​Amazon Pushes Private Label

by Andrew Hoeft | Oct 26, 2016 12:00:00 AM

After its May announcement, Amazon has continued to push forward in rolling out their new lines of private label brands, including its first thrust into perishable goods.

The new Amazon brands will feature names like Mama Bear, Wickedly Prime, and Happy Belly, and will include a variety of perishable goods, such as coffee, tea, spices, nuts and legumes, vitamins, and even a range of baby food.

Alongside these products will also be traditional non-perishable household items like detergents, personal hygiene products, and diapers. The process of brands appearing online is set to be in full swing by the end of 2016, according to industry insiders.

Playing the long game

It’s no secret that the global online retail giant has been working on developing a host of private label brands for a number of years. Amazon has, in fact, approached manufacturers and branding consultants in the past in order to further develop the products before launch. One such manufacturer includes TreeHouse Foods, one of the leading providers of own-brand perishables in the US. An Amazon spokesperson declined to comment on how much of a role such manufacturers have played thus far in developing their new products, however.

Popular with consumers

Historically, own-brand products have always been a winner with consumers since the days of generic products displayed in plain, “white label” packaging. Since then, the largest retailers in the world, including Wal-Mart, have offered wide varieties of in-house products–products which some consumers consider to be of a higher quality than their branded counterparts.

In terms of figures, own-brand products racked up nearly $119 billion in US sales alone—an increase of over $2 billion on the previous year’s figures according to statistics obtained from the Private Label Manufacturers Association.

Profit margins

Perishable goods generally yield higher profit margins for retailers than other consumer goods like electronics, which is clearly something Amazon is aware of given the amount of research and development pumped into developing its own private labels.

However, certain critics of the ecommerce giant have accused Amazon of “carpet bombing” the marketplace with new products, threatening to take sales from local retailers. On the other hand, others believe that Amazon is unleashing a high volume of products in order to litmus test prices and flavors with reduced risk.

Bill Bishop, the head of brand consultants at Brick Meets Click, believes Amazon will be successful in the grocery market as it already has a treasure trove of consumer data at its fingertips, which will allow them to accurately predict what products will be successful amongst its customers.

Testing the waters

When the program rolls out, it will initially only be available to members of Amazon’s Prime membership platform, which costs $99 per year and allows users access to free next-day delivery, exclusive discounts, and access to digital content. It’s likely that subscriptions to the service will increase if Amazon’s grocery lines are a success, further increasing profits for the Seattle-based corporation.

Balancing the risk

Food production generally carries more risks than consumer goods manufacturing, and when retailers offer own-brand products not produced in-house, they are at the mercy of the quality controls of the appointed manufacturer. This means that product recalls or quality issues can be damaging to the reputation of a company despite the company having had little control over the situation.

This of course is old news to Amazon, who pulled a line of diapers back in 2014 due to critical design flaws. It also discontinued an own-brand tool line in the same year. However, as of now, the future looks bright for Amazon as they continue to push onward and upwards towards cornering the online grocery market with their own-brand products.

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