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Report: Amazon Bidding for American Apparel and Its 250+ Retail Locations

Amazon American Apparel

According to Reuters, Amazon is one of several bidders seeking to buy bankrupt American Apparel LLC. Traditional apparel retailer Forever 21 is another of several reported bidders.

American Apparel makes its clothes in Los Angeles, which has raised costs but also been a key component of its marketing — that its fashions are made in USA. Were Amazon to succeed it’s not clear whether the company would maintain American Apparel’s more than 250 retail locations or close some or all of them and just utilize the latter’s manufacturing capabilities. It’s also not clear whether Amazon would make clothes to sell under its own brand or maintain the American Apparel brand — or both.

What’s most intriguing for purposes of this discussion is not Amazon making clothing for its own brand but the potential acquisition of all these retail locations. Amazon has opened a few book stores, pop-up holiday stores and is planning to open a set of grocery/convenience stores under the “Amazon Go” brand. It has teased opening many more physical locations over the next few years.

Buying American Apparel and its leases would give Amazon an immediate and relatively large physical retail footprint. This would come at a time when other retailers are consolidating or shuttering locations.

The single greatest advantage that conventional retailers have — which is also an e-commerce enabler — is physical locations where products can be “previewed” and returned. E-commerce returns are still very painful by comparison. I’m more inclined to take an e-commerce risk if I know I can bring something back to a local store for an easy return.

There are also certain kinds of purchases that most consumers won’t make without a physical encounter with the desired product: large appliances, bigger ticket furniture items, in many cases clothing, among other product categories. The problem for traditional retailers is that the store and/or sales associate experience in most places is mediocre-to-poor (uninformed staff, slow check-out, generally poor service).

Amazon may lose out in the bidding for American Apparel. But if it wins, it will be fascinating to see what comes next and whether the Seattle company seeks to do for retail what it seems to be gearing up to do to grocery stores — create a next generation customer experience.

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