Updated: Sep 1, 2020
Squaring the circle ! Trust-Place could be the perfect answer to satisfy both Luxury Brands and Amazon.
According to multiple reports, Amazon is moving ahead with plans to launch a luxury brand platform in September this year. This is not new, as rumors were running about that move for months, even pushing Bernard Arnauld, LVMH owner, to position himself against this model. Whereas today Amazon is the largest seller of apparel in the world, its success has not extended into the luxury sector of the fashion business yet.
Will Amazon crush everything in its path and revolutionize the distribution of Luxury? Are the Brands doomed to be part of this marketplace at the risk of marginalizing themselves or losing market share? Or are there solutions for these Luxury brands to benefit from this new platform, without selling their soul and their DNA to the web giant?
Why Luxury Brands are reluctant so to this model?
The fears of Luxury brands are not only concerning Amazon, but the model they intent to use in general. The main reason is quite simple: as soon as a Luxury good is sold outside the direct network of a Brand, it is very difficult to be 100% sure that the item is real. And this is affecting the Brand image. It is very difficult to fight efficiently against online counterfeiting without controlling the distribution. Chinese giant Alibaba tried to launch a luxury offer but is fighting with a lot of counterfeiting issues still, despite a lot of investment to try to control it, and customer trust is a big issue. The problem is the same with other marketplaces offering Luxury products, such as Net-a-Porter, or Farfetch for instance, or even worst, with emerging second-hand platforms like TheRealReal or VestiaireCollective in Europe. But with Amazon entering in the game, the difference is the huge punching power of the US web giant, which will multiply the fears against which Luxury brands are fighting every day.
A high risk of counterfeiting
Of course, the high margins in the luxury business, especially in accessories, are an incentive for fraudsters to create highly detailed and convincing counterfeits. In 2019, 37% of e-shoppers have bought fake products online without knowing it. Counterfeiting on e-commerce is increasing 3 times faster than the growth of this sector, which is already booming (especially after the crisis we are facing since the past few months). And we are not talking about fake t-shirts that you will pay 10€, but luxury goods which can reach very high prices. As an example, here’s a story about a fake Christian Dior bag bought on The RealReal for $3600.
The reports about Amazon’s new platform claim that one of its advantages will be the ability to access Amazon’s unique fulfillment capabilities. Of course, that would certainly enable brands to deliver faster and more reliably, but it would also increase the risk of counterfeit products entering into the system, either by being supplied by other vendors or in the returns channel.
The loss of the customer relationship ...
Generally speaking, one of the biggest issues for Luxury Brands is to keep control and enhance the relationship with the customer. In almost all of Amazon’s businesses, when a consumer buys a product from the marketplace, Amazon keeps the information about that customer to itself, and shares very little of the information with the vendor. This is also true for the majority of similar online resellers.
In that setup, it’s difficult or impossible for the vendor to re-access the customer for repeat sales, marketing, or any other type of services they would like to offer (and that they can offer with traditional and “direct” sales ceremony). Only Amazon has the information about the consumer and the data on who bought what. With repeat sales being a critical factor in the profitability of brands, that’s a major detractor for Amazon vendors.
Even worse, the data that Amazon has aggregated across its many products enables it to create offerings to consumers that attract them away from luxury vendors, if that works more profitably for Amazon.
The customer relationship is more important in the luxury business than in other consumer products. Luxury service drives higher profit margins. Without being able to understand a customer’s history, it is hard for brands to meet customer’s needs. The way Amazon’s luxury fashion site will work is not clear yet. They claim that Brands might have “complete control” over their concession. But Amazon is not launching this Luxury website just to please Luxury Brands, and if the information is not available to the vendor, that’s a major issue for the Brands.
... which will be even worse than the one experienced with Department Stores today!
In average, between 40%-50% of Luxury Fashion products are sold by legacy department stores. In the relationship between the retailer and the brand, there were always multiple tensions. Fundamentally, the store controlled the access to the consumer, offered competing brands and controlled or influenced pricing, marketing and placement. Very often, the goals of the two parties are in conflict.
In that relationship, Amazon replaces the department store and the tensions between the two have not disappeared. Because of Amazon’s size, it has enormous market power that presents a real challenge to brands.
Why didn't Amazon integrate Luxury earlier into its platform?
Amazon may be the best system in the world for providing consumers with a way to shop when they know what they want and are looking for fast and convenient service. But the luxury fashion business is different. It requires exploration, discovery, personal service and creativity to be effective.
Buying a fast-fashion brand underwear is not the same as buying an occasion dress from a Luxury Brand. It is not as easy for Amazon to add luxury to its portfolio as it is to add another type of toothpaste.
Amazon is near impossible to beat on selection and convenience. But if they want to succeed in Luxury fashion, they will have to take the fears of the brands into consideration, and on the other side, Brands will have to bring a solid answer to resists to the giant and take benefits of this new platform.
A light at the end of the tunnel? Trust-Place and the digital property community!
A simple and pragmatic solution exists today, with a community growing every day. Trust-Place is a trusted third party, helping brands generate and manage digital ownership certificates related to their products, at the time of sales. Whether this sale is direct or indirect, and this is the beauty of it. Through a dedicated application or under white label (managed by the Brand app), Trust-Place allows Brands to maintain a perpetual relationship with all their customers, including those they do not know (indirect, second-hand, gifts…), thanks to the digital transfer of these certificates. Trust-Place authenticates the item with an enhanced certificate of ownership, which protects its value, shares its history, and facilitates its transmission with confidence.