Last month, Amazon opened its Luxury Stores as a separate space on its mobile app, available “by invitation” to US subscribers to its Prime loyalty scheme.

Instead of its usual utilitarian look, the app looks snazzy, with a gold logo against a cream-coloured background.

It was launched with an ad featuring British actress Cara Delevingne.

But will Amazon’s foray into luxury work?

Luxury E-commerce has momentum: by 2025, consultancy Bain & Company estimates that roughly one-third of luxury’s annual sales will be made online, up from 12 per cent of total sales of €281bn in 2019.

The shift is being driven by millennials and customers in China — that’s the world’s most advanced e-commerce market and the world’s fastest-growing market for luxury goods.

Amazon may be betting that it can replicate the success that Alibaba’s Tmall has had in China. Initially, luxury brands mistrusted Alibaba as down-market and rife with counterfeits. But once it moved to a concession model with a separate safe space for luxury brands, brands were won over. They now see Tmall as a key online gateway to Chinese customers.

Amazon’s Luxury Store is entering a crowded field of established companies such as Farfetch, Yoox Net-a-Porter, MatchesFashion and MyTheresa.

Such sites have supplanted the roles once played by department stores and fashion magazines —discovering new designers, tracking what is in style, and giving inspiration about what to wear.

But they all suffer from a problem. Despite growing user bases, few of them are profitable.

One leading e-tailer, Far Fetch enjoys fast growing sales, but net income is dropping.

And this is where Amazon may slowly suffocate its competitors. The world’s biggest store – Amazon has 150m global prime members – has infinite access to cheap capital without the driving need to turn a profit. That means they can consistently undercut all competition, driving them out of business.

In truth, the only thing that can stop Amazon is government regulation.

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