According to reports, Amazon (AMZN) is going to eliminate hundreds of its in-house brands and scale back its private-label business in a move to enhance profit and avoid FTC antitrust enforcement action, even while competitors like Walmart (WMT) and other retailers continue to benefit from private labels.
Dismal Sales and Criticism
According to the Wall Street Journal, the Seattle-based company has dropped 27 of its 30 clothing brands, including Lark & Ro, Daily Ritual, and Goodthreads. When its supply runs out, Amazon will gradually stop selling the private-label furniture brands Rivet and Stone & Beam. As Amazon sells off its leftover stock, certain discontinued brands are still available on its website. Amazon will only have three apparel brands left after that: Amazon Essentials, Amazon Collection, and Amazon Aware.
Following dismal sales and criticism from politicians and others who said Amazon should prioritise its own labels above other vendors’ brands, Amazon started to scale back its private-label business last year. Amazon is hardly the only company battling in-house brands. Private label brand share of voice is down 39% from this time last year, according to Numerator.
The dollar share of private label CPGs across stores is still substantial, though. More than one in four customers say they would switch brands to take advantage of a deal, 34% check store ads, and 32% utilise coupons, demonstrating that the practise of finding the best deals rather than relying on brand names is still alive and well among buyers. Retailers like Costco (COST), with about a 15% CPG dollar share across e-commerce and brick and mortar sectors, and Walmart, with more than 28% of the market, are benefiting.
Results of the Modification
In addition to Albertsons, Kroger (KR), Target (TGT), and Target are other retailers that favour private labels. Walmart and Costco are the top two online retailers when compared, with respective market shares of 42.6% and 11.5%. With only 6.4%, Amazon is further down the list in fifth position, which raises the obvious issue of why Amazon is having trouble with private label sales while other shops are succeeding.
According to a Wall Street Journal article from 2020, Amazon employees used information on specific third-party sellers to create products under the Amazon brand, which led the business to reduce the promotion of its own products in search results.
As a result of that modification, many of Amazon’s in-house brands were buried in search results, which made it more difficult for them to sell goods and forced them to reduce the expenses involved with storing all of that inventory. An Amazon spokeswoman told the Wall Street Journal that the company had a “clear line against using non-public, single-seller data to choose which private label products to launch, and our policy goes further than any retailer we know of.”
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