The New York Times :
It started with a simple battery.
Around 2009, Amazon quietly entered the private-label business by offering a handful of items under a new brand called AmazonBasics. Early offerings were the kinds of unglamorous products consumers typically bought at their local hardware store: power cords and cables for electronics and, in particular, batteries – with prices roughly 30 percent lower than that of national brands like Energizer and Duracell.
The results were stunning. In just a few years, AmazonBasics had grabbed nearly a third of the online market for batteries, outselling both Energizer and Duracell on its site.
Inside Amazon’s Seattle headquarters, that success raised a tantalising possibility. If, with very little effort, Amazon could become a huge player in the battery market, what else might be possible for the company?
Anyone who spends much time on the Amazon site can see the answer to that question. The company now has roughly 100 private-label brands for sale on its huge online marketplace, of which more than five dozen have been introduced in the past year alone. But few of those are sold under the Amazon brand. Instead, they have been given a variety of anodyne, disposable names like Spotted Zebra (kids’ clothes), Good Brief (men’s underwear), Wag (dog food) and Rivet (home furnishings). Want to buy a stylish but affordable cap-sleeve dress? A flared version from Lark & Ro ($39), maybe in millennial pink, might be just what you’re looking for.
On the surface, the move into the private-label business (in which goods are sold under the retailer’s name rather than that of an outside vendor) appears to be a deft move by Amazon. Analysts predict that nearly half of all online shopping in the United States will be conducted on Amazon’s platform in the next couple of years. That creates a massive opportunity for Amazon to more than double revenue from its in-house brands to $25 billion in the next four years, according to analysts at SunTrust Robinson Humphrey. That’s the equivalent of all of Macy’s revenue last year.
Furthermore, in an effort to incentivise shoppers to sign up for the Amazon Prime program (which now costs $119 a year, up from $99 a year ago), certain of Amazon’s private-label products, such as its Goodthreads men’s khakis or Wag’s salmon-and-lentil dog food, can be purchased only by Prime customers.
“Amazon started very slowly in private label,” said Youssef Squali, a managing director of internet and digital media research at SunTrust. “Quite frankly, we think our estimate for the size of the private-label business is conservative,” he added.
Amazon declined to make any of its executives available for this article, but in a response to a list of questions, the company said its overarching goal is to provide customers a wide range of products and brands.
“We take the same approach to private label as we do with anything here at Amazon: We start with the customer and work backwards,” the company said in its statement.
Amazon is hardly alone in its charge into private label. Big-box retailers like Walmart and Target have been offering store brands for years and are also racing to start more private labels, particularly in apparel.
But Amazon holds a unique position in the global marketplace. From its beginnings in 1994, Amazon’s platform was designed to democratise retail. Small vendors or manufacturers could sell outdoor grills, computer bags and toys alongside established brands. Now, with its expansion into private label, Amazon has shifted away from being an impartial, may-the-best-product-win distribution partner to being a direct competitor to those other vendors.
A TILTED PLAYING FIELD?
It’s not just lower prices that are driving Amazon’s customers to its private-label goods.
Amazon is utilising its knowledge of its powerful marketplace machine – from optimising word-search algorithms to analysing competitors’ sales data to using its customer-review networks – to steer shoppers toward its in-house brands and away from its competitors, analysts say.
And as consumers increasingly shop using voice technology, the playing field becomes even more tilted. For instance, consumers asking Amazon’s Alexa to “buy batteries” get only one option: AmazonBasics.
It started with a simple battery.
Around 2009, Amazon quietly entered the private-label business by offering a handful of items under a new brand called AmazonBasics. Early offerings were the kinds of unglamorous products consumers typically bought at their local hardware store: power cords and cables for electronics and, in particular, batteries – with prices roughly 30 percent lower than that of national brands like Energizer and Duracell.
The results were stunning. In just a few years, AmazonBasics had grabbed nearly a third of the online market for batteries, outselling both Energizer and Duracell on its site.
Inside Amazon’s Seattle headquarters, that success raised a tantalising possibility. If, with very little effort, Amazon could become a huge player in the battery market, what else might be possible for the company?
Anyone who spends much time on the Amazon site can see the answer to that question. The company now has roughly 100 private-label brands for sale on its huge online marketplace, of which more than five dozen have been introduced in the past year alone. But few of those are sold under the Amazon brand. Instead, they have been given a variety of anodyne, disposable names like Spotted Zebra (kids’ clothes), Good Brief (men’s underwear), Wag (dog food) and Rivet (home furnishings). Want to buy a stylish but affordable cap-sleeve dress? A flared version from Lark & Ro ($39), maybe in millennial pink, might be just what you’re looking for.
On the surface, the move into the private-label business (in which goods are sold under the retailer’s name rather than that of an outside vendor) appears to be a deft move by Amazon. Analysts predict that nearly half of all online shopping in the United States will be conducted on Amazon’s platform in the next couple of years. That creates a massive opportunity for Amazon to more than double revenue from its in-house brands to $25 billion in the next four years, according to analysts at SunTrust Robinson Humphrey. That’s the equivalent of all of Macy’s revenue last year.
Furthermore, in an effort to incentivise shoppers to sign up for the Amazon Prime program (which now costs $119 a year, up from $99 a year ago), certain of Amazon’s private-label products, such as its Goodthreads men’s khakis or Wag’s salmon-and-lentil dog food, can be purchased only by Prime customers.
“Amazon started very slowly in private label,” said Youssef Squali, a managing director of internet and digital media research at SunTrust. “Quite frankly, we think our estimate for the size of the private-label business is conservative,” he added.
Amazon declined to make any of its executives available for this article, but in a response to a list of questions, the company said its overarching goal is to provide customers a wide range of products and brands.
“We take the same approach to private label as we do with anything here at Amazon: We start with the customer and work backwards,” the company said in its statement.
Amazon is hardly alone in its charge into private label. Big-box retailers like Walmart and Target have been offering store brands for years and are also racing to start more private labels, particularly in apparel.
But Amazon holds a unique position in the global marketplace. From its beginnings in 1994, Amazon’s platform was designed to democratise retail. Small vendors or manufacturers could sell outdoor grills, computer bags and toys alongside established brands. Now, with its expansion into private label, Amazon has shifted away from being an impartial, may-the-best-product-win distribution partner to being a direct competitor to those other vendors.
A TILTED PLAYING FIELD?
It’s not just lower prices that are driving Amazon’s customers to its private-label goods.
Amazon is utilising its knowledge of its powerful marketplace machine – from optimising word-search algorithms to analysing competitors’ sales data to using its customer-review networks – to steer shoppers toward its in-house brands and away from its competitors, analysts say.
And as consumers increasingly shop using voice technology, the playing field becomes even more tilted. For instance, consumers asking Amazon’s Alexa to “buy batteries” get only one option: AmazonBasics.
