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- Amazon could start selling more apparel on its core e-commerce platform.
- There are several indicators showing upside for Amazon in the space.
- But there’s one major consumer headwind.
- Watch Amazon trade in real time here.
Amazon dominates in many industries. But its primary business, believe it or not, is missing a key component: apparel.
E-commerce is Amazon’s bread and butter, and it has used both data and profits from that business to disrupt other industries. But even though Amazon is well positioned to succeed in apparel, it is the one category that it is not particularly great at selling.
“Amazon is increasingly well positioned to capture a portion of the fast growing NA online fashion market,” UBS analyst Eric Sheridan wrote in a recent note to clients. Sheridan says Amazon could generate $40 billion in gross merchandise volume (different than revenue) from Amazon Fashion, a relatively new business.
The two key drivers of Amazon’s potential in apparel are Amazon Prime and the relatively small amount of private labels on its main site.
“Prime members will be key for Amazon Fashion expansion given their higher frequency and spend,” Sheridan said. “Potential for increased adoption of private labels and current initiatives given lack of user awareness” indicates that if Amazon gets more private labels onto its site and makes users aware of those labels, it can realize significant upside.
Amazon’s fashion GMV growth has slowed considerably of late.
UBS
And there are serious headwinds for Amazon in the apparel space. Consumers do not perceive Amazon as a fashion seller, and aren’t expecting to buy fashion products from retailer any time soon, according to a UBS survey of 9,000 respondents.
“Based on our survey, very few respondents see Amazon as a site for trendy designs, fresh collections, or unique designs,” Sheridan said. Amazon also ranks second to last in online retail platforms for percentage of respondents that see those online retailers as “trendy,” UBS data shows.
There’s a reason for all of this. Designers don’t like to put their products on Amazon because they’re afraid the products will lose visibility and prestige on the platform.
The designer brands that do sell through Amazon “tend to sell their core replenishment items versus unique fashion items,” Sheridan said.
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