Amazon owns Zappos and Shopbop, and Walmart is suddenly scooping up e-commerce brands like Modcloth and Moosejaw, but the luxury sphere remains immune to the retail giants’ temptations. Although many brands and retailers worry about the continued rise of Amazon and Walmart — which are currently the two largest e-commerce platforms in the U.S. — those within the luxury space believe their sector, at least, is safe.
“Nothing about the way they do business and nothing about the way their business is set up is appropriate for a luxury brand,” said Charlie Cole, vice president at Tumi. “When you think about their completely egalitarian and no-barriers-to-entry model for their marketplaces — which is what’s served them so well as far, as expansion goes — it’s remarkably anathema to a luxury business.”
A clash of values
Luxury brands thrive on a host of brand protections, like price control and counterfeit regulation, that Amazon is notorious for lacking. Ryan Bonifacino, the former CMO of Alex and Ani, a longtime first-party seller on Amazon, said scoring such protections is “next to impossible [there].” Jewelry identical to that of Alex and Ani’s is a constant issue on the site, including some created by Amazon’s very own private labels. Amazon didn’t respond to requests for comment.
Although the Brand Registry the company rolled out in 2015 was a step in the right direction — allowing brands to register as the sole brand owner and submit the proper product information for each item — it wasn’t enough to rid the site of copycats. Amazon’s recent announcement that it will be expanding the program so that brands can register their logo and intellectual property is somewhat more promising, though it still requires outside parties flagging the counterfeit items. It also does nothing to stop other sellers from initially listing a brand’s original products on their page; it only lends them fighting power when and if those sellers are caught.
“If I’m a luxury brand, and I’m acquired by Amazon, the first thing I’m going to do is say, ‘OK, kick off every unauthorized marketplace seller from the platform’ — but Amazon doesn’t do that. That’s not the way they think,” said Cole.
In short, brand protections are still a low priority for the company, which continues to put the customers’ interest in low prices, extensive optionality and speedy delivery first, instead.
“Saying, ‘We’re going to give the consumer the best price possible’ is a not-so-subtle way of telling luxury brands: ‘We don’t care what your MSRP is, we’re going to figure it out and let the marketplace detail it,’” said Cole. “For a high-end brand, that’s a race to the bottom.”
Less than luxury
“Amazon and Walmart are retail experts, but they are experts in retail efficiency, not creating luxury retail environments,” said Tammy Smulders, global managing director of LuxHub, a division of Havas Media Group. “Top luxury brands are extremely careful about where their brands are sold, and what the environments need to look and feel like – both in physical and digital retail.” There’s often s a set of rules their stockists must adhere to with respect to their brands, which often includes “no discounting” and specifics about brand adjacencies (or what brands their products are shown alongside).
Customers come to these brands with certain expectations, too. “Luxury shoppers, particularly younger ones, are open to buying those products online,” said Rachel Krautkremer, insights and strategy director of youth-research firm Cassandra, “but they want the experience to feel high-end.”
High-end and, crucially, exclusive. “Shopping at a luxury store or website can be compared to being part of an exclusive club,” said Lori Mitchell Keller, the global general manager of SAP Retail. “Unlike high-low partnerships with limited availability — which retailers such as Target and H&M are popularly a part of — an acquisition serves as a permanent departure from the brand’s original reputation,” she added, highlighting a phenomenon we’ve seen with the recent, controversial acquisitions of Modcloth and Moosejaw by Walmart. We’ve seen this historically, too, notes Smulders, attributing L Brands’ (which owns Victoria’s Secret and Bath & Body Works) purchase of Henri Bendel in 1985 with the store’s less-than-luxury status.
As such, maintaining the luxury identity that is core to brands like Gucci and Louis Vuitton would prove challenging. “Brands like Amazon and Walmart are high-utility, convenience-based, higher-value brands,” said Roy DeYoung, senior vice president of creative strategy at PMX Agency. “These brands have something for everyone, which dilutes the exclusivity factor that is so important to the luxury brand experience.”
What’s more, the majority of these luxury brands are either family-owned, as with Chanel and Hermès, or are part of a focused luxury brand management company like LVMH, Kering or Richemont — two scenarios in which the grip on brands is tight. “These companies specialize in brand custodianship – carefully honing and protecting their brands,” said Smulders, noting that there’s usually a lot of historic pride involved that would be difficult to overcome. “They are rarely interested in any kind of sale, and, [if they were], it would be to a company they believe will continue to value and protect their brand.”
“Anyone can be bought,” countered Cole, with some skepticism. “But we also saw the chief marketing officer of LVMH — days after it acquired [suitcase brand] Rimowa — saying flat-out that none of their brands would be sold on Amazon.”
A possible alternative
Operational roadblocks aside, most people question whether Amazon or Walmart are even interested in the luxury space. If they were, said Cole, they would have tried to buy a multi-brand luxury retailer like Net-a-Porter or MyTheresa.com already. Smulders believes that’s still a slim possibility, citing Neiman Marcus — which is currently exploring the potential sale of its company — as a future option, but considers it “extremely unlikely” these companies will acquire a single luxury brand.
But acquiring a legitimate luxury retailer like Neiman Marcus wouldn’t necessarily solve Amazon’s problems in the space. Tumi may sell to Neiman Marcus, said Cole, but he still wouldn’t let Tumi product show up on Amazon. “That’s a deal-breaker for me,” he said.
Even if these luxury and mass companies never sync up, however, they stand to learn from each other.
“Amazon believes that people’s demands and data drive what merchandising should be, while luxury brands believe in trendsetting, or, ‘You don’t tell me what’s cool, I tell you what’s cool,’” said Cole. “I think they both need to meet in the middle to be somewhat successful. Gucci and Hermes can rely on heritage to keep them relevant for a long time, but if they don’t let consumer demand drive their nose a little bit, they’ll only be known for statement pieces, and they’ll never really grow on the more commoditized pieces, like a black cashmere sweater.”