Why is Amazon investing in Saks Fifth Avenue, Neiman Marcus?

Will Saks Fifth Avenue and Neiman Marcus help Amazon find its fashion fit?

That’s the question after the news last week that the tech giant will become a minority investor in Saks Global, the luxury retail and real estate company to be created by Saks Fifth Avenue parent company HBC’s planned acquisition of Neiman Marcus Group in a deal valued at $2.65 billion.

Industry analysts say Amazon’s involvement could give the company new insights and potentially additional momentum in a retail segment that it has long considered a key component of its overall e-commerce strategy. The investment could also help to counter criticism of Amazon’s impact on traditional retailers.

In an era of heightened regulatory scrutiny, it’s part of a pattern of tech companies making strategic investments in lieu of outright acquisitions, although this pattern has been more evident in artificial intelligence startups.

Amazon has been involved in fashion on numerous fronts for more than two decades, stretching back to the launch of its Apparel & Accessories Store in 2002, in partnership with major retailers at the time.

In addition to its Amazon Fashion e-commerce storefront and Prime Try Before You Buy service (formerly Prime Wardrobe), the company dabbled in bricks-and-mortar fashion retailing before closing its two Amazon Style clothing stores in Glendale, Calif., and Columbus, Ohio, last fall.

Separately, the company plans a new online storefront for low-priced apparel and home goods, shipping directly to customers from China to compete with Temu and Shein, according to a June 26 report by Bloomberg News.

By simultaneously investing in two luxury fashion retailers, Amazon promises to also strengthen its position at the high end of the market.

Official details are scarce at this point. The size and value of Amazon’s expected stake in Saks Global are unknown. With the deal still pending, Amazon declined to comment Tuesday in response to GeekWire’s inquiry.

The July 4 press release about the deal included one line: “Amazon will be an investor in and work with Saks Global to innovate on behalf of customers and brands partners following the close of the transaction.” It added that Salesforce “will also become an investor at closing,” without similar elaboration.

Amazon will provide Saks Global “with technology and logistical expertise,” reported the Wall Street Journal, which broke the news of the deal last week in advance of the formal announcement.

Beyond that, it’s not hard to imagine the company’s motivations.

“It’s no secret Amazon has been trying to crack luxury fashion and in a partnership like this, there is, I suspect, hope for either some access to luxury brands or consumer data,” said Sucharita Kodali, vice president and principal analyst at Forrester. “Who knows if they’ll get access to any of it, but it’s a plausible expectation that justifies whatever price they may have paid.”

On the other hand, Kodali added, “it may just be as banal as having the joined entity be a lifelong customer for Salesforce and AWS,” which could make the investment worth it on its own.

“I think this is a low-cost option for Amazon to build upon its fashion / department store efforts,” said Wedbush analyst Scott Devitt via email, noting that he does not expect Amazon to go beyond the current structure of this deal. In other words, don’t look for the tech company to start consolidating bricks-and-mortar department stores.

The investment is also notable in light of broader antitrust scrutiny.

“Helping strengthen Neiman Marcus and Saks by contributing to their combination would allow Amazon to forestall critics who might otherwise blame it for the problems of the department store chains,” wrote Martin Peers in The Information, comparing the strategy to Microsoft’s $150 million investment in Apple in 1997.

Last week’s announcement by HBC, the Saks Fifth Avenue parent, noted that its Neiman Marcus acquisition is subject to regulatory approval, without giving an expected timeline for completing the deal.