Amazon.com, Inc. (AMZN) has disrupted publishing, broadcasting, electronics retailers and a host of other sectors over the past decade as the online retailer’s popularity among consumers exploded.
Now, the company is making inroads into the fashion industry with its own line of in-house clothing and apparel brands. The firm’s push into the fashion industry is largely seen as a positive for AMZN stock, as the sector represents a huge expansion opportunity.
Already on the Market
So far, the firm’s seven brands boast around 1,800 different items being sold on Amazon’s U.S. site, though most consumers don’t realize that the label they’re buying is controlled by the e-commerce giant.
Unlike most other fashion labels, Amazon began selling its apparel items under brand names like Lark & Ro and Franklin & Freeman without any fanfare, leaving customers in the dark about who their clothing was coming from.
AMZN stock has spent the past few years beefing up its apparel offerings, but the firm’s own labels may not have the same appeal as other designers. The company could be trying to get its products out there before announcing its fashion prowess to the world, as some consumers may be reluctant to buy clothing made by the e-tailer.
While some may be dubious about AMZ’s place in the fashion world, investors and analysts are cheering the decision.
The clothing and accessories business in the U.S. garnered $254 billion worth of sales in 2015 and is expected to continue growing steadily in the coming years. If the company is successful with the launch of its fashion arm, Amazon stock is likely to benefit as analysts see the retailer’s profit margins far surpassing the industry average.
KeyBanc has estimated that the company’s attack on apparel could add 25 cents to the Amazon stock earnings per share in 2017.
Amazon Expands Its Retail Position
Amazon’s decision to create its own labels has been a long time coming. The company has taken on new employees with extensive apparel experience like former Vogue editor Caroline Palmer and acquired smaller fashion retailers like Shopbop and Zappos.
Last year, Amazon Fashion Vice President of Clothing Jeff Yurcisin hinted that in-house brands were coming, saying that the firm was hoping to fill the gaps in its apparel offerings and compensate for some brands’ decisions not to sell on Amazon by introducing similar items.
Entering the apparel industry with in-house brands won’t be without its challenges, but the firm is likely to find its feet within the space. Amazon-backed apparel may not be well-received by the fashion community initially, but discount chains like Target Corporation (TGT) have proven that good marketing and strategic partnerships work wonders for signature brands.
AMZN Likely to Conquer the Space
It remains unclear exactly how AMZN plans to use its in-house brands in order to boost its presence in the fashion retail space, but its signature lines cover everything from women’s clothes and accessories to children’s fashion and menswear. Many expect that menswear will be the first place the e-retailer will dominate, as males tend to be bigger online shoppers than women.
In the coming year, many are expecting Amazon to announce its entrance into the fashion world, but for now the company is keeping its new lines quiet.
However, despite the firm’s tight-lipped approach to fashion retail, most are expecting that it will only be a matter of time before the e-retailer becomes a dominant player in the apparel market.
As of this writing, Laura Hoy did not hold a position in any of the aforementioned stocks.
