Well, I spoke too soon. Last week I made some remarks about Amazon’s approach to Consumables Private Brands:
“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.” – Is Amazon Playing Fair with Private Brands?
Then on Friday, our tools picked up some new data showing Amazon has applied “Amazon’s Choice” to all of their consumable private brands, including “Presto! Laundry Detergent”.
Amazon’s Choice, introduced in May 2015, is a product designation for both traditional search and the Amazon Echo internet-connected speaker, which acts as personal assistant like Apple’s Siri. For Amazon Echo users, products can be ordered from Amazon by voice command. For example, say you ask Echo to order laundry detergent. If you’ve ordered laundry detergent from Amazon before, it will default to that item, but if not, it will say:
“I didn’t find that in your order history, but Amazon’s Choice for laundry detergent is Presto! The order total is $19.99. Should I order it?”
In the past, Amazon’s Choice would typically be applied to a top-performing item, such as this key Tide SKU that is currently out-performing Presto! in several core metrics:
By applying Amazon’s Choice to private brands including Presto!, Amazon Element Baby Wipes and Happy Belly Coffee and Nuts, Amazon is leveraging the competitive advantage of owning the retail environment. This has long been the norm among America’s largest retailers that stock private brands alongside their traditional suppliers and apply promotions to them to increase sales and traffic in the same way suppliers do.
Compared to the 10 largest retail store chains in the U.S., for whom private brands account for at least 20% of sales, the portion of the market share held by Amazon’s private brands remains relatively low. But it appears that Amazon, still new to the private brand game, is taking cues from America’s top brick-and-mortar retailers and aiming for that 20% market share. And why not? Private brands improve a retailer’s margins and give them more control over their supply chain, so it’s no wonder Amazon’s private label department is well-funded and stacked with 40+ of the industry’s top people.
In last week’s article, I expressed a lot of confidence that Amazon had their Consumables Private Brands plan fully realized and laid out. What’s clear from this development, however, is that they are still adjusting their private label strategy and trying on different tactics. Certainly, manufacturers are going to begin thinking of Amazon as not just a platform but also a competitor. That said, even with this new development, private brands aren’t going to change the branded players’ landscape overnight, no matter how much laundry detergent Amazon Echo sells to its users.
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