By Matthew Dalton in Paris and Laura Stevens in San Francisco
Swatch Group executives earlier this year were planning to sell
some of the Swiss conglomerate's higher-end watches through
Amazon.com Inc.
But after months of talks, the two companies hit a wall. Swatch,
whose brands include Longines, Omega and Blancpain, demanded a
commitment that Amazon proactively police its site for counterfeits
and unauthorized retailers. Amazon refused, according to Swatch
Chief Executive Nick Hayek, putting a deal between the two on
ice.
"We add value to them," Mr. Hayek said. "But they should also
add value to the brand."
Amazon declined to comment on Swatch.
Amazon is courting companies across the retail spectrum, but one
sector is still mostly holding out: the world's club of luxury
brands. Swatch and other high-end retailers say Amazon's online
marketplace undermines the strict control they say is key to
maintaining a sense of exclusivity -- and keeping prices high.
While some makers of luxury products have decided to join Amazon,
many of the industry's biggest players -- including Swatch, Gucci
owner Kering, luxury-watch maker Cie. Financière Richemont SA and
LVMH Moët Hennessy Louis Vuitton SE -- are staying away for
now.
The absence of high-end products has hampered Amazon's push to
be a force in the fashion industry, despite years of working to
expand the merchandise it sells officially though its website.
Adding luxury goods would help Amazon boost margins and build
loyalty among customers of Amazon Prime, its premium service
favored by higher-income shoppers that offers faster delivery and
other perks, according to former executives familiar with the
company's shopper base.
Amazon has been investing heavily in the fashion industry in
recent years. It opened a large fashion photo studio in Brooklyn,
started its own private-label brands and sponsored glittering
events such as the Met Ball at the Metropolitan Museum of Art. The
company also has introduced a "luxury beauty storefront" within its
site to draw customers looking for high-end brands.
Amazon has won over some of the world's biggest lifestyle
companies by pledging action against unauthorized retailers and
knockoffs. Earlier this year, Nike Inc. agreed to make some of its
products available for sale directly from Amazon, in exchange for a
promise for limited policing. But Amazon typically only does that
for the biggest brands, people familiar with the arrangements say.
Nike sales the last fiscal year were $34 billion, nearly five times
Swatch's annual revenue.
Amazon is concerned about counterfeit goods, but it is also
reluctant to help brands stop legitimate products from being sold
outside approved distribution channels, said James Thomson, a
former senior manager in business development at Amazon and now
partner at brand consultancy Buy Box Experts. A multitude of
third-party sellers -- which often sell at discounts -- helps keep
prices low on the site with legitimate merchandise, too.
"Amazon will say to any brand, 'your distribution problem is
your distribution problem,'" Mr. Thomson said.
An Amazon spokeswoman said it works with brands and
manufacturers to improve its counterfeit detection systems. She
said the company has automated systems in place that constantly
scan for and block potential counterfeiters. "We take this fight
very seriously," she said.
Amazon does have programs to help protect brands, such as one
introduced last year requiring fees from third-party sellers and
invoices proving goods are legitimate. But many sellers were
grandfathered in under the old rules, and the programs offer brands
varying levels of protection against unauthorized merchandise.
The Amazon spokeswoman said the Amazon Brand Registry program
provides rights owners access to tools including proprietary text
and image search and more authority over product listings.
Luxury brands want more. Swatch, in its talks with Amazon,
demanded a written commitment from Amazon to deploy its "best
efforts" to fight knockoffs. Amazon's approach, former employees
and analysts say, is often reactive, depending on brands to
complain first before a listing is removed.
"Amazon doesn't want to be a policeman," says Cynthia Stine,
president of eGrowth Partners, which works with third-party Amazon
sellers to fight account suspensions and improve daily
operations.
Some of the more affordable designer brands, including Nicole
Miller and Calvin Klein, have moved to Amazon anyway. Kate Spade
had, too, before shifting course in February, according to a
spokeswoman, stopping the sale of handbags and small leather goods
though the site. Joshua Schulman, a senior executive at Coach Inc.,
which bought Kate Spade in July, has said the company wants to
focus on selling through its own e-commerce channels, rather than
Amazon.
"For the time being, we don't see [Amazon] as a true luxury
play," Mr. Schulman told analysts.
Representatives for Nicole Miller and Calvin Klein didn't
respond to requests for comment.
LVMH, which owns Louis Vuitton and Christian Dior, said it sees
little opportunity for dealing with Amazon.
"We believe the business of Amazon does not fit with LVMH, full
stop," LVMH's chief financial officer told analysts last October.
Kering, owner of Gucci and Yves Saint Laurent, says it has no
relationship with Amazon and declined to comment further.
One of the biggest worries for these luxury companies: The
difficulty of segregating their product listings from the rest of
the goods sold through the site. That means a $5,000 suit from
luxury Italian menswear company Brioni, a subsidiary of Kering, can
appear next to a $200 suit from Kenneth Cole.
"That contradicts the essence of luxury selling and shopping,
where the product is the product also because of its environment,"
says Jean Cailliau, executive adviser at Paris-based investment
bank Bryan, Garnier & Co.
Some luxury companies have struck out on their own, funding
e-commerce sites. LVMH recently launched 24sevres.com, which offers
24-hour delivery of select LVMH products in 70 countries.
Richemont, the Swiss conglomerate whose portfolio includes Cartier,
owns a 49% stake in Yoox Net-a-Porter Group, a London-based company
that specializes in online luxury retail.
Still, Amazon's massive customer base makes it difficult for the
luxury industry to ignore. It now sells more than 40 cents of every
dollar spent online in the U.S., according to market research firm
Slice Intelligence. More than half of all product searches start on
Amazon, too, according to BloomReach. No other retailer comes
close.
Write to Matthew Dalton at Matthew.Dalton@wsj.com and Laura
Stevens at laura.stevens@wsj.com
(END) Dow Jones Newswires
October 08, 2017 07:14 ET (11:14 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Amazon.com (NASDAQ:AMZN)
Historical Stock Chart
From Mar 2024 to Apr 2024
Amazon.com (NASDAQ:AMZN)
Historical Stock Chart
From Apr 2023 to Apr 2024