Amazon’s Luxury Problem

By Prinitha Govender | 17 Oct 2017

The luxury goods sector thrives on exclusivity to maintain its high price point, which is why so many high-end brands are pushing against Amazon.

The word “exclusivity” is mammoth when it comes the luxury goods sector. This market doesn’t just depend on it – it thrives on exclusivity to maintain its high price point, which is why many high-end brands are pushing against Amazon.

Amazon’s talks with Swatch Group, a company that offers luxury brands like LonginesRado and Tissot, went nowhere, according to Wall Street Journal (WSJ). Swatch rejected Amazon’s advances to sell its goods on the world’s largest e-commerce platform.

The deal vaporised when Swatch “demanded a commitment” from Amazon to scour its site for Swatch knockoffs and unauthorised third-party retailers, which Amazon refused, according to Swatch Group’s CEO Nick Hayek.

Amazon failed to provide any comment to WSJ but a company spokeswoman said it works with brands to improve counterfeit detection. Amazon says it also requires invoices from its third-party sellers to verify that goods sold on its platform are legitimate.

Why then did House of Chanel recently win its court battle against Amazon in a lawsuit that alleged 30 Amazon sellers were peddling fake Chanel merchandise on the Amazon Marketplace? Chanel wanted US $2 million from each defendant for every fake item a seller had for sale. The courts instead handed a default judgement of US $100,000 per item, which totalled US $3 million from all the sellers in question.

While Amazon reacts to complaints made about counterfeit goods on its site, the e-commerce powerhouse is unwilling to police its platform for fake items, which is proving unsatisfactory for luxury labels.

While several luxury brands have been late to the e-commerce table, many are now devoting sizeable resources into their e-commerce strategies, including Prada which recently admitted its plunging top line can be attributed to being slow to pay attention to its digital channels. The company is responding to its predicament saying it plans to roll out complete e-commerce platforms around the world by the end of 2018.

One year ago, LVMH, which owns several luxury labels, told analysts on an earnings call that there is “no way” it would do business with Amazon”, even though the internet marketplace was (and still is) keen to take on more high-end brands.

“We believe the business of Amazon does not fit with LVMH full stop, and it does not fit with our brands,” said Jean-Jacques Guiony, chief financial officer of LVMH, following his announcement of the group’s unexpected robust quarterly sales.

Even though LVMH won’t budge, you can still find its products on Amazon Marketplace. This year, the luxury goods maker decided to launch its multi-branded online store, 24 Sevres, selling everything from Louis Vuitton to Dior, Prada, Gucci, Valentino and Fendi , offering fashion, cosmetics and luggage products from the brand’s own portfolio, as well as over 150 other labels. Later this month Hermes will also unveil its new e-commerce platform.

Many luxury brands are staying strong on their ethos of exclusivity and availability, and unless Amazon can offer guarantees to these labels, they just don’t seem to be budging on selling on a mass site like Amazon. Let’s see if they can do e-commerce better on their own.

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