How Amazon's in-house brand biz measures up to rivals

By June 6, 2019Advertising

Amazon claims its private-label business is small, and at 1 percent, it’s a fraction of the share-of-business of rivals. However, the Seattle-based ecommerce giant is still growing its stable of in-house offerings, even as it increases its “Exclusives” business of third-party sellers who pay to favorable treatment on that boosts visibility.

Earlier this week, speaking at Amazon’s re:MARS conference in Las Vegas, the company’s retail chief Jeff Wilke said that in-house brand products represent roughly 1 percent of Amazon’s sales—or around $2.3 billion, according to Bloomberg News.

Other retailers, including Kohl’s and Target, attribute a much larger portion of sales to their growing private-label business. In its 10-K annual report, Target said one-third of sales in 2018 were related to its “owned and exclusive brands,” which amounts to about $24.6 billion of the Minneapolis-based retailer’s business last year. Similarly, Kohl’s, which is also expanding into more in-house brands, said in its 10-K report that its proprietary brands “penetrate” 39 percent of sales–or some $7.9 billion. Walmart doesn’t break out its private-label business, but the retailer has been investing hugely in the offering in recent years.

“Amazon’s private label business has the potential to catch up with Target’s and Walmart’s if Amazon’s business continues to grow at the rate that it has, while drawing market share away from Target and Walmart,” says Oweise Khazi, director of Amazon Intelligence at Gartner. He noted that Amazon built buzz for its private-label brands in 2016 and 2017, when the company first started doubling down on and investing in such products. But the expansion has been more targeted and careful in 2018.

Khazi points to Amazon’s debut earlier this year of Belei, a skincare line that taps into ingredient-centric consumer trends in beauty at an affordable price. As a story in Vox points out, the collection is free from parabens and sulfates, not tested on animals and encased in recyclable packaging. “This feels like a brand birthed by an algorithm,” wrote Vox.

Amazon is getting savvier about using its retail trend and shopping habit data to bolster its in-house products.

“You can see Amazon has learned the ropes of the private label business,” says Khazi. “Rather than just throwing a bunch of stuff at a brand wall to see what sticks, they are honing in on areas with more consumer traction.”

Amazon is also ramping up its exclusives offerings. According to a March Gartner L2 report, Amazon has 119 private labels in the U.S. and 314 exclusive brands. Brands that opt into the exclusives program receive a visibility boost from things like special listings in product carousel displays, for example.

“The profitability aspect is accelerated slightly [with Amazon exclusives compared to private-label],” says Khazi. “The performance boost will drive more sales and Amazon gets a bigger cut.”

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