Try before you buy, exclusive products, search based retargeting and Q4 slowdown

Try before you buy fashion service

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Amazon is launching its “try before you buy” fashion service in the UK, marking the online retailer’s latest push into the clothing market. Prime Wardrobe delivers a bag of three to eight clothing items with no upfront charge and free delivery for people signed up to Amazon’s subscription service. Wardrobe shoppers are offered discounts relating to the number of items they choose to keep, beginning with £5 off when they choose items worth £100 or more and £20 discounts if they keep items worth £200 or more. Shoppers can return any unwanted items free of charge within seven days. The UK is the third country to join the service, which started in the US in June and launched in Japan last week.

Amazon has marked out fashion as a key growth area in the UK.  They have built a market share of 4.6%, not far behind Marks & Spencer’s online clothing market share. Next remains by far the biggest online seller of clothes, with 12.5% of the market, followed by John Lewis, Asos and eBay, according to analysts at stockbroker Société Générale. However, the vast majority of clothes are still bought on the high street, making Amazon a minnow in the overall market with just 1% of sales.

Amazon Exclusives

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Two very different Amazon exclusives were announced this week:

A healthcare brand

Amazon will start selling a new brand of medical devices, thanks to a partnership with a health brand consultancy called Arcadia Group (not to be confused with the UK fashion group with the same name). The partnership was created when the founder of Arcadia Group approached Amazon as they started to make their interest known in health care.

It is expected the range will include items like blood pressure cuffs and glucose monitors. The brand will be called Choice and will be designed for the millions of people with hypertension and diabetes. Choice will be exclusive to Amazon, but won't be an Amazon private-label brand. Arcadia's Choice website also has a page where it asks people to vote on which health products it should offer next, with options such as heart rate monitors and insulin pens. The intention is to incorporate the devices into Amazon's Echo home speakers, which would help sufferers manage their disease with Amazon's voice assistant, Alexa. One of the barriers to this happening is the update of the device to be compliant with federal privacy policies that govern how health information is stored and shared.

A single malt whisky

Amazon has a very impressive whisky range on its website and prices are mostly competitive compared to other online stores. And now, Amazon has stepped into new territory, with its first exclusive bottling of a scotch whisky that is not available elsewhere. Amazon have partnered with Bowmore, who are known for their high-end releases, to sell a 19-year-old whisky aged entirely in red wine barrels from Chateau Legrange, a red wine from Bordeaux. The whisky costs £120  and is bottled at 48.9% ABV (alcohol by volume).

A growing trend

Amazon has been ramping up its private label and exclusive business in recent years and now has over 120 brands that sell exclusively on its Marketplace. Amazon has increased the number of those brands by more than nine-fold since early 2016 and is on pace to generate $7.5 billion in 2018. Amazon has also been giving private label products more exposure across its site. They now show up high in search results under a separate box titled "Top Rated from Our Brands." In recent months, Amazon has also been testing a feature that promotes its own private label brands at the bottom of its competitors' product listings.

Amazon tests search based retargeting


Amazon is testing a program that allows advertisers to use search queries made on Amazon to retarget shoppers across the web. This capability is only available through Amazon’s DSP and it is the first time that Amazon search data is being used off of Amazon’s owned and operated platform.

While Amazon already enabled advertisers to retarget shoppers who had viewed product pages or made a purchase, search-based retargeting lets advertisers capture intent. With over 50% of product searches starting on Amazon, this is extremely valuable data which will enable advertisers to pinpoint customers with the intent to make a purchase similar to their own. Amazon is combining its media and data assets more effectively within the DSP.

Due to all the brand safety issues in recent years, the reputation of many DSP providers is damaged and brand marketers have moved down the funnel to get more precise targeting. Amazon is the main beneficiary of this move, given the wealth of data and targeting potential they have.

Applying search data for off-platform campaigns shows how much Amazon’s advertising ambitions are reshaping its data policies. Historically, Amazon silos the unique data from its search and Prime groups, such that marketers can’t use these data segments to enhance Amazon brand campaigns.

Amazon Q4 growth slowdown

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Amazon made record profits of $2.9bn in Q3, compared with $256m last year. That marked a fourth consecutive quarter of more than $1bn in profit for the Seattle-based company and came despite a 21% rise in operating expenses. Added costs came from investment in its Prime membership scheme, offering home delivery from Whole Foods stores and creating more original content for Amazon Prime Video. Retail remains the firm's biggest source of revenue, but revenue from AWS, its cloud-based business, increased by 46% year on year and "Other" revenue - a category that primarily includes the firm's advertising business - jumped 122% to almost $2.5bn. Amazon's physical retail locations - most of them associated with the Whole Foods grocery chain the firm acquired last year - brought in about $4.2bn.

The disappointment came in the forward forecast, as Amazon expects year on year sales growth of between 10-20% for Q4. This would be a marked slowdown from the 29% jump in sales for the most recent quarter. On a call with analysts, executives blamed the modest Christmas season forecast on factors such as currency fluctuations. They also said comparisons were complicated by changes to the business, such as the acquisition of Whole Foods. The stock market reacted accordingly and after initially ending 7% higher, shares fell almost 8% in after-hours trading in New York.  But to put this into context, Amazon stock has jumped nearly 40% this year.

Equity analysts believe there is still an underlying strength to Amazon's business, but there is more online competition in e-commerce than there has ever been, and the competition has become more effective at defending against the Amazon threat.