Amazon’s Private Label Fashion Play

In what appears to be a quest to be in the business of everything, it seems Amazon may have found its latest vertical to make an assault on. According to reports in BuzzFeed, the world's largest retailer by market cap is considering launching its own private label clothing line.

At a conference earlier this week, an Amazon executive reportedly confirmed that as part of its efforts to build out the Amazon Fashion brand it will likely expand into its own private label.

“For Amazon, we know our customers love brands, many of the brands in this room…and that’s where the lion’s share of our business comes from,” Jeff Yurcisin, vice president of clothing at Amazon Fashion and CEO of Amazon’s Shopbop unit, said at the WWD Apparel and Retail CEO Summit on Tuesday. “When we see gaps, when certain brands have actually decided for their own reasons not to sell with us, our customer still wants a product like that.”

This new development may cause some complexity for the Amazon Fashion total project, since its efforts thus far have been centered on convincing name retailers to sell their goods on Amazon's marketplace. A willingness to actively manufacture against those who are reluctant to put their brands on Amazon could prove to be a formidable negotiating chip for Amazon. Alternately, it could scare some retailers away.

The push into clothes comes in tandem with Amazon's aggressive push into other targeted retail segments, primary among them grocery. Apart from the expansion of its same-day delivery service and pantry efforts, Amazon has also investigating its own private label grocery items, offering it even further penetration into that market.

Apparel is not necessarily an easy business to jump into, however, and Amazon is not necessarily anyone's first choice for dressing sharp.

In June, the Business of Fashion said: “While women’s, men’s and children’s apparel are some of the e-tailer’s fastest growing product categories, Amazon is simply not the first place most people think of when it comes to buying clothing.”

Yurcisin, however, noted there are many reasons to believe Amazon is up to the task. “We work just like any other retailer — we buy at full price, try super-hard to sell at full-price … then we follow a traditional markdown cadence,” he said.

He also referenced Prime customers, which major retailers can gain access to by selling on Amazon and the collection of well-known consumer brands already gaining exposure on Amazon, like Calvin Klein, Levi’s, Kate Spade, New Balance, PUMA and Steve Madden.

Fashion goods could represent a strong margin play for Amazon; in general, profit margins in apparel retail are 30 percent to 40 percent. Private label margins are stronger, 55 percent to 65 percent, according to a note from Nomura analysts in April.

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