Commentary: Amazon accelerating e-commerce disruption of apparel
Apparel is at a tipping point. E-commerce currently accounts for 17%-20% of total apparel sales in the U.S. Historically, when e-commerce surpasses the 20% threshold of a retail category Amazon comes in and makes a big wave, because Amazon is the main beneficiary of e-commerce capturing half of all growth in online retail. We’ve witnessed it time and time again in both media and electronics, and now it’s happening in apparel.
Amazon will accelerate e-commerce disruption of apparel by launching new services, such as Amazon Prime Wardrobe which was announced Tuesday. Dressing rooms have been a competitive advantage for traditional department stores, but now Amazon is offering dressing rooms as a service and putting them in shoppers’ homes. This is yet another nail in the coffin for traditional department stores.
The last hurdle Amazon still has to overcome is how to handle the lavish cost of free returns for customers. Over time, Amazon will use predictive analytics to make better, more accurate product recommendations (like it does for household items with Prime Pantry). For now, Amazon appears content to absorb costs and weathering the storm until it becomes the number one fashion retailer in America.
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Whole Foods Markets CEO expects Amazon deal to evolve the brand
The ink is barely dry on Amazon’s acquisition of Whole Foods Markets, yet the natural grocer’s CEO implied that “big ideas” are already in the works.
During a town hall meeting for employees on Friday following the announcement that Amazon would purchase Whole Foods Markets for $13.7 billion, the natural foods grocer’s CEO John Mackey revealed that the deal positions Amazon to open new formats. “Over time, there could be other formats that evolve that wouldn’t be branded Whole Foods Market, they wouldn’t be our standards,” he said in a transcript filed with the Securities and Exchange Commission.
He also reported that Whole Foods Market stores and brands will maintain the quality standards that the brand has built its reputation on. “The integrity we have behind our products and our brand, those are going to be intact,” Mackey added. “They don’t want to change those things.”
Jeff Wilke, Amazon’s CEO of Worldwide Consumer, who was also at the meeting, concurred. “We admire the quality standards of Whole Foods,” he added. “And I think it would be crazy to change them.”
As expected, Whole Foods’ employees had questions. One of the more candid ones was what made the grocery chain so attractive to the online giant. Wilke expressed that Amazon was most impressed by Whole Foods’ innovative take on changing the way people thought about food.
“We have enormous admiration and respect for that. And the worst thing that we could do would be to ask you to change it in some discontinuous way,” he said.
“We want you to continue to do what you do best. We admire what you’ve built, and what you’ve already achieved, and continuing the mis-sion that you’ve been on for four decades,” Wilke said. “[Whole Foods] is going to help us in lots of ways, and make us a better company.”
The merger is also an opportunity for Whole Foods to step up its customer engagement game. For example, Mackey is already considering how to leverage Amazon’s expertise to drive a more customer-focused shopping experience.
“Amazon does many things better than Whole Foods Market. We do some things better than them. But they do a lot of things better than us,” Mackey explained.
“One thing they do better is they are more customer-centric than we are,” he said. “And one of my takeaways is that, by God, we’re going to be-come as customer-centric as Amazon. We’re going to import their passion about that.”
Technology will also play a stronger role for Whole Foods going forward — an area where the grocer has been lacking. Not only will the retailer be stepping up its game with technology, Mackey expects it to improve the shopping experience.
“[Amazon’s] at the forefront of technology, and we are a little behind,” Mackey said. “I think that we can expect that we’ll go to the front of the class, eventually, in the grocery business, from like, the class dunce to the class valedictorian.”
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