Amazon is on a tear and ready to shift tactics as it skirts whatever obstacles lie between it and the markets it chooses, from grocery via Whole Foods to luxury beauty — through what sources say is a new deal with Violet Grey.
And in another sign of its raw power, Amazon’s stock peaked at $1,083.31 Thursday, an all-time high that pushed its market capitalization over $500 billion and briefly made founder and chief executive officer Jeff Bezos the world’s richest person, with assets valued at $91 billion.
But clearly that’s not enough for Bezos or Amazon.
WWD first reported Wednesday that the web giant was in talks to collaborate with luxury beauty player Violet Grey. Multiple sources said Thursday that the two have already inked an agreement that has Violet Grey serving up a certain set of luxury brands to sell on Amazon in exchange for a commission of between 20 percent and 30 percent.
Linking up with Violet Grey appears to mark a shift in Amazon’s strategy. The company has made a habit of buying its way into new businesses such as Zappos or the still-pending purchase of Whole Foods. It’s also forged ahead on its own, for instance, launching private label apparel goods to satisfy many categories of basics.
But this deal opens a third way — a collaboration with an outside platform to help lure new brands and shoppers. If it works, it could provide a model for future growth.
Asked about the deal, an Amazon spokeswoman said the company “does not comment on rumors or speculation.” A representative for Violet Grey also declined to comment.
But Cassandra Grey, founder and chief executive officer of Violet Grey, said cryptically this week: “I cannot confirm a special relationship with Amazon apart from the fact that I have enormous respect for the company and view the platform as one of the only five distribution partners that matter for digital content producers.”
With Violet Grey’s access and influence in the luxury space — as well as its many high-end and boutique brands, from La Mer to Vintner’s Daughter — Amazon might be able to add a luxury hue to its reputation as a practical web site for a broad range of mainstream products.
But even with a hip new partner, it may not be so easy.
Many brands sold through Violet Grey are seen as valuable online offerings that currently do not distribute through Amazon. Many brands are wary of Amazon and third-party sellers who use its marketplace and could dilute their appeal.
Birkenstock is one brand with no interest in becoming part of the e-tail giant’s sprawling network, and it has taken a strong stand against having any of its product available on the site. In a recent e-mail to its retail partners published by The Washington Post, Birkenstock Americas ceo David Kahan took a hardline with retailers that may be considering selling Birkenstocks to the web site.
“I will state clearly, any authorized retailer who may do this for even a single pair will be closed FOREVER. I repeat, FOREVER.” Kahan wrote in the e-mail, referencing retail accounts.
Kahan sent the e-mail last week, after Birkenstock learned that Amazon had e-mailed a number of its retailers with an offer to buy inventory.
Although the offer was sent to tens of thousands of retailers covering a range of product categories, Kahan said Amazon was “in effect soliciting” Birkenstock retailers to break their sales agreements with the brand, and said the massive company could be legally liable for “tortious interference” with its business.
“I have never in my 25-plus years in this industry ever heard of a retailer on such a scale as Amazon actively soliciting other retailers for a brand’s inventory in the case of such a brand choosing not to sell to them,” Kahan wrote.
The ceo went on to characterize Amazon’s actions as “unconscionable” and “pathetic” and told retailers that such aggressive management of the Birkenstock brand has “created a market situation where not only is our brand in increasing demand, but our brand equity is maintained across all distribution channels.”
Of Kahan’s letter, an Amazon spokeswoman said efforts to expand its marketplace are part of a larger goal “to be Earth’s most customer-centric company” offering “the largest selection, at the lowest price and with the fastest delivery.”
“When items are unavailable in a particular geography, we provide customers with selection from another marketplace; while sellers can opt-out at any time, this offers customers a wider selection of great brands and helps sellers increase sales,” the spokeswoman said.
While Birkenstock might not appreciate Amazon’s expansionist outlook, it seems to be working well for the company.
Amazon said Thursday that its second-quarter sales rose 25 percent to $38 billion. However, net income fell considerably to $197 million, or 40 cents per diluted share, compared with net income of $857 million, or $1.78 per diluted share, a year ago.
“Our teams remain heads down and focused on customers,” Bezos said.
Looking ahead to the third quarter, Amazon is expecting sales growth to continue by between 20 percent and 28 percent, rising to $41 billion. Profits are less certain, and the company is projecting between an operating loss of $400 million to operating income of $300 million.
Moody’s analyst Charlie O’Shea took note of the volatility in the retail market when characterizing Amazon’s quarterly performance as “generally in line with our expectations for revenues” and pointed to the “highly promotional environment in North America” as an explanation for a lower operating income.
Amazon is also in the midst of acquiring Whole Foods for $13.7 billion and O’Shea said “volatility is likely to be the norm while this investment cycle continues.”
Although antitrust concerns around Amazon have increased since the Whole Foods deal was revealed, the company did not allude to any difficulties when discussing the last quarter on a call with investors.
The Whole Foods deal was not included in the second-quarter results as it has yet to close, but it is expected to be completed later this year, and Amazon’s chief financial officer Brian Olsavsky said the company is looking forward to the acquisition.
“We think they’re very consumer-centric, just like us,” Olsavsky said. “They built a great business.”