In the fast-changing world of retail, Amazon has always been a trailblazer. However, breaking into the luxury market has been challenging. Now, Amazon aims to revolutionize its approach by investing in Neiman Marcus, combining innovation with tradition to explore new opportunities in high-end retail.
Amazon aims to revolutionize its approach by investing in Neiman Marcus, combining innovation with tradition to explore new opportunities in high-end retail.INA FASSBENDER/AFP via Getty Images
Amazon Taking a New Approach to the Luxury Market
Amazon, known for revolutionizing retail over the past two decades, has struggled to penetrate the luxury goods sector. The online giant is now attempting a fresh strategy by acquiring a small stake in Neiman Marcus.
Amazon will offer data and logistics services to support Neiman Marcus and its new owner, Saks Fifth Avenue. Saks Fifth Avenue and its parent company, HBC, announced the $2.65 billion acquisition of Neiman Marcus, which includes Bergdorf Goodman.
The Wall Street Journal reported that this move consolidates the biggest US luxury retailers under one umbrella. Amazon's involvement in the deal, which is still pending regulatory approval, will be minor. The company will be an investor to innovate "on behalf of customers and brands partners," according to HBC's statement released on Thursday.
Saks CEO Marc Metrick emphasized the importance of technology in maintaining the relevance of luxury brands like Saks, Neiman Marcus, and Bergdorf Goodman. Amazon's role will involve collecting and analyzing customer data to provide personalized shopping experiences and enhance logistics to future-proof these iconic brands.
Amazon has long sought entry into the luxury retail, but leading brands have consistently resisted. In 2016, LVMH Moët Hennessy Louis Vuitton, which owns Louis Vuitton, Dior, Givenchy, and other prestigious labels, said that Amazon's business model does not align with its brand values.
As a result, LVMH maintains its presence exclusively through its stores, select retailers like Neiman Marcus, and its website. Amazon's track record in physical retail is mixed.
While its acquisition of Whole Foods has been a success, its cashierless Amazon Go stores have not gained significant traction. Saks' parent company, HBC, has acquired Neiman Marcus, and Amazon is now part of an organization projected to generate $10 billion in annual sales.
The size of Amazon's investment remains undisclosed, but this move seems to be a safer bet compared to its previous, more experimental ventures in physical retail.
The merger of Saks and Neiman Marcus comes when department stores are under growing pressure from sluggish sales. Lord & Taylor, previously owned by HBC until 2019, filed for bankruptcy in 2020 and has since transitioned to an online-only operation.
Macy's is closing 150 stores while also dealing with activist investors, and the Nordstrom family is trying to take their company private again. At the luxury end of the market, Saks and Neiman Marcus face challenges from powerful suppliers.
These chains introduced European luxury brands to affluent American consumers a century ago. Many luxury brands are now bypassing department stores to sell directly to customers through their stores and websites.
Some of these brands, like those owned by LVMH, have become so influential that their executives rank among the world's wealthiest individuals.
