Kirkland, Great Value, Up & Up — major retailers creating private labels is not a new concept. Yet with Amazon’s 78 private label brands and expected $7.5 billion in sales for 2018, companies have been left wondering how big of a threat this will be to their success on the ecommerce platform.
Private labels have had a track record of increasing sales for major retailers, due to the greater profit margins and less spent on advertising. They’ve provided a cheaper option to consumers – helping grow categories that may not always have the friendliest price points. So, what makes Amazon’s private labels different?
In the last decade, Amazon has become a force in the e-commerce industry, offering a sales platform, fulfillment options, and advertising opportunity for its sellers. In recent years Amazon has shifted its gears towards manufacturing and product development – with this expansion into the private label business, the weak points of the business are slowly growing stronger. Not only does Amazon have the manpower, financial support, and brand backing to succeed in the product development space, but they have limitless access to data across every platform, only providing the fuel to infiltrate its next category.
To add another factor to the equation, Amazon controls all advertising. As the repertoire of Amazon private label brands seem to expand, so do the targeted advertisements featured on like product pages. Amazon has the ability to implement Sponsored Product campaigns, advertising their private label alternatives on major product listings, thus driving traffic away from these product pages, usually playing into the weakness of price comparison. While the validity of these counter-advertising claims havn’t been confirmed, it leaves both small and big brands who depend on the platform questioning whether or not there is an unfair market advantage.
Amazon’s private label brands have shown signs of a changing marketplace, and many brands are feeling the heat. For example, AmazonBasics batteries outsold well-known battery brands such as Energizer and Duracell who have been selling on the platform for years. We never know what is going on behind the closed doors of Amazon, but time will tell if this shift creates a noticeable shift in the success of brands on the platform –what will it mean for the future of Amazon?