Andy Jassy, the boss of Amazon.com, is wearing affordable cargo pants with a nicely cut blazer. The e-commerce behemoth decided to support Saks Fifth Avenue's acquisition of Neiman Marcus while also considering a rival to bargain retailers Temu and Shein. Things should be dressed up with a high-low strategy.
Finding the ideal fit has proven to be difficult for the $2 trillion firm. According to research company eMarketer, Amazon is responsible for nearly $60 billion of the gross market value of apparel e-commerce sales in the United States this year, or 35% of the total. It holds around half of the market for electronics and computers and 60% of the market for office supplies and equipment.
For Amazon, there are many benefits. While the appeal of quick fashion appears to be sustainable, luxury clothing is significantly more profitable. Sensor Tower indicates that in May, the Shein and Temu applications were among the top ten most downloaded.
Saks' parent company, HBC, said over the July 4th vacation in the US that it would spend $2.7 billion to acquire Neiman's namesake chain and its upscale Bergdorf Goodman stores. This acquisition has been discussed for a while as upscale retailers struggle to satisfy the demands of online buyers. Theoretically, teaming up with Saks provides more negotiating power on behalf of 150 sites that generate $10 billion in sales annually.
Amazon's business strategy is unrealistic since it aims to maintain control over prices, customer data, and brand identity. Upmarket product manufacturers have their own unique concepts and prefer to avoid low-cost substitutes. Assuming trustbusters don't step in, Amazon's ownership of the recently established Saks Global arm should provide it with a better understanding of how wealthy consumers shop. This is significant information because, according to TD Securities analysts, just 2% of customers generate half of the revenue for the luxury sector.
The lower end of the market poses a greater threat. Temu and Shein are presenting new challenges, in part because they are taking advantage of tax loopholes in the United States. This helps to explain why Amazon may launch its own network of Chinese retailers that ship straight to consumers, as reported by CNBC. As all fashionistas know, affordable and chic often make a winning combination.