Amazon Selling Its Own Clothes Actually Makes a Lot of Sense

You already buy a lot of things on Amazon. You buy books. You buy toilet paper and batteries and toys. All of those everyday items are totally "on brand" for Amazon. But fashion? Not so much. Yet Amazon is confident you’ll soon be eager to buy fashionable apparel from its Everything Store. How confident? So much so that Amazon appears to have started selling its own clothes.

That's right: with no fanfare, Amazon has started selling clothes under at least seven different labels trademarked by the company itself, including about 1,800 different items in all, according to Women’s Wear Daily. None of these brands carry the Amazon name; instead, they masquerade behind labels that sound vaguely like something you may have heard of before: Franklin & Freeman; Franklin Tailored; James & Erin; Lark & Ro; North Eleven; Scout + Ro; and Society New York. Offerings range from men’s dress shoes and suits to women’s office wear to basics for children—and they don’t come dirt cheap. A sheath dress from Lark & Ro, for instance, is $70 (about half the price of a similar Betsey Johnson piece). All the brands live under the Amazon Fashion section of the retailer's website.

What exactly is Amazon up to? Fashion might seem like yet another brash experiment from a company famous for trying out so many different things as it reaches in every direction for massive growth. (Remember Amazon-branded diapers?) And the very fact that Amazon hasn’t said a word about these efforts suggests that it’s still very much in a kind of trial-and-error phase. (Amazon did not return WIRED’s request for comment.)

But even if Amazon’s push into private-label apparel is still in the early days, that it’s doing it at all is telling. Though it may not be the first thing that comes to mind when thinking of Amazon, the company actually has deep experience in fashion. The company already has gobs of data from years of watching its customers buy clothes. And it has the infrastructure---at scale---to make selling its own clothes online work to its economic advantage. Amazon may not be on the verge of becoming the next great fashion house. But selling its own clothes actually makes sense.

Amazon, it turns out, has a long history of selling clothes. Jeff Bezos launched his online store in 1995; by 2002, Amazon had expanded into apparel. Since then, the company has experimented with apparel in all kinds of ways, from its acquisitions of Shopbop in 2006 and Zappos in 2009 to the launch of flash-sales site MyHabit in 2011 and a failed experiment focused on shoes and accessories called Endless, which it killed in 2012.

Despite all these efforts, however, Amazon still has yet to secure an image as a place to buy stylish clothes. That's almost certainly why Amazon didn't use its own name to brand the clothes it sells, as it does with AmazonBasics, the company's own line of self-branded electronics accessories and kitchen products. "Amazon is generally thought of as a very good brand for fulfillment of needs, but not so much for aspiration," says Jason Goldberg, vice president of commerce and content at digital agency Razorfish.

But Amazon sure is trying. Last year the company was a marquee sponsor of New York Men’s Fashion Week. It’s recruiting for its Amazon Fashion Private Label unit. And it's hired bigwigs from the world of haute couture, including Vogue editor Caroline Palmer. The company even has a 40,000-square-foot studio in the Williamsburg neighborhood of Brooklyn that it uses for high-quality fashion photography for its website. And just this week, it started streaming its own fashion-themed reality show, The Fashion Fund, produced by Condé Nast (which owns both Vogue and WIRED).

“Amazon's commitment to be a successful fashion retailer is already way beyond the testing phase,” says Goldberg.

As it seeks to improve the quality of its fashion image, the company is also dramatically increasing the sheer quantity of clothes available on its site. According to analysts at the investment bank R.W. Baird, as reported by tech news site Recode, Amazon's apparel and accessories category climbed 91 percent over the last year to 20 million items by the 2015 holiday season, creating an even bigger pool of items than Amazon’s electronics inventory.

But how does Amazon know what kinds of clothes to sell? Conveniently, the company has tons of data from years of offering clothes on its site. Amazon itself has alluded to the advantages of this data. "When we see gaps, when certain brands have decided for their own reasons not to sell with us, our customer still wants a product like that," Jeff Yurcisin, vice president of Amazon Fashion, said in October during a fashion industry conference. If others won't sell with Amazon, Amazon can just go around them and start making those clothes itself.

Imagine if you're a fashion label that's been selling on Amazon for years, Goldberg says. "Then suddenly your partner (Amazon)---who has seen your sales data, and knows what products you have for sale, knows your sizes and price points, knows what consumers buy, and what they looked at but didn't buy---decides to sell its own apparel." Goldberg points Amazon hasn't pioneered this model at all---large-scale retailers like Wal-Mart have been doing the same thing for years.

But why would Amazon do something so seemingly cutthroat? Margins. “Apparel margins are generally very high, much higher than electronics,” says Sucharita Mulpuru, a retail analyst with market research firm Forrester. “They can be as high as 80 percent depending the product, price, and materials and labor used.”

Those margins don't mean much if people aren't willing to buy clothes online. Unlike other products, brick-and-mortar still would seem to have a distinct advantage: you can try clothes on before you buy. But that really doesn't seem to bother shoppers anymore. Research firm eMarketer predicts US e-commerce sales of apparel and accessories will grow 13.7 percent in 2016, from $60 billion last year to $68.2 billion. Amazon itself has said that more than 40 million US customers have purchased clothes, shoes, and/or accessories from its site.

And even if those customers send back ill-fitting clothes in droves, Amazon is in a better position than ever before to minimize the extra cost of those returns to its bottom line. Amazon's huge investments in infrastructure have created a massive logistics network with enviable economics of scale. As more people use their bedrooms as dressing rooms, Amazon has made its delivery and returns process more seamless than ever---which matters for clothes more than just about anything else. And now that it's got all those pieces in place, controlling the last piece—making the clothes themselves—is just the next logical step.