Why Amazon Struggles with Luxury Retail

It’s hard to imagine Amazon being a stronger competitive force for retailers than it already is, but it’s expected to triple its share of the U.S. apparel market in the next five years. The retail giant has a market cap of more than $300 billion, and has invested years and millions of dollars innovating on customer experience. With functionalities like Amazon Prime and Dash buttons, Amazon sets the standard for every stage in the customer journey.Amazon is already the largest clothing seller online, earning customers’ trust as an effortless means to buy apparel basics like a T-shirt or classic jeans, and setting the stage for shoppers to try popular brands such as Levi’s and adidas at home before committing to buy. Shoppers know they can rely on Amazon to always have products in stock, and Prime free two-day shipping is attractive for those looking to quickly fill their closets.But Amazon has yet to capture meaningful market share in the luxury retail sector. High-end shoppers aren’t looking for flash sales or free delivery—they value their preferred brands for the unique, sophisticated experience they provide, and would prefer to buy a statement piece over a best-seller. Though Amazon has mastered “fast and free” delivery, an efficient transaction may not be enough to pull shoppers away from the emotional experience they associate with their favorite luxury brands.Just as Chipotle’s farm-fresh menus and low pricing do not compete with a Michelin-starred restaurant, Amazon’s functional strengths do not weaken the exclusivity and careful curation that high-end brands offer.In an era when it’s hard to differentiate a brand based on price and product, customers make decisions based on two intangible qualities: the strength of the emotional connection and the effortlessness of the experience. Luxury brands have mastered both; thus far, Amazon has only nailed the latter. Luxury brands can continue to stay a step ahead by focusing on three key areas.

Delightful Discovery

Amazon is the pinnacle of choice—and this could end up being its Achilles’ heel. Choice begets complexity for consumers, and luxury shoppers are drawn to brands that act as curators. Amazon does not offer an inspiring “discovery platform.” Their experience is all about convenience and choice—not the lifestyle.Luxury shopping is a deeply emotional experience. A first-time buyer at Chanel or a regular on Bond Street is invested in much more than just free, two-day shipping and free returns. Luxury retailers know the importance of providing a special shopping experience. Customers want inspiration, fantastic personal service, an intimate in-store experience, a beautiful shopping bag—the whole package.

An Emotional Connection Bridges Physical and Digital

Luxury brands earned consumers’ loyalty through high-quality in-store service such as custom tailoring and personal shoppers. With the rise of e-commerce, high-end retailers shaped the online experience to complement the brick-and-mortar experience. Amazon’s physical bookstores, Amazon Go grocery store experiment, and recent acquisition of Whole Foods’ physical stores focus on new ways to introduce convenience into consumers’ lives, but have yet to approach the unique qualities of a luxury retail experience.Meanwhile, luxury retailers have gone a step further by extending the rich in-store experience to a sophisticated, highly branded online shopping experience. Companies like Net-a-porter elevate the e-commerce experience by shipping their online orders with beautiful packaging and personalized notes. Louis Vuitton’s website features images that capture the iconic company’s rich history and savoir faire.

Trust in Product Quality

Luxury consumers expect quality and authenticity. It’s no secret that Amazon struggles to control the problem of counterfeit products, especially from third-party sellers. With a lack of product authentication and an abundance of questionable third-party sellers, consumers, already wary of making expensive purchases online, simply don’t trust Amazon for these types of products. Though Amazon is a wonderful place to buy many items, it’s not where shoppers go to buy a Rolex.As Amazon continues to grow and to focus resources on apparel and accessories, it will likely take a page from the luxury book. To compete with luxury retail specialists, Amazon is looking for new ways to create unique, emotional experiences for its shoppers. Retailers must not underestimate Amazon’s potential to innovate.They will need to further elevate the 360-degree luxury experience by creating touch points at every step of the customer journey in order to protect their customers’ emotional connection and loyalty.A version of this article was originally published on WWD.com, December 22, 2016.