Amazon has been struggling to recruit luxury brands to sell their good on its platform, but there is one way that it could make its marketplace more of a destination for shoppers looking for certain tiers of luxury products.
Amazon could launch vertically integrated, mass-customized brands of its own that use technology to smooth the customer shopping process, similar to Indochino.
SEE ALSO : Amazon goes shopping
While Amazon is not likely to get catalog coverage from many of the ultra-luxury brands, it does have the ability to make a number of mid-level luxury brands less relevant to large segments of Amazon customers, replacing those brands through the merchandising of its own private-label luxury brands at prices that encourage even the slightly price-sensitive luxury products customer to consider a cheaper alternative, available directly from Amazon.
There will always be customers who want nothing other than the $10,000 handbag with that special brand name, or the $3,000 suit from Armani or Gucci. Yet for millions of Amazon Prime customers, the prospects of “affordable luxury” becomes available through something like an Indochino model.
Brands like Brooks Brothers, Hugo Boss, Zac Posen, Tom Ford and Burberry that may today be aspirational for millions of Amazon customers could be replaced with Amazon’s own mid-level luxury brands, made at comparable quality with perfect custom fitting and a much lower price. Such a model has the potential to wipe out much of the apparel advantage Stitchfix has created for itself over past few years.
Indochino is a direct-to-consumer manufacturer of custom suits for shirts for men. While production is based out of China, it offers U.S. customers the opportunity to get sized either through a measurement process online using videos, or in a limited number of storefronts based in major metropolitan locations throughout the United States. For under $400, Indochino is able to manufacture a custom-fitted garment and ship it to the U.S. or Canadian customer within 3 weeks.
Comparable pricing for a U.S.-tailored suit including luxury brands would range from $1,500-$3,000. While a luxury U.S. brand in the U.S. is likely to require 2-3 weeks for custom tailoring of an off-the-rack suit, the custom-made Indochino suit sells for a fraction and promises a better fit because it was made using the customer’s body measurements.
Let’s say Amazon bought Indochino, or built its own comparable model, and expanded it into women’s clothing too.
Then Amazon uses some variant of technology from its new acquisition Body Labs to develop a system for measuring customers’ dimensions. With such technology onsite at a range of retail studios across the country, Amazon now would have the dimensions of millions of Prime customers, and would be able to offer them its own custom-fit luxury-quality brands.
Using pin-point merchandising, Amazon could target these brands to specific customers that have searched for comparable luxury brands on Amazon already. Amazon’s scale and ability to accept low margins would quickly turn the mid-luxury brand customer towards Amazon, and away from so many of the luxury brands that have declined to distribute their products on Amazon.
SEE ALSO : Amazon : AR will change how we shop
With any decent scale, Amazon would have competitive manufacturing costs, the ability to up-sell and cross-sell all sorts of other items (apparel and non-apparel), all the while being comfortable with much lower margins than a typical luxury brand. With an already generous returns policy, Amazon could offer customers the opportunity to buy lower-priced custom-made items, returning whatever items the customer did not like. I do not know of any other apparel brand that could compete effectively with such a model.
The prospect that Amazon could win part of the customer’s wallet that today goes to luxury brand purchases externally should be on the radar of mid-tier luxury brands, and a ray of hope that more consumers will be able to afford a luxury look at lower prices.