nordstrom and Gap
Inc., fell about 3% Tuesday afternoon.
The service announced Tuesday would allow Amazon Prime members
to fill a box with three or more eligible apparel items from its
website, try them on at home for seven days and ship back what they
don't want free. Customers aren't charged for the purchase during
the trial period and they are offered a discount of up to 20% on
what they keep.
"The reason this program is such a wake-up call for traditional
retailers is the fitting room was the one place where an offline
retailer could differentiate itself from an online pure play," said
Joel Bines, the co-head of AlixPartners LLP's retail practice. "A
good sales associate [in a store] can make all the difference."
Apparel is a notoriously difficult and costly segment for online
retailers, where return rates can approach 40% for some items.
Amazon is now the second-largest apparel seller behind Wal-Mart
Stores Inc. after taking market share from Target Corp. and several
department stores, according to a research note published by Morgan
Stanley in April.
For all its success in other areas, "Amazon still hasn't cracked
the apparel code," Mr. Bines said. "It's philosophy of being the
everything store is a disadvantage in apparel." Traditional
retailers have relied on the instincts of their merchants to create
a curated selection for shoppers. By contrast, Amazon wants to make
every choice available to customers, which can be overwhelming for
some.
The online retailer has made inroads by convincing such name
brands as Calvin Klein, Kate Spade and Levi Strauss to sell on its
website. It has also been adding its own brands in several
categories, including athletic clothes, lingerie and workwear. It
recently named former Victoria's Secret executive Christine
Beauchamp to replace Catherine Beaudoin as head of its fashion
division.
An Amazon spokeswoman said more than a million items are
eligible for the Wardrobe service, including brands like Calvin
Klein, Levi's, Lacoste and Adidas. "It makes it easier for
customers to touch or see items in-person when buying clothing,
shoes and accessories online," she said.
Amazon's new program resembles online shopping service Stitch
Fix, but shoppers choose their own items. Stitch Fix, which
recorded sales of $730 million in its last fiscal year, uses
personal survey data and stylists to pick a set of five items for
each shopper. Customers receive a 25% discount when they buy
everything in the box.
Stitch Fix didn't immediately respond to a request for comment
Tuesday.
"We don't think it's that big of a game-changer," said Sam
Romanoff, a research associate at L2, a digital benchmarking firm.
"It seems like they are trying to enter the box business, but they
are not providing additional services, such as stylists."
Some traditional retailers noted that Amazon's latest offering
is no different from the free shipping and free returns they
provide their customers. They say they already allow customers to
buy items online but pick them up in stores, so shoppers can try
them on before they take them home. They also contend that shoppers
aren't willing to completely abandon physical stores.
"Our customer moves very easily between online and offline,"
Macy's Chief Executive Jeff Gennette told shareholders at the
company's annual meeting earlier this month.
A Nordstrom Inc. spokeswoman said Tuesday the company has
launched several initiatives aimed at making the online and
in-store experience more seamless, including a service that allows
sales associates to create digital boards filled with personalized
style recommendations that customers can view on their mobile
phones or computer.
Traditional apparel chains have struggled to turn a profit
online because of higher shipping and return costs, but Amazon's
logistics know-how could help. "Buying clothes online is dicey just
because of the returns factor," said John Haber, founder of
supply-chain consultancy Spend Management Experts. "If you're
buying a bathing suit, a very high percentage of those are
returned."
Write to Khadeeja Safdar at khadeeja.safdar@wsj.com, Suzanne
Kapner at Suzanne.Kapner@wsj.com and Laura Stevens at
laura.stevens@wsj.com
(END) Dow Jones Newswires
June 20, 2017 13:57 ET (17:57 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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