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Luxury Retailers Better Brace Themselves for Amazon

SAN DIEGO (TheStreet) -- This year Amazon quietly unveiled its luxury beauty products store, a slick online destination offering thousands of high-end makeup, skin care and hair care products from brands such as NARS, Dr. Brandt, Jack Black and Deborah Lippmann.

In launching the store, Amazon continued its positioning to be a serious contender in the luxury marketplace, a quiet march bricks-and-mortar luxury retailers ought to take notice of and start preparing for, according to a new report.

"Amazon, to me, has very quietly, in the background, become the No. 1 'store' for upscale people. And when I tell people that, they look at me like I'm nuts," says Bob Shullman, author of the Shullman Luxury and Affluence Monthly Pulse.

Shullman's December report about Amazon and the luxury and affluent marketplace provides a variety of revealing statistics. As household income increases, so does Amazon's penetration of the upscale household segments.

  • 69% of the adults in the $250,000-plus household income segment have shopped on Amazon in the past 12 months.
  • 64% of the $500,000-plus household income segment shop on Amazon once a month or more frequently.

The report also reveals that Amazon's customer base overlaps significantly with other top 20 retailers and that the Internet giant shares at least 30% of its customer base with more than one dozen stores Shullman describes as upscale.

Some of the stores vying with Amazon for customer dollars include Nordstrom, Apple, Macy's, Barnes & Noble and Costco, according to the report.

Shullman says he can't predict what other moves Amazon might make in the luxury market segment, but warns that luxury retailers need to start thinking seriously about how they will compete if and when Amazon starts courting their customers more overtly.

"Amazon to me -- are they per se a luxury marketer? Like major luxury brands today? Probably not," Shullman continues. "But let's put it this way: We know Amazon has warehouses everywhere, and the bottom line is they are upping the ante with their delivery and now Sunday deliveries in New York and Los Angeles ... I mean, they just have to get the goods. That's all. Which to me, is they have to get wholesalers or luxury brands that want to sell through them."

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