When news broke that Amazon had bought Whole Foods last week, grocery store stocks took a kick in the gut. Now, it’s happening all over again — but in a different industry.
On Tuesday, Amazon announced its newest store — Prime Wardrobe, and apparel retail stocks have taken a nosedive.
With Prime Wardrobe, Amazon aims to simplify the process of buying clothes for millions of people. The company promises that finding the right size and returning unwanted purchases will be a breeze.
But, judging by the stock market reaction, investors betting on traditional apparel retailers think Amazon is an unwanted intruder. According to CNBC, JC Penney closed on Tuesday down by more than 5 percent, Nordstrom fell by nearly 4 percent, Ascena Group (owner of Lane Bryant and Catherines) and Chicos dropped by more than 4 percent. Discount stores — like Ross and TJX — weren’t spared either; those two fell by 5 and 3 percent, respectively.
The panic about Amazon’s entrance into retail is understandable. The ecommerce juggernaut is offering its Prime customers seven days to try the clothes they buy. (Essentially giving clothes away free.) If customers like what they try, they pay for it — after they’ve had it for a week. If they don’t like some of their clothes, they can return the apparel by dumping it in a box by the front door and having Amazon come and pick it up.
But Amazon rewards customers with discounts based on the amount of apparel they keep. “You get 10 percent off if you keep three or four items, 20 percent off if you keep five or more,” CNBC says.
Amazon is betting that shoppers will order a lot of clothes, like most of those clothes, and decide to keep far more than they decide to return. If Amazon moves the volume they hope to move, it’s hard to see how retailers would respond.
Individual brands, of course, will be torn between loyalty to physical stores and putting most of their eggs in the (hugely successful) Amazon basket.
Watch the introductory video for Amazon’s Prime Wardrobe here.
Daniel White for TechFunnel.com
Leave a Reply
You must be logged in to post a comment.