Why Luxury Brands Refuse to Sell on Amazon (AMZN)

Seattle-based e-commerce giant sees high-fashion retail as its next holy grail.

Amazon AMZN shopping

Without a doubt, Amazon.com, Inc. (NASDAQ:AMZN) is king when it comes to selling goods online. From the latest gadgets to grocery items, you can find just about anything when you use their website. As of recent news, the e-commerce magnate is reportedly planning to extend their horizons to the world of high-fashion. Will this work?

According to a report from Engadget, Amazon has been eyeing on the fashion industry for quite some time now. Their efforts to do so were made obvious when they launched seven in-house brands in February. They introduced fashion brands like James & Erin, Lao & Ro, Franklin & Freeman, Franklin Tailored, Society New York, and North Eleven and Scout + Ro.

These designs – considered to be more affordable – offer around 2,000 clothing pieces for men, women, and kids. It only makes sense for Amazon to take advantage of this in-demand industry especially when they have more than 300 million active users where roughly 63 million are subscribed to Amazon Prime.

But Amazon’s goal is more ambitious. While Jeff Bezos’ company isn’t new to selling clothes, it sees high-fashion retail as its next holy grail. Their $15 million advertising campaign earlier this month seems to be an attempt to transform themselves as an online destination for high-fashion brands. Engadget’s Edgar Alvarez said it best: the online retailer “wants to be the place where you can have a $12 Hanes hoodie and a $1,500 Louis Vuitton frock in the same cart.”

However LVMH, owner of several top tier brands like Celine, Dior, Louis Vuitton, Givenchy, and other luxury labels expressed skepticism from this kind of marketing strategy as well as working with the Seattle-based e-commerce titan.

“We believe the business of Amazon does not fit with LVMH full stop and it does not fit with our brands. There is no way we can do business with them for the time being,” said Jean-Jacques Guiony, chief financial officer of LVMH.

The question to Guion’s rejection though is why wouldn’t LVMH want its brands included in the largest online selling market? The answer is simple. Companies like LVHM rely solely on their distribution channels. For example, Louis Vuitton only sells their products in accredited stores around the world. It is essential for luxury brands to have complete control of where they sell their products.

In another perspective, some luxury brands expressed their concerns about putting their items on Amazon. They fear that doing so will devalue their products. From a consumer’s point of view, this is totally understandable if you consider an expensive piece of haute couture sold beside dishwashing soaps, condiments, and other household goods.

Because these luxury brands are highly priced, they reflect a notion of exclusivity which is what most customers really want. Founder and editor-in-chief of “The Fashion Law” Julie Zerbo noted that when Louis Vuitton started mass producing their bags in lower prices, the sales decreased significantly.

So, although Amazon is largely known as the number one got-to place for any bits and pieces you might need, placing luxury items on their website could give designers more damage than good.

In other Amazon news, the name reported its Q316 results after the close on Thursday. The company posted earnings per share of 52 cents on revenue of $32.71 billion. Wall Street on average expected Seattle to post 78 cents a share on $32.7 billion in sales during the quarter.

The stock fell more than 5 percent in extended trading as more than 1.6 million shares changed hands.

Shares of Amazon are up 24% year-over-year, compared with a 3.5 gain in the S&P 500.

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