Prime Wardrobe Lowering Discounts; Extending Furniture Superiority

RetailTechNews’ weekly Amazon Watch brings you some of the company’s biggest moves from the past seven days, analysing how the giant is revolutionising the retail space. In this week’s edition: Prime Wardrobe lowering discounts; Extending furniture superiority; and playing to brick-and-mortar strengths.

Prime Wardrobe lowering discounts

Amazon has made changes to its Prime Wardrobe service, only five months after launching the service.

The original idea was to give consumers a week to try a maximum of 15 items of clothing out at home before paying, with a discount of between 10% and 20%, no matter the price of the items ordered. Fast forward five months, and the maximum number of items has been cut to 10, and discounts are a flat rate of USD$20 (£15) for orders of at least USD$200 (£152), and USD$50 (£38) for orders of over USD$400 (£304).

The change in strategy for Prime Wardrobe, which when rolled out globally can be seen as a major competitor to online fashion retailers such as ASOS, signals that Amazon was perhaps not well prepared for the return levels associated with online fashion.

The rate at which consumers are returning goods is harming the profits of online fashion retailers, and Amazon’s move here has been made with their bottom-line, rather than their customer, in mind. The fact that Amazon is not willing to make a loss here, just to put competition such as ASOS out of business (something which they could afford to do), is good news for all online fashion retailers, and means they will be able to be more price-competitive with Prime Wardrobe.

Extending furniture superiority

Amazon is furthering its dominance of the furniture market, with two new private label brands. Already by far and away the largest online marketplace for buying furniture, this move shows Amazon’s desire for consolidation of power in the space.

The investment makes sense – 7% of Americans have purchased furniture online in the last year, while 29% of Brits purchased furniture or home furnishings online in 2016. Between 2011 and 2016, total brick-and-mortar store sales of furniture and other home furnishings rose an average of 1.9% each year, compared to 16% online, according to Euromonitor.

One of the main problems in the past has been that shoppers don’t know what the furniture will look like in their home until they order it, as they can only see a picture online. Even with Amazon extending a 30-day free returns policy, this is still an obstacle which could convince customers to go in-store to purchase furniture.

However, the online retailer has come up with a solution. They are rolling out a new augmented-reality feature for iPhone users, dubbed ‘AR view’, that lets customers place virtual versions of products into real-world scenes before buying. Furniture is the most applicable use for this app, and could help tighten Amazon’s grasp on this space.

Playing to brick-and-mortar strengths

Amazon is opening pop-up shops at Whole Foods stores, to help sell hardware devices and Prime subscriptions.

Customers can now buy the Echo, Echo Dot, Fire TV, Kindle, Fire tablets, and other products at more than 100 Whole Foods stores. The pop-up stores are an expansion of Amazon’s strategy of selling its first-party devices inside Whole Foods.

On the back of Amazon’s recent earnings, the move doesn’t come as a surprise. Here, the business reported in-store sales of USD$1.3bn (£990m) – all of which was derived from Whole Foods, despite big investment in Amazon’s book stores and other brick-and-mortar locations.

The move to bring more of their hardware devices, and to sell Prime subscriptions, represents the tech giant playing to their strengths. Rather than investing more money in expanding their physical stores, Amazon appears to be consolidating their efforts around Whole Foods.