Amazon.com’s decision to pull the plug on Myhabit.com further highlighted the shakiness of the flash-sales model — but it doesn’t appear to have weakened the Web giant’s resolve to build a fashion empire.
“Fashion is one of Amazon’s fastest-growing categories,” the Web giant said in a statement to WWD, which first reported its plans to shutter the site on Thursday. “As we continue to increase our breadth of selection and improve the customer experience on Amazon.com, we have decided to simplify our offering and will be closing MyHabit at the end of May. Our customers can now shop from Amazon Fashion’s incredible assortment of brands across clothing, shoes and accessories — backed by award-winning service, free shipping and returns, and exclusive benefits for Prime members.”
Amazon launched the site in 2011 as the flash-sales model was still buzzy, but the business always accounted for only a fraction of the company’s revenues, which last year hit $107 billion.
“It’s really small,” Charles O’Shea, a debt analyst at Moody’s Investors Service, said of Myhabit. “The company’s experimenting in a lot of different areas; some are going to do well and others aren’t. It’s almost like a laboratory.”
O’Shea said that while anyone can sell white T-shirts online, it remains an open question how far Amazon can move up the price spectrum and capture more of the fashion business.
Certainly, Amazon is trying — and hard.
The company recently joined forces with Moda Operandi, allowing users to check out on the luxe site with their Amazon log-in; launched a live-streaming style show called “Style Code Live,” and quietly ventured into the private-label business.
The push seems to just recently have taken on new urgency, but Jeff Bezos has had the business on his mind for some time. The founder and chief executive officer gave a keynote address at the 2003 WWD CEO Summit, when the dot-com bust was still a fresh memory.
While many at the time likened the digital boom of the Nineties to the Gold Rush, Bezos said that was the wrong analogy.
“With the Gold Rush, when you take the last nugget of gold out of the ground, it’s over….But the Internet is very different because the gold is not actual nuggets, it’s ideas and inventions,” Bezos said at the time. “And take one invention out of the ground, so to speak, and you often get two more that are produced as a result of that. So it’s a very different thing. It just doesn’t end in the same kind of time frame. In fact, it can be expanding.”
Amazon had just launched an apparel store 11 months earlier with 26 partners, which handled their own fulfillment. From that start, the company’s fashion business grew dramatically and led to the launch of Myhabit.com during the heyday of the flash-sale concept, which ran from 2007 to about 2012 and also saw the rise of Rue La La, Gilt, HauteLook, Zulily, Ideeli and Fab.
In addition to selling designer duds at deep discounts, the quick-moving sites injected a sense of urgency to the process, with styles that were available only at a specific time and, sometimes, in limited quantities.
Rue La La is the last of that fashion-focused group to remain independent. One source said the site has been “shopping itself around to everybody,” but hasn’t found a buyer. A spokeswoman from the company said, “Rue La La is focused on building a healthy independent business,” adding that “2015 represented a record, and profitable year and we are already exceeding our plans for 2016. Rue La La does not comment on rumors regarding potential M&A.”
As for other once high-flying sites, Gilt is now being integrated at Hudson’s Bay Co., HauteLook was bought by Nordstrom Inc., Ideeli is part of Groupon and Zulily is controlled by QVC.
Gilt, which was bought for just $250 million, was once valued at $1 billion and rumored to be gearing up for an initial public offering. Nordstrom bought HauteLook in 2011 for $270 million, and two years later merged hautelook.com with the site of its off-price business, Nordstrom Rack. Groupon snagged Ideeli for $43 million in cash two years ago, and Fab.com — arguably the buzziest start-up of all — was acquired by PCH International for $15 million in March of last year.
“This is a massive misfiring in the investment community,” said Sucharita Mulpuru, vice president and principal analyst at Forrester Research. “All of these acquisitions happened at not-huge premiums. They happened at pretty slim premiums and some even lost money for investors. It just speaks to the fact that it was never that big of a space to begin with. Every entrepreneur in the space was wrong.”
Mulpuru added, “These investors and entrepreneurs all thought the U.S. had this untapped market for this business, when in fact, TJ Maxx was the company that had the best access to all of the off price merchandise.”
And TJ Maxx’s parent TJX Cos. Inc. just keeps rolling: It had sales of $30.9 billion in the year ended Jan. 31, a 6 percent increase over the year before.