Amazon Moves into Luxury

On the surface, Amazon’s reported entre into ultra-luxury products does not make a lot of sense. The company’s business model is to provide the quickest route from wanting to getting, and many luxury manufacturers have demonized Amazon for its unwillingness to address counterfeiting and copyright infringement among its third-party suppliers.

The Business of Fashion reported that Amazon has been operating a site called SRSNL since September. SRSNL offers products from Rick Owens, Versace, Burberry, Bottega Veneta, Prada, Alexander McQueen, Gucci and Stain Laurent, and is expected to launch in the first half of this year. Each of the 12 luxury brands will control how their products are featured on the site, select the products that will be available, and set pricing using the same platform used in department stores. The manufacturers will lease space on the Amazon site and pay a portion of the sales to Amazon for hosting. It is rumored that Amazon is building a fulfillment center in Arizona and will invest $100 million to market the luxury site.

One of the challenges Amazon faces in the luxury arena is access to products, as most true luxury brands control their distribution and how their products are displayed. LVMH has emphatically rejected offers to sell on Amazon. That’s not the case with many American luxury brands, however. Michael Kors, Versace, Jimmy Choo, Coach, Kate Spade, Stuart Weitzman and Ralph Lauren reportedly will be featured on the new SRSNL. These brands are already sold on Amazon through third-party resellers and are not averse to having their products discounted.

Another challenge for luxury brands selling on Amazon is their ability to control third-party sellers that tend to discount and commoditize everything. The luxury brands that have reportedly signed on to SRSNL are likely attracted to 112 million Prime members who tend to be in a higher-income bracket than the average Amazon customer. Luxury retailers who have relied on department stores for decades realize that Bloomingdales, Nordstrom and Neiman Marcus are not winning venues for their brands and have been looking for alternatives. Amazon offers a new opportunity. Nonetheless, entering the luxury arena is contrary culturally to what Amazon excels at – the fastest way from wanting to getting. There’s nothing particularly enjoyable associated with clicking on an item and paying for it at checkout. That being said, who is going to challenge Jeff Bezos’ instincts and business operations?