Amazon.com Inc. is giving shoppers another reason not to visit stores. The online giant is rolling out a free service to let its Prime members try on clothes at home, its latest attempt to crack into the fashion world.
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The new service, dubbed Prime Wardrobe, is a threat to traditional sellers of apparel, especially department stores, that are struggling to get shoppers to visit stores. It also challenges online players, such as Nordstrom Inc.'s Trunk Club and startups like Stitch Fix, which ship boxes of clothes for people to try on at home. Shares of several retailers, including Nordstrom and Gap Inc., fell about 3% Tuesday afternoon.
The service announced Tuesday would allow Amazon Prime members to fill a box with three or more eligible apparel items from its website, try them on at home for seven days and ship back what they don't want free. Customers aren't charged for the purchase during the trial period and they are offered a discount of up to 20% on what they keep.
"The reason this program is such a wake-up call for traditional retailers is the fitting room was the one place where an offline retailer could differentiate itself from an online pure play," said Joel Bines, the co-head of AlixPartners LLP's retail practice. "A good sales associate [in a store] can make all the difference."
Apparel is a notoriously difficult and costly segment for online retailers, where return rates can approach 40% for some items. Amazon is now the second-largest apparel seller behind Wal-Mart Stores Inc. after taking market share from Target Corp. and several department stores, according to a research note published by Morgan Stanley in April.
For all its success in other areas, "Amazon still hasn't cracked the apparel code," Mr. Bines said. "It's philosophy of being the everything store is a disadvantage in apparel." Traditional retailers have relied on the instincts of their merchants to create a curated selection for shoppers. By contrast, Amazon wants to make every choice available to customers, which can be overwhelming for some.
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The online retailer has made inroads by convincing such name brands as Calvin Klein, Kate Spade and Levi Strauss to sell on its website. It has also been adding its own brands in several categories, including athletic clothes, lingerie and workwear. It recently named former Victoria's Secret executive Christine Beauchamp to replace Catherine Beaudoin as head of its fashion division.
An Amazon spokeswoman said more than a million items are eligible for the Wardrobe service, including brands like Calvin Klein, Levi's, Lacoste and Adidas. "It makes it easier for customers to touch or see items in-person when buying clothing, shoes and accessories online," she said.
Amazon's new program resembles online shopping service Stitch Fix, but shoppers choose their own items. Stitch Fix, which recorded sales of $730 million in its last fiscal year, uses personal survey data and stylists to pick a set of five items for each shopper. Customers receive a 25% discount when they buy everything in the box.
Stitch Fix didn't immediately respond to a request for comment Tuesday.
"We don't think it's that big of a game-changer," said Sam Romanoff, a research associate at L2, a digital benchmarking firm. "It seems like they are trying to enter the box business, but they are not providing additional services, such as stylists."
Some traditional retailers noted that Amazon's latest offering is no different from the free shipping and free returns they provide their customers. They say they already allow customers to buy items online but pick them up in stores, so shoppers can try them on before they take them home. They also contend that shoppers aren't willing to completely abandon physical stores.
"Our customer moves very easily between online and offline," Macy's Chief Executive Jeff Gennette told shareholders at the company's annual meeting earlier this month.
A Nordstrom Inc. spokeswoman said Tuesday the company has launched several initiatives aimed at making the online and in-store experience more seamless, including a service that allows sales associates to create digital boards filled with personalized style recommendations that customers can view on their mobile phones or computer.
Traditional apparel chains have struggled to turn a profit online because of higher shipping and return costs, but Amazon's logistics know-how could help. "Buying clothes online is dicey just because of the returns factor," said John Haber, founder of supply-chain consultancy Spend Management Experts. "If you're buying a bathing suit, a very high percentage of those are returned."
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(END) Dow Jones Newswires
June 20, 2017 13:57 ET (17:57 GMT)