Just as quickly as the news broke, the industry began to speculate on how Amazon's latest fashion initiative will evolve.
As TheStreet's Rebecca Borison reported, it is possible Amazon will partner with niche high-fashion brands and work to transform them into household names. It is also possible that the e-commerce giant will focus on developing and marketing the seven private-label brands it already launched.
Although the aforementioned developments are possible, it appears that the best possible route Amazon can take is fast fashion.
From an e-commerce perspective it simply doesn't make sense to waste time and money trying to compete with high-end designers such as Escada and Rebecca Minkoff, both of which are already selling in its marketplace.
Although Amazon has tremendous brand recognition, it is largely associated with utility, not luxury. Shoppers know that they can go to Amazon for fast shipping and competitive pricing on everyday items.
Similarly, shoppers know that they can go to fast-fashion retailers such as H&M and Zara for everyday basics and clothing inspired by high-end designers at a much more affordable price point. Reasonably priced fast-fashion clothing is the kind of purchase that the everyday shopper is willing to make online.
Amazon has the same minimum order value for free shipping as Zara despite its recent price hike, and H&M charges a standard shipping fee of $5.95 regardless of order size, so it is easy to see why some shoppers might opt to get their fast-fashion fix from Amazon, given its reputation for reliable shipping and impressive customer service.
Additionally, Amazon sells very few items from these fast-fashion retailers. For example, a quick search for Zara in Amazon's "Clothing, Shoes & Accessories" category generates just 20 results. Rebecca Minkoff, on the other hand, generates 1,390 results.
Clearly, Amazon has a sizable fast-fashion void in its inventory.
Now let's look at Amazon's tremendous upper hand over fast-fashion retailers when it comes to supply chain operations.
At Onestop Internet, we handle warehousing and fulfillment for several fashion brands, so we are acutely aware of the challenges associated with supply chain operations. Amazon's advantages in this arena shouldn't be overlooked.
This is a company that is launching its own global shipping and logistics operation, and though Chief Financial Officer Brian Olsavsky says that the initiative isn't meant to compete with shipping providers such as FedEx,United Parcel Service and most significantly, Chinese e-commerce giant Alibaba, it certainly has the potential to do so. Amazon knows how to ship rapidly and has a business model in place that allows the company to absorb high shipping costs because of the revenue it generates from other initiatives such as Amazon Web Services.
The infrastructure Amazon has in place is unparalleled and certainly gives it an edge over other retailers.
Finally, consider Amazon's advantage in customer service. The company has a global reputation for addressing customer service concerns quickly and taking a "customer is always right" approach.
According to a recent survey we commissioned at Onestop Internet, 28% of shoppers have had an issue with an online order that required contacting customer service within the past 12 months. That is a significant percentage and goes to show that customer service will undoubtedly come into play as more and more shoppers make purchases online.
I have personally seen Amazon re-ship an item because the shopper said it wasn't delivered and then a few days later realizes that the first package was left in a mail room. In these instances, Amazon doesn't ask questions and tell customers that they should have received the item; it just reships the order.
That approach to customer service sets Amazon apart from a consumer perspective, which further positions the web giant to succeed in fast fashion.
Overall, the fact that Amazon is investing in private-label fashion should come as no surprise to anyone in the industry. The company been planting the seeds for some time, and provided it targets the right segment of the market -- namely fast fashion -- it will likely be quite successful.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.
Michael Wang is the president and chief executive of Onestop Internet.