Selling with the enemy: Why rival brands embrace Amazon while competing for customers
THE BIG PICTURE
Amazon plans to shut its Chinese marketplace business this summer.
However, from Nike to Levi Strauss, major brands are distributing clothing and accessories directly through Amazon, attracted by more than 100 million members of the multinational's loyalty club Prime and its advanced delivery network.
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The risk in this relationship, according to retailers and industry analysts, comes if Amazon uses real-time data from customer purchases to help it quickly build out its own private label clothing brands, and ends up stealing market share from its current retail partners.
"The word that's most commonly used with respect to Amazon from a brand perspective, and also retailers to some extent, is 'frenemy,'" said Kate Delhagen, an independent retail consultant and former senior director of global digital business development at Nike. She had input into Nike's decision process to partner with Amazon, but left the company shortly before the deal was finalised in 2017.
Recognising the concern from retailers, the European Commission has launched a preliminary antitrust investigation into Amazon and whether it might "gain access to competitively sensitive information about competitors' products which it could use to boost its own retail activities at the expense of third-party sellers on its marketplace", an EU spokesman said.
The company told Reuters it does not use an individual seller's data to give its private label products an advantage. It declined to comment on the early-stage probe, or say how many private label clothing brands it had and how fast it was churning out new ones.
A spokeswoman noted that Amazon's private label products account for about 1pc of its total retail sales. "Our private brands supplement the great assortment that our selling partners provide," she said.
A Nike spokeswoman said its business with Amazon continued to perform well, but said the company's approach was broader than Amazon alone and that it continued to engage with a number of digital marketplaces.
To sell through Amazon, clothing retailers can either sell product to Amazon in a traditional wholesale relationship or sell directly to consumers as third-party merchants, paying a 17pc referral fee on clothing and accessories sold.
Retailers pay Amazon extra to store and ship their orders under the 'fulfilment by Amazon' model.
Amazon has set a goal of being a leader in the apparel space for around a decade, former Amazon director Mike Pazak told Reuters, and has invested heavily in the sector. It has recently ramped up its own private label apparel brands.
It had 109 of its own brands in clothing, shoes and jewellery categories at the start of 2019, according to TJI Research. In Britain, it has outpaced M&S as the most-shopped clothing retailer, according to HSBC.