What the Saks-Neiman merger means for Amazon

In sum, the merger gives Amazon a bigger foothold in a space that has largely eluded it: luxury retail. And it comes at a time when Amazon is simultaneously looking for new ways to compete with discount players.

“I suspect there are people at Amazon who hope this will provide access to brands, but that may be wishful thinking,” said Sucharita Kodali, a principal analyst at Forrester Research. “Brands don’t like mass markets.”

Look no further than former luxury e-commerce darling Farfetch, which was acquired by South Korean company Coupang in December. Like other high-end fashion players, Farfetch has been struggling with weakening consumer demand following the pandemic-era boom that fueled discretionary spending. But Farfetch’s struggles also come at a time when many leading luxury brands have — and continue to do — scaled back their wholesale presence in favor of selling directly to consumers. Other casualties in the luxury retail space include Britain’s Matches Fashion, which closed in March after being acquired by retailer Frasers Group late last year. Yoox’s troubled e-commerce business Net-a-Porter is also reportedly up for sale.

Despite its struggles in the broader luxury goods market, Amazon has increasingly sought to enter the space—with mixed results. In 2020, Amazon launched Luxury Stores, which aims to give high-end brands more control over the look of their storefront on the platform. While Amazon has managed to attract high-end brands like Coach and Clinique, the number of top luxury brands in the market remains small and scattered.

Amazon also tested its own department stores in 2022, called Amazon Style. However, the Seattle-based company closed all locations of its physical clothing stores just a year after opening its first one. Amazon has long been trying to crack the code of traditional retail, and its involvement in the merger of Saks and Neiman Marcus is just the latest sign that the e-commerce giant is continuing to test new strategies to see what works.

It’s certainly an interesting time for Amazon to get involved in the luxury retail takeover — the platform is also planning a new Temu-like discount section on its website that will sell ultra-cheap goods directly from China. The news has sparked outrage among Amazon’s third-party sellers, Modern Retail reports.

There are more questions than answers when it comes to the Saks deal, such as what exactly Amazon plans to do with the new partnership, according to Greg Portell, senior partner and global markets leader at strategy and management consulting firm Kearney. As he put it, “It’s a shoe that hasn’t dropped yet.”

Portell also noted that “Amazon did not have to invest to provide advanced logistics and fulfillment services.”

Amazon’s involvement could risk weakening the relationship between Saks Global and its portfolio of brands, especially as Amazon looks to add more ultra-cheap goods from China to its marketplace, according to Neil Saunders, managing director of GlobalData Retail. Still, Saunders doesn’t see the deal as a direct attempt to bring more luxury brands to its online store. Rather, he sees Amazon’s minority stake more as a testing and learning opportunity for the retailer.

“I don’t think it’s a very direct play just trying to get brands on Amazon, because the licensing restrictions and brand agreements are much more complex,” Saunders said. “But they could gather data and information that would help them better understand the luxury market.”

The question remains whether the deal will even close, as Saks Global could face opposition from the Federal Trade Commission for anticompetitive conduct. In April, the FTC sued to block Tapestry’s proposed $8.5 billion acquisition of Capri, which would have combined brands like Versace, Coach and Kate Spade under one roof. Amazon is also facing an antitrust lawsuit from the FTC, which accuses the e-commerce company of operating a monopoly on online retail.

Whatever Amazon’s modus operandi, the strategy is in keeping with the company’s reputation for experimenting and testing things out, according to Scott Markman, founder and president of global branding agency MonogramGroup. How that plays out, whether it pays off or not, remains to be seen.

“Saks and Neiman brought Godzilla into the room,” Markman said. “I bet Amazon didn’t enter into that deal to be a sidecar player.”

Amazon News You Need to Know

• A US court has dismissed a class action lawsuit filed against Amazon accusing it of unfairly operating a checkout field.
• Amazon announced earlier this week that it had achieved its goal of using 100% renewable energy seven years ahead of schedule. Some critics are skeptical of that claim.
• Amazon showcased improvements to its AI products at a conference in New York.

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