Amazon Opens First Clothing Store

Here is the marketplace news that captured our attention this week.

Amazon Opens First Clothing Store

Amazon is opening its first-ever Amazon Style physical clothing store with the promise of a high-tech shopping experience, confirming a rumour from last year.

It will offer brands consumers “know and love,” according to Amazon, and an app will let you choose an item, size and colour and send it directly to a fitting room or pickup counter. The first store is coming to The Americana at Brand in Los Angeles sometime “later this year,” the company said.

Amazon said it will offer “hundreds of brands” chosen by fashion creators and “feedback provided by millions of customers shopping on” It didn’t specify which, but its online store currently carries products from designers like Oscar de la Renta, Altuzarra and La Perla. However, many luxury and high-end brands have resisted listing goods online with Amazon.

The stores will offer double the number of styles of traditional stores, while not forcing customers to search manually for the right size or colour. Instead, if you see a clothing item you like, you can scan its QR code using the Amazon Shopping App to see sizes, colours, customer ratings and other details. You can then send it to the fitting room or directly to the pickup counter if you don’t need to try it on. As you might expect, it also uses an AI-powered algorithm to recommend more products based on what you’ve already picked.

You can open the fitting room door using the app, with all the items you’ve picked inside. Each one offers a touchscreen that lets you continue shopping and request new items to try on without having to leave. They’ll then arrive in “minutes” thanks to tech that Amazon also uses in its fulfilment centres.

You can feel free to buy items online that you found in the store, with the same prices in both places. Items can be returned in store, and any item you’ve scanned will be saved in the shopping app so you can revisit it later.

Amazon has already opened a number of Fresh grocery stores, along with book stores and even a hair salon. It didn’t say if it would use its cashierless “Just Walk Out” tech found in Fresh and Whole Foods, but it will use the Amazon One palm recognition service for checkout.

Tambo’s View:

The new Amazon Style store could deepen Amazon’s influence in the fashion sector, especially among clothing shoppers who love the experience of exploring and browsing physical stores. What's more, it could empower Amazon with more shopping data. However, Amazon has in the past, has struggled to create a great in-store experience. For this to work, Amazon must combine its solid technology and operations with heart and soul- something which is particularly important in fashion where creativity, innovation, inspiration and customer service, reigns supreme.

Amazon reverse Visa cancellation decision

Amazon have stepped back and reversed the Visa cancellation on their platform. As of the 19th of January, Amazon had previously announced (with several reminders sent to customers) that the Visa cancellation would end acceptance of Visa credit cards on Amazon due to high payment transaction fees.

Visa had always said that they were trying to to work toward a resolution to enable their cards to continue to be accepted on Amazon, but just six days ago Amazon were still emailing customers to remind them of the Visa cancellation about to take place this week. Now today, the 17th of January and just two days before the deadline, the following email is pinging it’s way into Amazon customers’ in boxes:

Visa and MasterCard increased their UK-EU interchange fees this year due to the EU fee cap for the UK being removed after Brexit. Amazon expressed their disapproval towards Visa applying such high fees. One might well look at the announcement of the Visa cancellation and it’s reinstatement before customers were impacted and think that there was a certain amount of posturing to assist in negotiating a preferential deal. A credit card processor the size of Amazon would certainly make a company think twice, although in this instance we don’t know who blinked first – It’s possible Amazon simply backed down and equally possible that Visa bent a little and gave them a more acceptable deal.

The good news is that today’s reversal means merchants will no longer be left wondering if their customers will be able to purchase from their websites through Amazon Payments, and you’ll still be able to make purchases on Amazon, Amazon Business and fund your Prime or other Amazon services with your Visa credit card and for most customers, that’s all we care about.

Tambo’s View:

As we suspected back in November when this story first aired, Amazon and Visa have finally reached a deal. Although retailers are forced to pay high fees each time a consumer pays for a purchase with a card, customer choice and ubiquity are paramount. Moreover, the relationship between retailers and financial services companies are mutually beneficial and an ending of the relationship would have resulted in significant losses for both sides.

Marketplaces expected to grow by 15% annually and match direct ecommerce spend by 2025

The unstoppable rise of the online marketplace model is driving the largest fundamental shift in consumer spending since the emergence of ecommerce in the 1990s, a report by OC&C Strategy Consultants has found.

OC&C’s report, Trading Places, predicts that by 2025, spending through the leading online marketplaces will overtake the vast majority of ecommerce outlets in established retail and travel categories. When considering aggregate spend, marketplaces in those categories are set to catch up with direct ecommerce ahead of 2025. In 2020 alone, marketplaces accounted for over $1tn of total western consumer spend in these categories, and 40% of total consumer spend online.

Across all of these established categories, the report estimates that marketplace growth will continue at 15% per year in the West and become as large as direct ecommerce by 2025, when it will account for c.45-50% of online spend.

The move to the marketplace model is being driven by their increasingly sophisticated offerings. For consumers, they bring convenience, choice, and value. For suppliers, they provide access to a large customer pool and a slick user interface, plus value-added services like fulfilment and payments.

Marketplaces are now very much the norm when it comes to books, food delivery, or ticketing, where they represent at least 25% of consumer spend. They are also continually increasing their share against ecommerce players in the travel, clothing, and furniture sectors. In these established retail and travel categories, it is only grocery where marketplaces, and indeed ecommerce, have yet to make an impact, with offline and online direct spending accounting for at least 97% of overall spend.

These trends have been accelerated by Covid-19. The trading conditions created by the pandemic, where consumers were largely forced to transact online, drove a significant increase in penetration across digital channels, with only one established marketplace category – DIY, Gardening and Pets – seeing a reduction in third-party/online spend during the pandemic.

US powerhouses dominate European counterparts in the West

Not all marketplaces are enjoying a piece of the pie, however. The extraordinary performance of the likes of Amazon and Expedia has created a highly consolidated landscape in which the top 10 marketplaces account for 70% of marketplace gross merchandise value (GMV) in Western markets, with eight of the top 10 marketplaces of US origin.

Despite many European marketplaces operating successfully, most are simply unable to compete with their U.S. counterparts in terms of size and scale. While they do not account for any of these top 10 grossing marketplaces, they make up just a quarter of the top 50 but contribute only 5% of GMV.

The largest threat to US marketplaces comes from China, who in Taobao, Tmall and (owned by Alibaba), possess three of the four largest e-commerce marketplaces globally. All three are expected to expand their presence in Western markets by 2030.

The marketplace scene is continuing to evolve at pace. As well as overtaking direct ecommerce spend in categories such as retail and travel, the report predicts that the next cohort of verticals to benefit from online marketplaces will be those where buyers already use price comparison as part of the purchasing journey. These include real estate, automotive and retail, financial services.

Marketplaces will also grow to scale in new verticals. These include B2B products, where marketplaces are overcoming the longstanding practice in industries built on analogue and relationship-driven interactions by developing a tool that is closely tailored to the specific needs of their verticals. The second-hand goods market is also set to thrive with consumers demonstrating a growing sustainability conscience in their purchasing, which is in turn creating a wider pool of geographically diverse buyer and seller segments.

Finally, the developing regulatory landscape is also presenting opportunities for new players, with incumbents operating in the EU now forced to shoulder VAT processing costs.

Tambo's View

The OC&C report brilliantly highlights the fundamental change in consumer spending habits; online marketplaces are rapidly becoming the first port of call for both customers and suppliers, and the share gain by marketplaces shows no sign of slowing. Given the sector remains in its relative infancy, there will be opportunities for both new and incumbent players to operate profitably. That said, ecommerce giants should be confronting these industry changes head on if they want to avoid the fate of bricks and mortar retailers and travel agencies.