In what has come as a shocker to the top names in the sportswear industry, Amazon appears to be set to launch its own brands of sports apparel and has already tied up with a Taiwanese manufacturer to make the products for them, reports Bloomberg.
It is pertinent to note that the sportswear segment is already cruising through a crisis of sorts with sales falling and cut-throat competition eating into the profitability of these companies. The Taiwanese firm, Makalot Industrial Company, is already supplying to popular brands in the segment like Gap, Uniqlo and Kohl’s Corp and so on and they have just made a beginning with Amazon.
The order quantities are still low and may scale up in due course. Another Taiwanese company, Elcat Textile Co., is also involved in the same way with making clothes for Amazon meant for sportspersons.
Amazon’s policy on this has been fairly clear. When customers come into their virtual store looking for particular products and don’t find them, they move on. To avoid losing such customers, Amazon pushes up its own brands and the customers complete their buys and check out. Many of them may not know what they are buying are Amazon’s own products or brands. It is also feasible some brands are not keen on sharing all their premium products on Amazon and here again, Amazon sees that gap and wants to jump in.
Whatever the compulsion, the new move by Amazon has definitely impacted the prices of the stocks of the sports gear companies starting with Nike. Though Nike’s shares did not see a steep fall, others, like Under Armor and Lululemon Athletica Inc were not so lucky. All three companies listed here are facing bleak prospects in terms of their sales forecasts for the quarters ahead and this piece of news on Amazon jumping into the fray will only make matters worse for them.
There are other moves made by Amazon to strengthen its portfolio in this segment. It has been hiring experts in private-label athletic apparel.
An interesting facet of this story is that, like virtually every other product line, apparels are also witnessing a steep climb in terms of the sales clocked online as opposed to the volumes sold offline through the physical brick and mortar outlets or stores. It has almost doubled in a matter of five years, from 12% in 2011 to 19% in 2016. The manufacturers like Elcat are also watching these developments and latching on to where the gravy train is headed.