It’s long been clear that Amazon wants to dominate pretty much every retail sector, segment, and assortment. Despite its start as an online marketplace and its success in utterly transforming the retail landscape, it also appears determined to go back and take over the space that previously had been held by companies that it has sought to outcompete and potentially drive out of business.
The most recent example is its reported plans to become a department store that sells fashionable clothing. Many conventional, traditional department stores have struggled to keep afloat in competition with Amazon. One report notes that whereas they accounted for approximately 10 percent of all retail sales about 20 years ago, today department stores only make up 1 percent of that total. When traditional companies like Macy’s, JCPenney, or Lord & Taylor have vacated their large spaces, Amazon has identified opportunities. In some cases, it uses the large, vacant department stores as distribution centers, as we have noted previously in these abstracts.
But now it appears (though these reports remain unconfirmed) to be planning to establish tech-enabled department stores that stock Amazon-branded fashion apparel. According to reports, shoppers will be able to select various garments that they would like to try on by using their phones, whether clicking on Amazon’s website or scanning a tag in the store. Store personnel then will fill a dressing room with those items; the smart fitting rooms will be equipped with touchscreens so customers can request other items or sizes, as well as receive recommendations for complementary accessories. In the future, Amazon reportedly will rely on robots to bring the chosen items to people in dressing rooms, though the current plans still involve human retail employees.
The focus on apparel is intentional too. Clothing offers strong profit margins, so if Amazon can continue to establish its owned fashion brands, such as Lark & Ro and Goodthreads, as appealing options, it can solidify its competitive advantages. In 2021, it already had passed Walmart in clothing sales, making it the largest seller, likely to earn about $45 billion in clothing and shoe sales alone this year. Just as in most of the sectors in which it competes, Amazon’s primary and initial focus is on building market share. Profits, it believes, will follow later.
In addition to expanding its reach, the department store concept promises to help Amazon overcome two complaints that shoppers note with its main retail channels: They don’t want to have to pay for shipping or a Prime membership, and they want to try on clothing before purchasing it. Although Amazon’s Personal Shopper service has sought to address some of those concerns by offering personalized recommendations for those who sign up, it cannot provide the in-store experience that many consumers enjoy.
Will a tech-enabled department store provide that enjoyment? Will shoppers be convinced that Amazon is a fashionable brand? Can Amazon be a fashion retailer, as well as a seller of books, groceries, and other more practical goods? It has suffered some stumbles before, such as when it tried to market an Amazon smartphone or introduce a restaurant delivery service. But is it likely to do so this time?
Discussion Question:
- Is this extension into areas that contrast with Amazon’s initial foundation (e.g., sales of books and other commodity-like products online) appropriate and likely to succeed? Why or why not?
- Do smart fitting rooms and other technology-enabled tools align well with the image of a fashion brand?
Source: Sebastian Herrera and Khadeeja Safdar, “Inside Amazon’s Department Store Plans: High-Tech Dressing Rooms, Its Own Apparel Brands,” The Wall Street Journal, September 22, 2021; Sebastian Herrera, Esther Fung, and Suzanne Kapner, “Amazon Plans to Open Large Retail Locations Akin to Department Stores,” The Wall Street Journal, August 19, 2021