Luxury brands are under the false assumption that they are totally insulated from the disruption that Amazon is bringing to the rest of the ecommerce space. This article posits that Amazon just isn’t compatible with how luxury retail works and that the experience is most of what luxury consumers desire. That may be true, but how long will Amazon stay ignorant of this?
The founder of boutique marketplace Farfetch states that, “Luxury is built on emotion, desirability, heritage. And so, we believe that the DNA of Amazon is at present not really compatible with the luxury industry,” he said, adding that Amazon has “really nailed convenience and price. They’re bringing lower prices to the market and convenience, which brings tons of customers, which allows them to go back to the suppliers, lower the prices and create this flywheel. That doesn’t work with luxury. It’s oil and water.”
Right now, eighty-two percent of households that earn more than $112,000 per year are Amazon Prime members. Amazon isn’t going to sit on their laurels here. With their purchase of Whole Foods, their market share of luxury shoppers increased even more. They’ve got the customer’s attention, they just don’t have the wares. Odds are that as this is being typed, there’s a group at Amazon working on online luxury. Whether it’s through partnerships or acquisitions, Amazon will enter the luxury goods space at some point in the next 5 years.
If Amazon can create experiential shopping and retain scarcity for luxury goods on their online storefront, they have a very attentive marketing tapped for shopping. There’s several roadblocks along the way. Scarcity here is important. Scarcity is also extremely anti-Amazon. Take, for example, how Lilly Pulitzer was treated after partnering with Target. There’s a lot of ground to gain before Amazon can execute this correctly but they’re slowly figuring it out with consumer electronics. There’s a big jump from consumer electronics to luxury goods, but these learnings compound and it wouldn’t surprise me to see Amazon (or an Amazon owned brand) on the runway instead of just nearby before too long.
I don’t think that the crossover of Amazon and Luxury is as far gone as oil and water but Amazon has a difficult path ahead. Outside of nailing luxury supply chain while retaining quality, they have to also figure out how to create scarcity among any luxury in-house brands they create. They can’t go mass marketing, as they’ll lose prestige and the signaling that luxury brands give their customers. Putting that aside, I’d argue that luxury ecommerce is ready for a massive disruption. Most legacy, old-world luxury brands still are trying to figure out how leverage technology. If they don’t figure it out first, someone else will. That someone is likely to be the $700b gorilla in the room that owns 44% of all e-commerce sales.
Without luxury brands improving their on-site experience, implementing marketing automation that’s engaging as well as overhauling their onsite shopping experiences, I think they’ll eventually fall under the sights that Amazon currently has trained on a wide variety of consumer goods. What Amazon has to do is nail the prestige of luxury shopping before luxury brands figure out ecommerce. It’s a race.