Victoria’s Secret Is Embracing Amazon. Should Others?

It’s generally the case that brands partner with Amazon — and accept all the baggage that comes with that — because they have to. Victoria’s Secret is no exception.

The lingerie giant announced this week that it would begin selling its bras, underwear and swimwear on the e-commerce platform. Not coincidentally, Victoria’s Secret last week reported that sales fell 5 percent in the first quarter from a year ago, its fifth straight quarter of decline. Comparable sales, a metric of store performance, dropped 11 percent compared to the first quarter of 2022.

The cold streak casts doubt on the company’s reboot, which included a spinoff from parent company L Brands and a pivot away from the sexualised messaging it had leaned on for decades. A more inclusive approach to marketing included a new slate of ambassadors announced in 2021, including soccer star Megan Rapinoe, plus-size model Paloma Elsesser and trans model and activist Valentina Sampaio.

Victoria’s Secret has had more success with its bottom line. It reported net income of $81 million in 2022 and $174 million in 2021, when retailers across the board experienced booming demand, though that metric fell to just $1 million in the most recent quarter. Analysts agree a new strategy of taking on less inventory and reducing promotions — selling less to earn more — is the right approach. Investors are less convinced: Shares hit a post-spinoff low of $17.62 on Thursday and are down by about half this year.

A high-profile wholesale partnership addresses the chain’s problems, at least in theory: It gets product in front of customers who have no reason to set foot in a Victoria’s Secret or Pink store, or even the malls they inhabit. It’s not the only brand to reach this conclusion. Macy’s and footwear retailers announced this week that Nike will be returning to their stores. Many formerly direct-to-consumer brands, including Glossier and Allbirds, have embraced wholesale as well.

“The world has returned to understanding that wholesale partnerships are not evil. In fact, they can prove the most profitable way to scale,” said Simeon Siegel, an analyst at BMO Capital Markets.

But Amazon isn’t Macy’s or Sephora. The e-commerce company has for more than two decades been viewed as an existential threat to conventional retail. It’s been blamed (with varying degrees of accuracy) for waves of store closures and bankruptcies. Whereas brands control how consumers experience their products in stores, on Amazon their merchandise is presented as a commodity: a search for women’s underwear yields more than 10,000 results. Brands often find their products listed alongside unauthorised third-party sellers, knockoffs and Amazon’s own Essentials line.

This lack of control has kept many companies off the platform, including brands that will happily work with other wholesale retailers. Nike and Birkenstock have partnered with Amazon in the past, only to pull out in the face of these challenges. Few major luxury brands sell through Amazon.

For the right brands, and when done in the right way, working with Amazon can be a win for both sides, not just the e-commerce behemoth. Many small brands use Amazon to boost sales early on, with customers finding them via product searches rather than expensive Instagram ads. Amazon does allow brands to create landing pages that are a step up from the endless grid. Some large retailers have found innovative ways to use Amazon’s reach, including Kohl’s, which allows customers to return their packages in its stores.

“Amazon works well for certain types of brands: generally those that aren’t super luxury or high-end and are less concerned with brand-equity dilution due to being on a mainstream platform,” said Alex Song, co-founder and chairman of Innovation Department, a portfolio company that scales early-stage brands through selling on Amazon.

For Victoria’s Secret, Song added, as an established retailer with deep brand awareness among consumers, Amazon’s commodifying effect isn’t as harmful as it would be for newer companies.

Other mall retailers struggling to compete with newcomers should consider making the same move as Victoria’s Secret, Song said.

“In this environment, efficiency matters and getting to your customers where they are matters,” he said.

For its part, Victoria’s Secret isn’t jumping into the deep end of the Amazon marketplace without testing the waters first. It began selling cosmetics on the platform last April, a partnership that has brought new customers to the retailer, the company said.

“We’re very, very, very pleased with the results there,” Greg Unis, chief growth officer at Victoria’s Secret, told shareholders at the company’s investor day last October. “They’ve been great partners to us and the customers responded really well.”

Ultimately, a sale is a sale — especially as Victoria’s Secret continues to scale back its brick-and-mortar footprint. The key lies in weighing brand value and brand reach, according to Siegel.

“At the end of the day, all brands need to balance exclusivity and distribution,” he said.

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Compiled by Sarah Elson.