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Amazon's new try-on service may threaten legacy retailers (AMZN)
BI Intelligence
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Amazon is introducing a new service, Prime Wardrobe, enabling Prime members to ship clothing and accessories to their homes to try on, for free.
Shoppers must pick at least three items to ship, and they have seven days to choose products they’d like to keep. Customers will get a 10% discount if they choose to keep three or four items from the order, and 20% if they keep five or more items.
This is yet another move by Amazon to further its success in online apparel — a category that accounted for 12% of its sales growth last year.
Amazon launched seven private-label clothing lines in 2016, bolstering an already impressive online apparel portfolio, which includes Zappos and ShopBop.
In addition, the company acquired a patent for an on-demand manufacturing system that can make clothes after they are ordered. Shortening lead times is a huge advantage in apparel manufacturing, as retailers can avoid mass producing items that may not sell well. Both Nike and Adidas use robotics in their manufacturing process as a way to bring production closer to demand.
It also launched the Style Check feature to its shopping app, allowing customers to upload pictures of themselves in outfits and get feedback from Amazon stylists. The company quickly followed up this new feature with the debut of the Echo Look.
Prime Wardrobe will allow Amazon to capture revenue from customers who are interested in such a service, but unwilling to pay for options like Trunk Club or Stitch Fix. Both companies have a styling fee — Trunk Club charges $25 per shipment, while Stitch Fix’s fee comes in slightly lower at $20. The fee for each service can be applied toward any purchase a customer makes, but those who return their entire shipment must eat the cost. Amazon has a distinct advantage here in that Prime Wardrobe will come baked into the Prime membership, meaning there is no added cost to use it.
This service could pose a huge threat to legacy retailers as they struggle to stay afloat. Apparel sales through online channels are already on the upswing, reaching 19% of total apparel sales in 2016. And this feature may be able to persuade more shoppers to move online by addressing their desire to try on clothes before making a purchase. If this feature catches on with just a portion of Prime's massive customer base, legacy retailers without competitive online offers are unlikely to remain viable.
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