What Amazon Wants
By Doug Stephens
Internet retail behemoth Amazon has turned a dangerous eye toward the luxury apparel market. Long regarded as more of a clearinghouse for commodity items, Bezos and company have announced their intent to conquer (or at least take a sizeable chunk out of) high-end fashion. Despite throwing heaps of money into the initiative, some analysts question the fit for Amazon in the luxury category.
However, Amazon is a little like a Great White shark. It doesn’t really matter whether they’re hungry or not, when they come close, the smaller fish get worried… and with good reason. Amazon has developed a knack for disrupting category after category, seemingly without breaking a sweat. So, whether Amazon can actually become a respected purveyor of brands like Michael Kors, Jack Spade or Tracy Reese is really beside the point. The mere fact that they want into this market is reason enough for concern and it’s chains like Bloomingdales and Macy’s that stand to take the worst beating.
The question for everyone else is what to do. How should competitors react when Amazon threatens?
Unfortunately the natural tendency of most is to compete. Basically to do what the other guy does but just a little better. To that end, I imagine we’ll see some predictable reactions – faster shipping, free returns, sharper pricing, wider selections etc., all aimed at becoming a little more like Amazon. This is a colossal mistake.
Competition is precisely the deep, dark water that Amazon looks to drag companies into. They know others can’t compete on their terms, so they let them flail and tread water until they can quietly drag them under.
The key, I think, lies in understanding why Amazon is attacking you or your category in the first place. In most cases it’s because they see the incumbents in a particular market as being mediocre or lazy. They’re radar for detecting an underserved market is unparalleled.
Best Buy is a good example. In a pre-internet world, Best Buy was remarkable. Few people had ever seen so many electronics products under one roof. However, as it became clear that e-commerce could spell trouble for them, they did little to react. Their stores and online properties remained static and their service levels mediocre at best. The death knell sounded when their own customers began buying things from Amazon while standing in a Best Buy store. And now at this late stage, there’s little Best Buy can do but try to become a little more like Amazon – exactly what Amazon wants.
Stop Competing, Start Differentiating
Former heavyweight champ, Mike Tyson is credited with saying “Everybody has a plan until they get punched in the face.” The luxury retail apparel market may have just gotten punched in the face. The worst thing they can do is go toe to toe.
For luxury apparel retailers, survival lies not in competition with Amazon but rather in diametric opposition to Amazon. Changing the rules of the game. Setting an entirely new standard for the luxury apparel experience and in doing so, shifting consumer expectations. Moving into market space that’s simply too deep and narrow for Amazon to squeeze their war machine into. Creating new terms of reference for consumers and avoiding any direct comparison to Amazon. The more competitive distance they can place between themselves and Amazon, the safer they’ll be – at least until Amazon moves again. And they will most certainly move again.