Amazon Struts Its Fashion Sense, Challenging Traditional Stores

Amazon is employing a new strategy on fashion pricing and has launched a show, ‘Style Code Live,’ to spark sales. 

Amazon.com Inc. AMZN 1.94 % has crushed rivals by offering cut-rate prices on everything from books and electronics to diapers. But to attract fashion brands, it has employed a new strategy: promising full price.

With that pledge, the Internet retailer is making headway attracting a crowd that for years had rebuffed its approaches. Dozens of brands now sell directly to Amazon, including department store stalwarts such as Nicole Miller, Calvin Klein, Kate Spade, Lacoste and Levi Strauss.

“Amazon understands fashion is different from its core business,” said Joëlle Grünberg, the North American chief executive of Lacoste, which started selling select items on Amazon last year. “They discount when products aren’t selling, but they don’t mark down at crazy rates.”

Fashion has been one of the last e-commerce holdouts because the fit and feel of clothing is important to shoppers. Only 15% of apparel was purchased online last year, compared with 65% of computers, according to Forrester Research Inc. FORR -0.91 %

But just like so many other traditional shopping habits, clothes shopping is yielding to the ease of the Internet. While the change means more choice and convenience for shoppers it is yet another blow to traditional department stores and the malls they anchor.

While shoppers still like to visit brick-and-mortar stores to try on clothes, Amazon’s Prime membership, which includes free, two-day shipping and free returns, helps make buying apparel online a less risky proposition.

“It’s so much easier than going to a store,” said Karen Gestwicki, a 44-year-old real-estate broker in Charlotte, N.C., who recently bought a pair of Jack Rodgers sandals on Amazon. When Ms. Gestwicki was looking for dresses for a recent vacation, her first stop was the Internet retailer “because Amazon has the biggest selection.”

For brands, Amazon offers growth at a time when department-store sales are sluggish. Amazon’s North American overall sales last year rose nearly 25% to $ 63.7 billion, while sales at Macy’s Inc. M 0.22 % fell 3.7% and Kohl’s Corp. KSS -0.41 % sales inched up 1%. The two chains are closing stores and cutting staff.

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Brands known to be picky about their distribution are tiptoeing onto Amazon, including Ralph Lauren Corp. RL 2.10 % , which sells shoes directly to the online retailer. There are still holdouts, however, including Nike Inc. NKE 0.72 % , Tory Burch, Rag & Bone RL 2.10 % and many of the European luxury-goods players, which are turned off by Amazon’s down-scale image and concerned about third-party sellers listing merchandise below suggested pricing.

“Product by the pound” is how one fashion executive described Amazon, adding, “Why would you undercut your own distribution channels by selling to them?”

An Amazon spokeswoman declined to comment for this article.

Amazon has long struggled to crack into the fashion world. A decade ago, Amazon CEO Jeff Bezos visited Seventh Avenue showrooms to try to generate interest, but apparel executives were reluctant to entrust their brands to a retailer known for cut-throat prices and a utilitarian approach to displaying products, according to people familiar with the meetings.

Mr. Bezos set about building a fashion beachhead without them. Amazon acquired Shopbop.com, an online seller of designer apparel and accessories, in 2006. Later it wooed Cathy Beaudoin away from Gap Inc. GPS 0.19 % to run its fashion business. In 2009, it bought shoe retailer Zappos.com and launched flash-sale site MyHabit.com in 2011.

It also has improved its presentation. Amazon built a photography studio in Brooklyn in 2013 to shoot clothing, shoes and accessories and create magazine-like spreads on its website.

For those that don’t sell on Amazon, the company has another message: watch out. The retailer is creating private-label products to fill gaps in its lineup. It recently introduced seven labels, including Franklin & Freeman men’s shoes and Society New York women’s dresses.

Earlier last month, Amazon launched a live fashion show that it streams each evening from its website. The program, which combines a QVC shop-at-home broadcast with MTV-like celebrity guests, highlights items that are sold on the site.

“We have a bad rap, and that’s not fully accurate,” Jeff Yurcisin, an Amazon vice president, told a gathering of retail executives last year. “We are a price follower, not a price leader.”

Frankie Grande and Rachel Smith on set at Amazon's Style Code Live on March 9 in New York City. ENLARGE
Frankie Grande and Rachel Smith on set at Amazon’s Style Code Live on March 9 in New York City. Photo: Craig Barritt/Getty Images for Amazon

Data compiled by Boomerang Commerce support that stance. Amazon, including sales by third parties, had higher average prices than Macy’s and Kohl’s on 69 items of women’s and men’s clothing and shoes that Boomerang tracked from Jan. 28 through Feb. 17.

In hard goods—items such as books, TVs, appliances and other non-fashion products—Amazon’s prices typically were the lowest for 75% to 90% of the time last year, according to 360pi, another price-tracking firm.

Brands that have joined forces with Amazon say selling to the retailer often is more profitable and a better experience than dealing with department stores, which increasingly have relied on deep discounts.

Amazon’s U.S. apparel business, including sales by third parties, is forecast to rise to $ 52 billion in 2020, from $ 16 billion last year, according to Cowen & Co. The bank estimates that Amazon will surpass Macy’s as the biggest apparel retailer in the U.S. as soon as next year.

To get a sense of the damage that Amazon can wreak, consider that it captured nearly 43% of overall online sales in November and December, according to Slice Intelligence, a research firm that gathered data on the email receipts of 3.5 million consumers.

Asked at a recent conference how Macy’s plans to head off the Amazon threat, Terry Lundgren, Macy’s chief executive said: “I think they are going to have an interesting challenge when they start getting all those returns coming back online.”

Amazon, however, has advantages that traditional retailers are finding hard to match, including analytical data that help brands target shoppers by letting them know which styles and sizes sell best by region and more sophisticated pricing.

During the period studied by Boomerang, Amazon changed prices 9.2 times on average per item, while Macy’s changed prices 2.1 times and Kohl’s did so 1.5 times.

“Years ago, when you walked into a department store, there was a salesperson who knew you and knew what to show you,” said Alex Del Cielo, the CEO of Camuto Group, which sells shoes and apparel to Amazon under labels that include Vince Camuto and BCBG Max Azria. “That’s what Amazon has done with technology.”


WSJ.com: US Business

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