Showpo considers Amazon deal
As Inside Retail reported last month, Showpo founder Jane Lu is focusing her business on international expansion in 2018, with the recent launch of a warehouse in Los Angeles.
But the Australian pureplay brand could soon be listed on Amazon, with operations chief Paul Waddy revealing to an audience at the Retail Fulfilment Summit yesterday in Melbourne that he was negotiating a potential deal with the ecommerce giant.
“Amazon in the US is quite keen to have Showpo come onboard, and we’re considering it,” Waddy told an audience in Melbourne.
A marketplace listing would be a first for the seven-year-old business, which has risen to prominence in Australia as a formidable fast fashion player that produces its own products.
Waddy also said that Southeast Asian marketplace platform Zalora has also approached Showpo for a potential partnership.
Amazon has offered to list Showpo in their Fulfilment by Amazon (FBA) program, which could see the retailer ship around 1,000 SKUs to an Amazon warehouse in the US for two-day delivery under its Prime program.
“We’d send to their warehouse and they’d zip that [stock] across 14 warehouses in the States according to their data, which [may] show that women’s maxi dresses sell better in Seattle, while shorts sell better in California,” Waddy said.
Showpo currently does around 30 per cent of its business internationally to more than 100 countries each month, with the US and Germany having emerged as key markets.
Both Lu and Waddy believe that the US is a lucrative opportunity for the business, with the possible benefit of an Amazon partnership being that it would extend the brand’s influence considerably in a relatively new market.
Showpo has yet to make a decision on whether a marketplace listing would be the best option for the brand, although Waddy described Amazon as a “relatively cheap” way to acquire customers.
“It’s quite attractive on paper, the rates they are doing at FBA are not achievable by anyone else, certainly not in Australia,” he said. “They fulfil in two days by road at ridiculous prices, they’ll do pick-pack and delivery for the price that some warehouses charge for pick-pack – it’s incredible.”
However, Waddy admitted that while the Amazon option would likely be profitable for Showpo, it likely wouldn’t deliver the same degree of returns as Amazon’s pitch indicated.
“When you have a good look at what they’re offering, it’s probably not as cheap as what it appears at face value,” he explained. “We’re looking at it as a way to get more customers in the US. Is it profitable? Yes. Is it as profitable as we thought? No,” he said.
Waddy’s negotiations with Amazon shine a light on the process many businesses go through deciding on whether to sign onto a marketplace. With Amazon announcing the launch of FBA locally yesterday, many retailers are considering their options.
According to Waddy, Amazon informed him that the ecommerce giant’s loyalty program Prime will roll out locally when it has a large enough logistics network to fulfil the model by road, rather than plane.
“They’ve got one warehouse. To do Prime in two days in Australia, you’re going to have to pop that on a plane and there’s no way you can do it for the same price,” Waddy said.
Soft launch won’t last
Amazon may have failed to impress analysts and retail veterans with its launch in December last year, but with the launch of FBA yesterday, the ecommerce giant has added an important step to the closed-loop model that’s made it so successful elsewhere.
That’s the view of fulfilment expert Jonathan Reeves, who said Prime shouldn’t be far away.
“If I was a betting man, I’d say soon, FBA will open up its range and that’s the point where Prime becomes attractive to customers,” the former Coles and Tesco development manager said.
Reeves said FBA was an example that highlighted the underlying strength of Amazon’s late arrival in Australia, namely that it is able to parachute in pre-existing solutions from other markets.
“Amazon has been [in the UK] for 20 years, so its competitors have had a chance to learn while it has trialled things, [but] in Australia, it can drop solutions it has developed in other markets without need for a trial,” he said.