How Should Luxury Brands Approach Amazon?

With the announcement of Luxury Stores, Amazon’s new invite-only apparel platform, there’s a heightened sense of optimism when it comes to the future of luxury brands achieving sustained success on the channel.

Many luxury brand representatives are still confused about how to approach the marketplace. In today's article, we’ve compiled 7 things all luxury brand decision makers need to be aware of.

1) Identify how Amazon fits into your overall
ecommerce strategy

First, let’s address the elephant in the room: Amazon is a difficult channel to make profitable, and luxury brands are no exception. Therefore, it’s critical to have a clear understanding of how the channel feeds into your broader digital presence.

Perhaps the most crucial decision relates to product assortment. For most luxury brands, a limited assortment of SKUs with very healthy profit margins is going to work best for Amazon. Or perhaps you utilize Amazon more as a liquidation channel for out-of-season items. Even launching a handful of products can help you connect with millions of Amazon shoppers, many of which are going to be compelled to seek out the rest of your catalog through other channels. 

Ideally, Amazon can facilitate more revenue and brand awareness for luxury brands, and identifying which products will work best on the channel is the first step.

Above: Oshiya Savur, Head of US Marketing and Education, Luxury Division at Revlon presented this mind map at CommerceLive, a virtual event on May 19, 2020

2) Not every luxury category is created equal

Luxury brands resisted Amazon for a long time. The tide is turning, but that doesn’t mean it’s the right time to jump in for your brand.

For example, look at luxury watches. According to the Jungle Scout tracking tool, the estimated sales for genuine Rolex watches is 0 units/month, whereas the estimated sales for an $85 Submariner competitor watch is a cool $130,000/month.

One imagines the in-store experience is very important for potential Rolex customers, and they’re unlikely to complete this one-time transaction online. Even during Covid, it’s difficult to imagine this consumer behaviour changing anytime soon.

Amazon’s new Luxury Stores program for fashion brands is still very much an enigma. Traditionally, it’s been difficult for high end fashion brands to generate meaningful revenue on the channel. Counterfeiters have plagued fashion perhaps more than any other category, and Amazon has largely failed in their response to this issue. Many are hoping that Luxury Stores’ augmented reality try-on experience will boost sales and reduce return rates, but it’s still too early to tell. 

One category that has proved compatible with luxury brands is Beauty. This is partly due to the Luxury Beauty program, and more specifically the ‘gating’ that this program facilitates, which is a foolproof way to get rid of unwanted third party sellers. It also probably helps that most beauty products are repeat purchase items - customers may prefer to acquire a new luxury beauty product for the first time in-store, but appreciate the convenience of replenishing tried and tested items through Amazon.

In summary; luxury brands need to complete in-depth category and target shopper research when assessing the viability of the Amazon channel.

3) Stand out from the competition

If your Amazon product listings look exactly like the competition, this is going to hurt your credibility as a luxury brand.

Fortunately, there are many ways to illustrate the premium quality of your product line.

A+ Content

Customized branded imagery on your product listings.

Video

Upload videos to your product listings and broadcast live streams with Amazon Live. Perfect for product tutorials.

Amazon Posts

Instagram-style pieces of content that are native to the Amazon app. Learn more about Posts.

Storefronts

Make your Amazon storefront resemble your own ecommerce channel.

Many luxury brands have a lot of this additional content ready to go - it just needs to be tweaked for the Amazon channel.

4) Watch out for unauthorized third party sellers
and counterfeiters

Unless your Amazon presence has been ‘gated’ through a special program such as Luxury Beauty, there’s a good chance third party sellers and/or counterfeiters will be competing for the Buy Box on your product listings. These third parties can undercut you on price and if they win the Buy Box, your ad campaigns will stop working.

Limiting competing offers on your product listings helps boost your Amazon revenue and reduces the risk of pricing conflict across channels, so it’s something luxury brands need to take ownership of.

5) Tweak your PPC strategy

When it comes to PPC, luxury brands will typically lean more heavily on branded search terms e.g. ‘burberry aftershave’ rather than generic terms e.g. ‘mens aftershave’ compared to the average Amazon seller. Having a PPC manager that understands the nuances of Amazon search term term trends is critical.

Competitors will also try to lure potential customers by bidding aggressively on high-volume branded terms, so luxury brands need to be intelligent with ad budget, and find the right balance between attacking competitor listings and defending their own pages.

6) Don’t expect too much help from Amazon

“Amazon will often roll out the red carpet for luxury brands when it comes to onboarding them onto the platform,” explains Bobsled CEO Kiri Master, “but this rarely translates to any meaningful form of ongoing channel management support, no matter how prestigious the brand.”