Download - Is Amazon Playing Fair with Private Brands
Presto! That’s the name of Amazon’s latest in a growing line of
private labels. This new brand of laundry detergent is off to quite a
start, selling a grand total of 20 units in its first week! While not
initially a threat to the biggest competitor (Tide’s top SKU sold
over 5500 units the same week), Amazon’s private brands tend to
sneak up from behind and surprise the market.
Is Amazon Playing Fair with Private Brands?By Spencer Millerberg, CEO at One Click Retail
Make no mistake: Presto!’s search rank of 17 is low for the term “laundry
detergent”, but that doesn’t need to be the case. Remember, Amazon owns
the product and the platform, so they can make their private brands as
visible as they want. With their first major consumables private brand
launch, Amazon placed their “Amazon Elements” diapers and baby wipes at
the top of the search results page; however, they were quickly flooded with
negative product reviews, supplier dissatisfaction, and customer comments
—leading Amazon to take a more considerate approach to future private
brand launches.
I’ve had an eye trained on Amazon’s private brands for years,
and believe they’ve learned from this false start. Today,
instead of stacking the deck in their favor, Amazon’s private
label strategy displays their commitment to fair play. Amazon
is taking its time with these brands, pushing them out slowly
and allowing them to grow organically.
Let’s back up. Amazon has spent years laying the groundwork
for their private labels. In 2007, the world’s biggest bookseller
introduced Kindle Direct Publishing, their own proprietary
ebook publisher that allowed them to work directly with
independent authors and eliminate the middleman (the Big
Five book publishers).
Since then, they’ve racked up a long list of brands with more
in the pipeline (Prime GT, Wickedly Prime). To protect against
any more false starts, there are half a dozen rigorous tests
each private label product needs to pass. A failure at any
stage results in the product being pulled. In fact, a prototype
of Amazon’s laundry detergent was pulled prior to the
eventual launch of Presto!
Today, some of Amazon’s private labels are finally starting to
turn heads:
• The Amazon Basics brand is responsible for one third of all online
battery sales with 93% YoY growth.
• Amazon Echo is the platform’s top-selling speaker, growing 67% YoY.
• Even their new-and-improved baby wipes are eating up market share,
now up to third place in the category with 16% of sales.
Private labels aren’t without risk:
Amazon is already familiar with manufacturing issues,
additional strain on the compliance and customer service
departments and the very real possibility of suppliers pushing
back against Amazon as a competitor. In navigating these risks,
Amazon has chosen to grow their private brands slowly and
carefully, with many, like Presto!, barely making a splash so far.
I am convinced Amazon doesn’t do anything without rhyme or
reason. The slow burn of Amazon’s private labels is all part of
their plan. They don’t cheat; they haven’t stacked the deck
against other players, opting to let their private brands grow
organically and compete on a level playing field with other
brands. But that doesn’t mean they aren’t going to win.
Amazon knows what makes brands successful. As the largest
eCommerce platform in the world, Amazon has more product and
marketing data than just about anybody and they have no
intention of slowing down. Amazon has set their sights on being
more than just a channel for brands. They are a competitor, and a
formidable one at that. The ramp-up might be slow but should
never be underestimated. A slow burn can be silent but deadly.
To read more on Spencer’s insights into Amazon’s private brands,
check out:
http://oneclickretail.com/amazon-private-brands-expand-very-very-sl
owly/
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