Amazon takes on Spain’s fashion giants

Amazon’s 2011 arrival in Spain set alarm bells ringing throughout the domestic publishing industry, which was already facing declining sales and was fearful of a global giant that had broken all the rules about selling books. Three years on, having carved a significant niche for itself selling not just books, but also electronic devices, toys and movies, the US giant has now turned its sights on fashion retail. On May 21, following its footsteps in Britain, the United States, Germany, France, and Japan, Amazon launched an online clothing store with a 700,000-item catalogue, featuring 2,000 labels. The aim is to get a foothold in Spain’s €300-million fashion market.

Until now, the country’s online clothing market has been dominated by Inditex, which turned over €82 million on the internet in Spain alone last year, and Privalia, which sold a similar amount, although it also sells electronic goods and home products. Smaller players include Britain’s Asos, French company Vente-privee and Germany’s Zalando.

They all now face stiff competition from Amazon, a well-known brand that already has six million unique users in Spain. The company has acquired extensive knowledge of the Spanish clothing market through its ownership of BuyVip, which it purchased in 2010. Furthermore, logistics, the weak point of many of its online competitors, is precisely where Amazon is strongest: it has a 32,000-square-meter distribution base in San Fernando de Henares, in Madrid’s eastern suburbs, and has deals with more than 1,200 businesses, including newsagents and florists, to allow customers to pick up their goods from their premises – a cheaper and faster option than home delivery.

Spaniards are no longer afraid of buying online, and there is huge potential”

The company has also entered the online market in Italy, albeit on a much smaller scale: its catalogue there includes 170 labels and around 450,000 items. “Spain right now is a very interesting market for online fashion retailing,” says Diego Galván, the head of GBS Finanzas, which produces one of largest reports on the sector in Spain. “There were problems a few years ago related to sizes, returns, and managing orders, but most companies have innovated and adapted, and the market has matured. Spaniards are no longer afraid of buying online, and there is huge potential.”

“There are a lot of factors at stake,” says Galván, “but to a large degree Amazon’s success will depend more on the shopping experience than on the range of its products.” In other words, customer service. “There are many online buying options. Products are available in different places, prices are similar… In the end, the ease with which people can return goods or the speed with which they receive them is what will allow Amazon to differentiate itself,” he says.

The advantage enjoyed by Inditex’s Zara is that its online sales are backed by the presence of shops in practically every Spanish town and city. Privalia’s lies in its huge catalogue and an app that allows customers to buy using their smartphone or tablet. Meanwhile, Zalando has set itself apart from the competition by offering a larger selection of shoes. The main reason that online retailers fail, says Galván, is because they take too long to deliver goods.

Amazon’s success will depend more on the shopping experience than on the range of its products”

El Corte Inglés, Spain’s largest and longest-established department store, also has an internet sales division that delivers to five countries. “It has maintained its traditional strength: a no-questions-asked returns policy,” says Galván.

Amazon has not released any sales forecasts for Spain. The company, set up by Jeff Bezos, is worth $100 billion, and reported a profit of $108 million in the first quarter of this year. Its profit margins are tight: sales for the same period were $19.7 billion. The company does not provide any breakdown of its results. Its 2013 annual report simply says that its fashion division was expanding rapidly, and that it has launched a 3,716-square-meter studio where more than 10,000 photographs are taken a day to promote its catalogue.

Company sources say that its online clothes division in the United Kingdom, set up in 2008, is the fastest-growing. Amazon also competes with brands such as Levi’s, Desigual, 7 For All Mankind, Lacoste, and Roxy – that’s to say, the same brands as those sold in bricks-and-mortar stores such as El Corte Inglés. As it has with books, the Spanish company will now have to fend off the US giant in another area. “There are no limits to the size of our shelves, which is why we can offer a huge range of styles and sizes,” says Sergio Bucher, vice-president of Amazon’s European textile division.