Vivek Gupta

Amazon & the Fashion Industry

A Disruption in Motion

Harvard Business School | HBX

Final Paper on “Disruptive Strategy by Clayton Christensen” 2017
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Contents
1. Amazon: Company Overview ............................................................................................ 3
2. Amazon & the Fashion Industry ........................................................................................... 4
2.1. The Fashion Industry: Context ...................................................................................... 4
2.2. The Fashion Industry: Challenge & Opportunity ........................................................ 4
2.3. Amazon’s foray into fashion: A Brief History of Limited Success .............................. 5
2.4. From Emergent to a Deliberate Strategy ................................................................... 5
2.5. Introducing Amazon Fashion: Organized around JTBD ........................................... 6
Figure 1: Organizing around Job to Be Done.................................................................... 7
3. Amazon Fashion: The path forward ................................................................................... 8
3.1. Low End Disruption......................................................................................................... 8
3.2. New Market Disruption .................................................................................................. 8
3.3. Product Architecture ..................................................................................................... 8
Figure 2: Product Architecture [6] ......................................................................................... 9
Table 1: Components of Product Architecture .............................................................. 10
3.4. The Path forward.......................................................................................................... 10
4. References ........................................................................................................................... 11

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1. Amazon: Company Overview

Amazon is an e-commerce company that came into being almost 23 years ago
in Seattle, WA. It’s considered the largest retailer in the world measured by
revenue and market capitalization [1].

The retailer had its beginnings as an online bookstore and since then it has
expanded rapidly in recent years in many other categories. In doing so, it has
heavily leveraged its huge investments in its e-commerce infrastructure including
the supporting supply chain as well as the rapid e-commerce adoption in the
market.

Almost every time, the retailer has expanded into a category, it has been able to
do so with great success capturing a significant portion of the market share in
the category even driving incumbent companies out of business in many cases.
This includes its foray into books, electronics & toys. In each one of these cases,
Amazon has captured a significant market share and played a significant role in
driving some established incumbents out of the market – Circuit City
(Electronics), Borders (Books) and more recently Toys R Us (Toys).

In recent years, Amazon has tried to enter the high fashion category and has
had mixed success in the same. This paper will analyze Amazon’s attempts to
expand into this category through the lens of Disruptive Strategy and make
recommendations and projections on its trajectory in this space in the next few
years.

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2. Amazon & the Fashion Industry

2.1. The Fashion Industry: Context

The US fashion industry has been dominated by large brand houses and
department stores that have maintained high margins and commanded
high prices for their products in exchange for premium service &
exclusivity. The industry has been progressively growing thanks to the
patronage of the baby boomers and their steadily growing purchasing
power over the last two decades.

Large department stores have steadily been growing their physical

footprint in large malls amid real estate booms in the last two decades.
They have been steadily improving their service for their core customers
for the past 2 decades.

2.2. The Fashion Industry: Challenge & Opportunity

As the overall demographics are starting to shift for USA, the baby
boomers are being replaced by the Millennials as the primary market
segment for many industries. As mentioned in the previous section, the
large department stores and the fashion houses are facing following
challenges:

• They are now overserving many of their core customers for the
basic category (replenishable basics like socks, underwear etc.).
For the customer’s jobs to be done (“Help me buy new socks and
underwear”), the large malls are inconvenient since their in
unnecessary experience overhead for the basic tasks and takes
too much time.
• The lower end of the market segment (the millennials) has been
priced out of many of the high fashion brands which now cater to
the baby boomers with higher purchasing power. The fashion
brands also have this unique dilemma where they cannot cater to
the lower end of the market since it dilutes the brand message by
eroding the exclusivity offered by these brands.
• The traditional brick & mortar stores in large malls are also under
siege since the overall trend among the new market segment (the
millennials) is to prefer convenience over experience.

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Thus, we can see that the fashion industry is ripe for low-end market
disruption as well as having an opportunity to tap into overserved
customers and capturing new markets by meeting the needs of the
millennials.

2.3. Amazon’s foray into fashion: A Brief History of Limited Success

Amazon purchased [Link] in 2006. The site, which focused on

contemporary fashion, has had modest growth since its acquisition and
amazon has primarily kept the branding and products separate from its
main [Link] offering.

Amazon purchased [Link] in 2009. It was it’s first major foray into
footwear and apparel industry. Amazon has since primarily kept
[Link] as an independent entity separate from its main
[Link] website. This has worked in favor of Amazon since we will
see that its own foray into fashion has met with mixed success due to its
brand perception.

Amazon also started its own websites [Link] and [Link]

which leveraged amazon’s own infrastructure in the backend but again
kept the branding completely separate from [Link]. Moreover,
[Link] was a private sale/Flash sale website, which offered a
limited time sale to a limited set of users.

Finally, in 2012, Amazon announced a high-profile foray into fashion with

sponsored fashion shows, partnership with few major brands and
proclamation from its CEO Jeff Bezos that “It was Day 1 in this category”
[2].

However, the reaction to this has been swift in recent years by many high
fashion houses with many of them proclaiming that they will not place
their products on [Link] since it will dilute their brand.

2.4. From Emergent to a Deliberate Strategy

As seen in the previous section, Amazon (consciously or unconsciously)

pursued an emergent strategy from 2006-2012. Each of its acquisitions or
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initiatives had different business models, catered to different customer

segments and had different set of fashion brands associated to them.

None of them really created a unified brand experience or addressed a

core Job to Be Done for a target customer. More importantly, none of
them leveraged the core [Link] capabilities around supply chain
and convenience.

In 2012 and since then, based on the press, its partnership with brands and
its marketing strategy, it feels like amazon is following a more deliberate
strategy around:

• The Job to be Done – “Help me conveniently Shop for my fashion,

footwear and apparel needs from anywhere”.
• Low End Disruption – Provide basics (underwear, socks etc.) at
lower prices and from the convenience of the home. Its not tied
upsell a larger purchase which is typically what incumbent retailers
do.
• New Market Disruption – Provide “Good Enough” Brands but in the
convenience of the home with a very wide assortment of products
and 2-Day free shipping for Prime members.

2.5. Introducing Amazon Fashion: Organized around JTBD

In the past two years, amazon has branded a part of its site as
AmazonFashion. They have closed their other online properties
([Link], MyHabit) and integrated them into AmazonFashion. This is a
clear strategy that’s organizing around the Job to Be Done. The following
shows how its building out AmazonFashion as its purpose brand around
the Job To Be Done:

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Purpose Brand-AmazonFashion (Leverages

Amazon & Amazon Prime branding)

Integration - integration between prime

membership, free 2-day shipping, rich browsing
experience with reviews, marketplace
platform, prime wardrobe, Alexa ecosystem

Experience - Endless Aisle, 1-click shopping, 2-

Day Free shipping for Prime Members, Easy
Returns

Job To Be Done - "Help me conveniently Shop

for my fashion, footwear and apparel needs
from anywhere"

Figure 1: Organizing around Job to Be Done.

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3. Amazon Fashion: The path forward

3.1. Low End Disruption

Slowly and steadily, Amazon has seen great success with its strategy of
low end market disruption. Per many reports [3], Amazon is poised to
become the largest apparel retailer in the USA. Its strategy around low
end disruption has a lot to do with it and its something that the retailer
should continue to do. This is evident in the fact that Amazon now enjoys
a 17% market share in underwear and intimate apparel category in the
USA. [4]

3.2. New Market Disruption

Though many high-end fashion brands have refused to place their

products on [Link], Amazon has still been able to provide a wide
variety of mid-level brands on its site. In addition to that, Amazon has also
launched many in-house brands[5]. This supports its strategy to provide
“Good Enough” brands to many millennial shoppers who were not
necessarily into brand based shopping but have now been converted
due to these “good enough” brands at reasonable price and primarily
due to the convenience and easy shipping provided by their Amazon
Prime membership. This helped them capture new markets and address
non consumption.

3.3. Product Architecture

Amazon has created a product architecture that is modular for most parts
since it leverages established pieces of its businesses (e.g. Supply Chain,
marketplace etc.). However, there are pieces of its architecture that are
partly interdependent due to its constraints (private label procurement Vs
3rd party brands). The following depicts the product architecture at a high
level:

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Amazon
Alexa

Amazon
Amazon
Marketplace
prime
Platform

3rd Party
Brands

Private Label Echo Look

Prime
Wardrobe

Figure 2: Product Architecture [6]

As seen above, the Product Architecture is highly modular and that

provides the opportunity for Amazon to innovate in certain areas while
sustaining a winning strategy in certain areas. The following depicts how a
different strategy can be applied to continue disrupting in the more
innovative parts:

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Product Module Recommended Strategy

Architecture
Area
Procurement Private Label Amazon should continue to invest in the private labels
Strategy 3rd Party for 2 reasons:
Labels • It gives them a way to provide good enough
brands to continue their trajectory in the low end
and new market disruption.
• It provides them leverage to get 3rd party brands
on the AmazonFashion Platform.

Presentation Amazon • This is the most mature part of the Amazon

Platform Marketplace Product architecture that is used across
categories and should be on a sustaining
innovation path.
Customer Amazon • This is an important aspect of the innovation
Experiences Alexa piece in the architecture since it creates new
Echo Look experiences for customers to migrate to the
Prime overall platform. Amazon needs to continue
Wardrobe innovating in this space and apply different profit
formula to try out integrating and creating new
experiences.
Customer Amazon • This is the most mature and alluring part of the
Loyalty & Prime Amazon Product architecture that is used across
Fulfillment categories and should be on a sustaining
innovation path.

Table 1: Components of Product Architecture

3.4. The Path forward

As seen above, AmazonFashion is on the right path and is poised to

become the biggest retailer in fashion in the next few years. It should
continue its current trajectory around both low end disruption as well as
new market disruption which leveraging the core parts of its brand and
platform which are on sustaining trajectory.

It also needs to continue innovating in the customer experience and

convenience category which is an evolving area in the industry.

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4. References

[1] Amazon (Company) Wikipedia - [Link]

[2] Amazon leaps into high end of the Fashion Pool, NYT -
[Link]
[Link]

[3] Amazon is about to become the biggest clothing retailer in US, business insider -
[Link]
us-2016-10

[4] OneClick Retail – Fall Fashion on Amazon - [Link]

amazon/

[5] Amazon quietly launches 7 in-house clothing brands – CNN Money -

[Link]

[6] Images are licensed under Creative Commons, Source:Bing

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