This week, Amazon founder Jeff Bezos said he would step down as chief executive, passing the baton to top lieutenant Andy Jassy. What does the internet giant’s new CEO mean for its fashion strategy?
–
This week, Amazon founder Jeff Bezos — whose mantra-like “Jeff-isms” on relentless invention, customer-centrism and long-term thinking anchored the company’s strategy — said he would step down as chief executive of the $1.7 trillion internet goliath after 27 years in the role, passing the baton to top lieutenant Andy Jassy, currently head of Amazon Web Services.
What does this changing of the guard mean for Amazon’s fashion strategy?
Bezos first set his sights on the fashion industry more than a decade ago. According to journalist Brad Stone’s The Everything Store, Bezos told employees back in 2007 that “in order to be a $200 billion company, we’ve got to learn how to sell clothes and food.”
Fourteen years later, Amazon generates over $300 billion in annual revenue and is a major force in fashion, having surpassed Macy’s and Walmart to become the largest apparel retailer in the US on the strength of its relationships with millions of consumers, a vast database of transactions, unparalleled logistics and a data-driven, iterative approach to its private labels.
Amazon has long tried to become a credible destination for upmarket fashion, too, spending countless hours attempting to convince designer labels to sell their products via its site, sponsoring everything from the Met Gala to Tokyo Fashion Week and launching a personal shopping service. Last spring, the company premiered “Making the Cut,” a fashion competition hosted by Heidi Klum and Tim Gunn that offers contestants the opportunity to get in front of millions of viewers and sell their clothes on Amazon, not to mention a shot at a $1 million prize.
But Amazon’s search-driven, utilitarian design is antithetical to the kind of brand storytelling required to sell luxury goods and most of the fashion items it carries remain affordable basics. Its latest effort to move upmarket, Amazon Luxury Stores, modelled on the successful template set by Alibaba’s Tmall Luxury Pavilion, where brands control their own inventory, pricing and the look and feel of their digital storefronts, has failed to gain much traction.
It’s possible that Jassy will do little to change Amazon’s stalled luxury fashion strategy. After all, Jassy has been studying the Bezos Way for decades and his appointment is a study in continuity. Then again, the spectacular success of the Amazon Web Services business Jassy founded could provide a powerful lens for reimagining the company’s approach to the luxury market.
Amazon Web Services, which sells data storage and processing to companies, governments and schools which don’t want the burden of managing their own IT infrastructure, is Amazon’s most profitable division. In 2020, it generated over $13.5 billion in operating profit — an impressive 63 percent of Amazon’s total operating profit for the year — on revenue of $45.3 billion. But the service that now owns 30 percent of the world’s cloud computing market began as an internal system to support the rapid growth of Amazon’s own e-commerce business.
According to Amazon lore, an executive retreat at Bezos’ house in 2003 provided the realisation that eventually led the company to turn its own infrastructure into a service it could offer to other businesses. “If we can get to the moon, we can do a shuttle service for other people and charge them lots of money,” said retail guru Doug Stephens, summarising the thinking.
In a similar move, Amazon recently started selling the technology that powers its automated Amazon Go stores as a business-to-business service. Same with its Amazon Delivery Service. Jassy’s appointment to the company’s top job suggests just how important such services may become to Amazon’s overall business strategy. Could the approach work for fashion?
Amazon may never be the next Gucci or the next Net-a-Porter. It doesn’t understand brand image nearly well enough and its internal culture suggests this never will be a priority. But if image is what fashion companies do best, they are typically far weaker on practically everything else along the industry value chain, especially when it comes to solving technical problems, from demand forecasting to supply chain inefficiencies to global shipping, areas where Amazon excels. It’s this technical prowess that has driven the success of its private-label apparel brands.
Could Jassy turn Amazon’s real strengths into a new fashion strategy — Amazon Fashion Services — by providing the infrastructure, not the front-end experience, for luxury fashion?
Amazon may never be a credible destination for luxury fashion, but it could be the platform that solves fashion’s many back-end inefficiencies. “If they can solve the really deep problems in the fashion industry, that becomes a marketable product,” said retail consultant Robert Burke.
For fashion’s long tail of highly creative but technically unsophisticated smaller labels, this could be a genuine game-changer. For Amazon, there is surely more upside in providing the platform that powers a large chunk of the luxury industry than in being the next Net-a-Porter.