Amazon’s Lofty Ambitions for Private-Label Fashion

Fast growth, but still a tiny sliver of portfolio

Author: Andria Cheng

September 5, 2017

Amazon’s private-label business has received plenty of attention in the wake of its recently disclosed plan to carry newly-owned Whole Foods’ 365 and other private-label products. But grocery isn’t where the biggest surprise is.

Among some 20 private-label brands Amazon owns, more than half of which debuted last year, three of the top nine fastest-growing brands in the first half were in the fashion department. The Scout + Ro kids' line jumped 542% year over year, the Franklin & Freeman men’s shoe line rose 153% and women's apparel line Lark & Ro saw gains of 84%, according to a 1010data study published in August.

Three Amazon labels—Lark & Ro, Buttoned Down men’s apparel and the Amazon Essentials basics line—are among its 10 top-selling private-label brands, the study found. 1010data said its research also showed that Amazon-owned fashion brands including James & Erin, Paris Sunday and Lark & Ro are attracting new customers from consumers who are doing generic searches for, say, dresses on Amazon.

Amazon has said that apparel will be a key growth driver. Private-label brands are a key part of its fashion focus not only because they can offer a higher gross margin but also because they are a way to differentiate Amazon from other retailers. Many other traditional fashion retailers from Macy’s to Nordstrom also are keen on their store brands.

Private-label apparel and shoe sales saw a 5.4% average annual growth rate between 2011 and 2016—double the rate of the average industry growth, according to Euromonitor data.

A Morgan Stanley study earlier this year showed that Amazon, including its marketplace sellers, is already the No. 2 US apparel seller, generating $20.3 billion in clothing gross merchandise value and garnering a 7.4% share of the overall 2016 US apparel market—second only to Walmart at 8.1%.

To be sure, Amazon’s private-label fashion business still has a long way to go before it becomes a more meaningful part of the company’s sales. Within its private-label portfolio, clothing represented only 1% of first-half sales, compared with with a 55% share for electronics, according to 1010data.

Meanwhile, a Slice Intelligence study showed that sales by Lark & Ro, the top-selling Amazon-owned fashion line, pale in comparison to online sales of store fashion brands sold by other retailers including Macy’s, Nordstrom and Costco.

For instance, Nordstrom’s Halogen women’s apparel line’s online sales were 11 times those of Lark & Ro in the 14 months through February, according to a Slice study of online receipts. The study also showed that ecommerce sales for the majority of Macy’s store brands have surpassed those of Lark & Ro, with Macy's Alfani generating over nine times the revenue.

However, if Amazon’s track record is any indicator, its private-label fashion growth may have only just gotten started.