Did the “Amazon effect” play more than a cameo role in the Kardashians’ decision to shutter their chain of boutiques?
On Friday, the first family of reality television announced they’re pulling the plug on their fashion boutique chain, Dash. Kim Kardashian West, who launched the first boutique in Calabasas, Calif., in 2006, with her sisters Kourtney and Khloé, said the family had simply become too busy with other projects.
Launching boutiques has been a bigger challenge for the E! reality TV family than launching their slew of online ventures. In 2016, Kourtney Kardashian said the original Dash store didn’t turn a profit for years. “There were months we couldn’t pay our bills,” she wrote on her own lifestyle app, which charges $2.99 for a monthly subscription.
“Opening and operating brick-and-mortar stores in this changing retail environment, without multiple distribution channels, is tricky at best,” said Jeff Green, an independent retail consultant based in Phoenix, Ariz. “In the case of Dash, it was tough to build and maintain a brand whose price points were not accessible to the masses.”
In recent years, the family’s brand exists primarily online. The Kardashians have creating multiple fashion and beauty websites, from Kylie Cosmetics by Kylie Jenner to Pretty Little Thing by Kourtney Kardashian, and each of the five sisters have their own lifestyle app. It is perhaps no wonder they have had enough with physical stores. Collectively, the five sisters and their mother, Kris Jenner, have 464 million Instagram FB, -1.08% followers.
In 2016, Kourtney Kardashian said the original Dash store didn’t turn a profit for years. ’There were months we couldn’t pay our bills,’ she wrote.
“After nearly 12 years, my sisters and I have decided to close the doors of our Dash stores,” Kardashian West said in a statement. “We opened our first store as a family in 2006 and since then we have made so many lifelong memories. From opening locations in Los Angeles, Miami and New York, to having our Dash Dolls spinoff show, it has been such a huge part of our lives.”
In her post, Kim Kardashian West blamed the closure on her family’s other commitments—which includes the family’s apps and multiple branding ventures in addition to their E! CMCSA, -0.81% reality show, “Keeping up with the Kardashians”—rather than economics or the relatively high prices of many items ($248 for a jean jacket).
“We’ve been busy running our own brands, as well as being moms and balancing work with our families. We know in our hearts that it’s time to move on,” Kardashian West said. That includes “Screenshop,” dubbed the Shazam of fashion, an app that allows users to find (and buy) brands worn by celebrities.
The “Amazon effect,” as it has been dubbed by industry researchers, refers to the impact of all online retailers on brick-and-mortar stores that undercut physical stores in both price and convenience. Case in point: H&M HMB, +3.60% reported earlier this month that it has more than $4 billion in unsold clothes, which analysts attributed to the “Amazon effect,” as well as uninspired designs, changing tastes and a 2018 advertisement widely regarded as racist. (H&M apologized for the ad.)
Amazon AMZN, -1.89% itself has made a big advance into online fashion in recent years. Financial services group Cowen & Co. projects that Amazon will sell $28 billion of clothing in 2018 and $62 billion by 2021. Morgan Stanley estimates Amazon’s private-label brands could boost profit by $1 billion by 2019.
The ’Amazon effect,’ as it has been dubbed by industry pundits, refers to the impact of all online retailers on bricks and mortar stores.
Indeed, there other signs that Amazon is transforming itself into an online fashion empire. It currently has over a dozen private-label Amazon fashion brands, including Ella Moon, Lark & Ro and Mae, in an effort to provide a more personalized and familiar fashion experience for online shoppers.
Last year, Nike Inc. NKE, +0.55% decided to sell products via the online retail giant this summer in order to crack down on the proliferation of third-party sellers.
Aside from Amazon, there is stiff competition to family-run stores: Even bigger brick and mortar stores. The NPD Group rates Walmart as No. 1, another low-priced retailer, among America’s favorite retailers and restaurants. (Amazon rated No. 18 overall or No. 5, excluding restaurants.)
Others say the “Amazon effect” and Amazon’s dominance should not be underestimated. “Amazon is a formidable competitor as it continues to make inroads in the apparel space, spawning other retailers like Walmart Inc. WMT, -1.04% to offer new private label lines and Target Corp. TGT, -0.93% to join with high-profile brands like Hunter,” Diana Smith, associate director for retail and apparel at Mintel, told MarketWatch earlier this month.
Of course, Amazon has long been accused of killing off mom-and-pop businesses, from bookstores to clothing stores, something the company has previously said is due to a variety of factors, not least other brick and mortar retailers.
“I applaud them for knowing their own limits,” said Bob Phibbs, Chief Executive of The Retail Doctor, a New York-based consultancy.
But Phibbs said the Kardashians could likely have continued to operate their Dash stores, but they new the margins were lower and profits were higher online. “I don’t think this is as much about brick and mortar versus online as simply knowing limits and the stores were no longer useful to build their empire,” he said. “In fact, I would imagine they became more of distraction.”
But physical clothing stores are facing challenging times, particularly over the last 18 months. Two dozen retailers have announced store closures over the past year, as they struggle to compete with changing tastes and online shopping. Among them: Claire’s, Foot Locker, J.C. Penney Co. Inc. JCP, -4.61% J. Crew and American Apparel.
Some alt-leisure brands, however, appeared to have successfully bucked that trend, including Japanese retailer Uniqlo, whose parent company Fast Retailing reported record profit in January, and Yeezy, a casual clothing and footwear brand that has joined with both Nike and Adidas. It was founded by musician and singer Kanye West, husband of Kim Kardashian West.