Amazon (AMZN) has spent its history disrupting traditional retailers by offering cheaper competitive products online. Now it’s trying to be more like some of them by developing its own brands as it also looks to open brick-and-mortar stores.
As Recode recently noted, Amazon has unveiled eight proprietary clothing lines over the past year such as Scout & Ro for children and Society New York for women. The next move apparently is to expand into the athletic apparel market dominated by Nike (NKE) and Under Armour (UA): Amazon is looking for several managers to produce “creative, exciting activewear programs and product” for Amazon Active Apparel, according to a job posting. A spokesperson for Amazon declined to comment.
Cracking the $44 billion activewear market, though, won’t be easy.
“Honestly, I view this endeavor as having a lower probability of success than many of the company’s other endeavors,” wrote Morningstar analyst R.J. Hottovy in an email.
“There are very few mass merchants that have enjoyed success in apparel (outside of basic apparel products),” he added, “and while Amazon certainly has developed a brand that consumers trust and associate with convenience, I’m not sure it will extend into athletic apparel.”
Amazon would be targeting a hot category. Market researcher NPD estimates that athletic apparel sales in the U.S. rose about 12 percent in 2016, as people increasingly wear their workout clothes outside the gym, a trend nicknamed “athleisure.” That’s a slight decline from the 15 percent rise in 2015, though far better than the 2 percent increase in total apparel sales.
“The overall apparel market remains quite strong,” said Matt Powell, a sports industry analyst at NPD, adding that the 20 million consumers who participate on NPD’s online panels have identified more than 2,000 athletic apparel brands. “That’s just unprecedented. This space is noisy right now,” said Powell. “There are a lot of brands who are making what they are calling ‘performance apparel’ that isn’t ‘performance apparel.’ I think consumers are confused and disappointed by a lot of what’s out there.”
Amazon CEO Jeff Bezos senses an opening. He told Fortune last year “there’s so much opportunity for invention” in the apparel market, without getting specific.
Retailers push their own brands because they generate better profit margins than other products. Amazon’s profit margins were 1.8 percent of the latest quarter, razor-thin compared with other companies of its size. Not surprisingly, the e-commerce giant’s interest in private-label brands goes beyond apparel.
It offers hundreds of proprietary products, from bamboo cutting boards to training pads for puppies. It also recently began selling prepacked snacks on its site under the Happy Belly Brand along with Presto consumer packaged goods.
Some of these new products may find a home in the Amazon Go food market concept that it unveiled last year, which will operate without checkout lines. The company also said to be opening as many as 100 popup stores this year to highlight products such as the Amazon Echo personal assistant. And it has opened three physical bookstores in California, Washington and Oregon and plans to add others in Illinois and Massachusetts.