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Analyzing Amazon’s Apparel Ambitions

Since its inception in 1994, Amazon has become one of the biggest names dominating online shopping. From its massive array of products to their impressive use of data, Amazon just seems to never lose. And now it has set its sights on apparel.

Over the past decade, Amazon has been slowly growing their presence in the apparel industry, starting with its acquisition of Shopbop in 2006, followed by its acquisition of Zappos a few years later. But this was just the beginning. Slowly but surely, it has been expanding sales of its own private-label brands of clothing, with few people noticing. Despite going under the radar, Amazon sold an estimated $16 billion in clothing and accessories alone in 2015. To put that in perspective, Nike’s total revenue last year was $32 billion.

It’s no wonder that Amazon is predicted to overthrow Macy’s from the top U.S. clothing retailer spot this year. The eCommerce giant has expanded its selection by over 87 percent over the last year and opened two photo studios in New York and London to support their high-end (and higher-margin) items. Amazon is showing no signs of slowing down. Morgan Stanley predicts that Amazon’s share of U.S. apparel sales will nearly triple from 7 percent to 19 percent by 2020.

So why has their strategy been successful? The answer is in the data and methodology behind their decisions. They already have a huge amount of data from not only their own sales but also from their marketplace sellers and affiliate marketing program. This gives them insight into what’s selling, what’s not, white spaces (which styles and price points are not currently being served), and other demand trends as they occur. Armed with this powerful information, Amazon can make educated guesses on what type of products and prices will be successful and run experiments with private label products.

Amazon also constantly tests prices, essentially mapping price elasticity, to find the sales-maximizing price. With this methodology, they are able to test to see what works and what doesn’t and then adjust accordingly. An added bonus of launching private-label products that aren’t obviously tied to the Amazon brand? If a certain brand or product fails, they can simply remove the listing quietly without anyone noticing or it having any impact on the overall Amazon brand. Even if something does happen to fail, the data is still incredibly valuable.

What’s next for Amazon? The company has successfully been serving the more low-mid market, but it’s already making moves to include higher-end fashion items. There will be challenges along the way, but with a wealth of data giving it a huge competitive advantage, don’t be surprised to see Amazon taking a bigger share of the fashion market in the near future. Amazon has massively disrupted the consumer goods retail market with its impressive use of data, and it looks to do the same with the fashion industry.

As a retailer, hearing all of this can be disheartening given that many other retailers are already struggling to compete with Amazon’s convenience and prices. The solution? Cancel out one of its key competitive advantages by beating it at their own game. Wiser can help level the playing field by giving retailers and brands the market intelligence they need to determine category trends, find white spaces in assortment, analyze competitor promotions, determine price elasticity, and more. These insights allow you to ultimately make better, data-driven decisions—just like Amazon.

For example, by looking at historical assortment data, you can identify demand patterns and generate better merchandise forecasts. We also provide insights into competitive assortments by category including white spaces, product count, and when products are added or removed. These insights allow retailers to plan their assortment strategy more intelligently, informed by data that their competitors don’t have.

Here’s a glimpse into just a few of the types of insights that Wiser provides.

Identify the White Space in Your Competitors’ Inventory

Monitor New Product Introductions

View Assortment Distribution by Brand or Price

Contributing Writer: Matt Chow

Min-Jee Hwang

Min-Jee is the former Director of Marketing at Wiser. She has extensive experience working with SaaS companies and holds a BA from Carnegie Mellon University and an MBA from NYU Stern.

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