The Strategy Behind Amazon’s Private Label Push: Customer Loyalty, Supplier Leverage, and Long Term Margins

Amazon created its first private label brands about a decade ago. But lately, something’s changed — Amazon is ramping up its private label brand portfolio in a massive way. What’s going on? Big picture, we think there are three vectors to Amazon’s private label efforts: customer loyalty, supplier leverage, and long term margins.

A Customer Loyalty Strategy

Consumer products companies have spent billions of dollars over decades to build brand loyalty. Why? Because building brands works: customers with a brand affinity stay loyal over time.

Along those lines, we believe Amazon has decided it is a strategic priority to build customer loyalty and preference through the development of private label and exclusive brand products. In a world with an ever-increasing number of “microbrands” and DNVBs, Amazon is betting that customers who find quality products on Amazon that they can’t get anywhere else will become more loyal to Amazon and spend more on Amazon over time because of their loyalty to those private brands.

From this perspective, Amazon is incentivized to build private brand products in as many categories as possible. This is generally good news for private label manufacturers who have built their businesses serving large retailers like Walmart and Target (and who are now increasingly shifting their efforts to serving Amazon) — though they are more easily replaceable than owners of established consumer brands.

In our view, there’s no reason why Amazon shouldn’t offer a private brand option (if not multiple private brand options) for most product categories it sells. Some will succeed, and others won’t. In addition to creating loyalty to private brands, the overall effect of increased selection and value should strengthen Amazon’s position as a first-stop destination in consumer shopping habits, driving traffic and sales for all Amazon vendors and sellers.

A Supplier Leverage Strategy

Amazon Prime has built significant loyalty and habit in consumer purchase behavior since it launched in 2005 — not through retail brand loyalty, but through the sunk cost psychology of pre-paid shipping. It’s one of the amazing business accomplishments of our time.

But Prime is not without its vulnerabilities. Chief amongst them: most of the brands that Amazon sells are owned by other companies. The probability that some companies that own the brands that Amazon’s customers have built loyalty to over time might at some point have sufficiently different incentives than Amazon is non-zero.

For example, one fundamental strategy conflict: brands might increasingly feel like Amazon is not offering the differentiation they want for their products on its marketplace.

Amazon aggregating everyone else’s value chain into their channel, while diluting external Brand value in general, is sort of scary… Just wonder when this starts to rub off on already established brands. Amazon wants a Brand-Free future where they hold the keys to the consumer’s purchase point, on their terms. (Jordan Rice, via Twitter)

The question of whether Amazon and other technology platforms have the potential to change the fundamental nature of brand psychology and create a “brandless” future is an interesting one. The increasingly sophisticated private label efforts from Amazon and others will affect some product categories more than others: categories that are more easily commoditized will see faster and greater disruption, while customers will always have enduring affinity for truly differentiated products.

Big picture, there appears to be a sense of urgency at Amazon to build out its private label portfolio as quickly and broadly as it can to accelerate the process of introducing its customers to its own brands so that, in the long run, if some brand owners decide their incentives aren’t sufficiently aligned with Amazon’s, Amazon will be able to fulfill (ideally large portions of) that demand with (ideally very comparable) private brand products to satisfy as many customers as possible. The better private brand alternatives Amazon can create, the more leverage it will have with suppliers.

A Long Term Margin Strategy

Jeff Bezos is reputed as saying, “Your margin is my opportunity.” Given Bezos’ and Amazon’s long term perspective, margins that look terrible to many other businesses can look attractive to Amazon. That steely view has led Amazon to make investments others haven’t.

Once Amazon establishes more of its own brands and builds loyalty to them over time, it should be able to extract attractive gross margins from the sale of those items, especially compared to the low margins it and most retailers usually earn when selling third party brands.

Could Amazon someday even create luxury brands? (And if so, could Amazon even only offer some brands through certain types of its own physical retail stores one day?) Maybe, but first it must prove that it can move beyond low-emotion private label brands like “AmazonBasics” that primarily compete on price and create a portfolio of brands that have sustaining appeal to different customer segments.

If it can, then private label could be a significant source of margin for Amazon over time — that Amazon can then use to invest in its next “low-margin” business.

Amazon Launches Several Solimo Brand Private Label First Aid Products

Continuing its expansion into private label health care products, Amazon has launched several new Solimo brand first aid items.

The new items include:

Vine reviews for Solimo Hand Sanitizer are dated since September, though the rest of the items don’t have any Vine reviews. It’s possible they may in the coming weeks.

This is Amazon’s first private label hand sanitizer product. It also offers hand sanitizer from the Amazon Exclusive Mountain Falls brand, which it also labels as “Our Brand”.

Currently, hand sanitizer searches in Amazon’s US store are dominated by sponsored listings and headline search ads from Purell. Purell is the flagship brand of GOJO Industries, Inc., which is headquartered in Akron, Ohio.

Purell and Mountain Falls dominate organic search results for “hand sanitizer” on Amazon’s US store as well, with Germ-x, Babyganics, Cleanwell, and Bath and Body Works also present.

Amazon is in the process of ramping up its physical retail infrastructure as well. It’s possible that Amazon could stock those stores with first aid items, decreasing the number of trips made to traditional retail drug stores like Walgreens, Longs, Rite Aid, Walmart, Target, and many others.

GNC Launches Amazon Exclusive Supplement Brand, “CHALLENGE by GNC”

GNC, one of the largest retailers of vitamins, supplements, and other health and nutrition products, has quietly launched a new Amazon Exclusive brand called CHALLENGE by GNC.

GNC, which has seen declining revenues over the past two years from $2.68 billion in 2015 to $2.45 billion in 2017, operates over 8,000 stores around the world and over 3,000 in the United States. Amidst changing retail trends, GNC announced earlier this year that it intended to close approximately 200 stores in 2018.

Now the company appears to be trying a new tactic – creating a brand of products exclusively available on Amazon. As an Amazon Exclusive brand, CHALLENGE by GNC is labeled as “Our Brand” by Amazon and included in special promotional real estate in Amazon search results.

GNC has not made any announcements about the new strategy or launch of the new brand that we can find. The company has also not yet responded to our request for comment. We will update if they do.

Amazon is currently promoting the new CHALLENGE by GNC Amazon Exclusive brand in the nutritional supplements section of its US website with ads like the following:

Vine reviews for CHALLENGE by GNC products are dated since September, so it’s possible GNC is waiting to promote the new brand until after some initial reviews come in.

The move signals a possible growing trend of well known brand owners deciding to create new brands or sub-brands for certain product lines exclusively for Amazon. Carter’s currently offers its Simple Joys by Carter’s brand exclusively on Amazon. Iconix now makes its entire Starter brand of clothing available on Amazon as well. We expect to see more of these kinds of moves in the coming months, as Amazon is looking to increase the volume of exclusive brands on its platform.

As always, follow TJI for the latest on Amazon’s private label and exclusive brand efforts.

Perrigo Launches Amazon Exclusive Infant Formula Brand, “Love & Care”

Perrigo, one of the largest manufacturers of private label OTC pharmaceuticals, has launched a new Amazon Exclusive infant formula brand called Love & Care.

It’s the first infant formula Amazon Exclusive brand we’ve seen. Currently, Earth’s Best (owned by Hain Celestial Group), Similac (owned by Abbott Laboratories), Enfamil (owned by Mead Johnson), and Happy Baby brand infant formulas rank the highest in Amazon US search results for infant formula. Plum Organics, Happy Baby, Love & Care, and GoodSense are the top brands advertising on those searches.

While “Love & Care” brand items are not yet showing up with the “Our Brand” label in search results, Amazon is promoting the new Love & Care brand in the baby healthcare section of its US website with ads like the following:

Perrigo has not made any announcements that we can find, and the company has not yet responded to our request for comment. We will update if they do. Vine reviews have started coming in in recent days, suggesting that Perrigo may be waiting to promote the new brand until after some initial reviews come in.

Perrigo filed for the US trademark for “Love & Care” on May 9, 2018. The company also produces the Amazon Exclusive Basic Care brand, which includes a variety of first aid health care products and OTC medicines.

Follow TJI for the latest on Amazon’s private label and exclusive brand efforts.

Amazon Launches Revly, a New Private Label Vitamin Brand

Amazon has just launched a new private label vitamins brand called Revly. As of today, there are 11 Revly brand products live on Amazon’s US store. Vine reviews are still coming in in support of the launch.

The US vitamin market was estimated to be about USD $13 billion in 2017.

This marks the 5th private label brand under which Amazon has launched vitamins. It has also created private label vitamin products under the Amazon Elements, Solimo, Mama Bear, and Whole Foods’ 365 Every Day Value brands.

Amazon also sells vitamins under several Amazon Exclusive brands, including Nature’s Wonder, Metatrition, and Pure By Nature, that it also labels “Our Brands”.

Revly vitamins are generally priced on the higher end of Amazon’s private label brands. For example, Revly Vitamin D3 2000 IU gummies sell for $0.17 each, while Solimo Vitamin D3 2000 IU gummies sell for $0.06 each.

Top third party brands in organic US search results for vitamins currently include Nature’s Bounty, NatureWise, Garden of Life, Viva Naturals, Jarrow, and Bronson. Top advertisers currently are NatureWise, Bronson, and Pure.

Follow TJI for the latest on Amazon’s private label brand efforts.

5 New Amazon Exclusive Personal Care Brands Identified

As we continue to track Amazon’s private label and exclusive brand efforts, we have identified 5 new Amazon Exclusive personal care brands that appear to have launched recently. These are all labeled “Our Brands” by Amazon but all appear to be owned by third parties.

The 5 new Amazon Exclusive brands that we have identified are:

1. Shave It – razors (8 items)

2. NATRÄL – essential oils (24 items)

3. Visage Envy – lotions and creams (3 items)

4. Paris & Vine – nail lacquer (2 items)

5. Zitabeth – makeup wipes (1 item)

As always, follow TJI for the latest as we continue to track Amazon’s private label efforts.

Amazon’s Accelerator Program Seeks to Grow Volume of Amazon Exclusive Brands

Here at TJI we’ve been closely tracking the growth of Amazon’s private label and exclusive brand efforts, which have been accelerating.

Amazon itself is trying to grow its private brand teams and volume of exclusive brand as well. Amazon is calling this team and program “Amazon Accelerator.”

According to this Amazon job listing titled “Sr. Product Manager, Consumables Private Brands”, here’s what the team does:

The Amazon Accelerator program is designed to enable established manufacturers to rapidly launch their products on Amazon. Accelerator participants create Amazon-exclusive brands that they own and manufacture their entire catalog of products under these brands. This program is in start-up mode and looking for someone who is ready to take ownership and join a tightly-knit team tackling a very interesting and challenging opportunity.

Other positions Amazon is hiring for on this team include Sr. Product Manager, Private Brands and Program Leader, Private Brands. The Senior PM listing says:

Do you want to create new brands from scratch? Do you want to invent and Think Big to take an idea from concept to reality for Amazon customers? Come join the Amazon Accelerator Program, that enables manufacturers to create new brands exclusively for Amazon’s customers.

We are looking for an entrepreneurial, analytical, and highly motivated Sr. Product Manager to join the team. The Sr. Product Manager will own supplier operations, product replenishment and scaling our process WW.

And the Program Leader listing says:

Do you want to build a business from the ground up? If yes, you should consider Amazon Private Brands. The Private Brands team is rapidly expanding and is looking for an exceptional product leader to grow the business. As we explore different business models, we need a seasoned leader who can help build a new program to rapidly expand our selection.

Amazon has put together this landing page for prospective “Our Brands” manufacturers, as first spotted by CNBC. Amazon highlights that the “Our Brands” effort is both B2C and B2B, and that Amazon offers participants onboarding support and marketing services.

Amazon also highlights 17 product categories it is looking for:

  • Apparel & Accessories
  • Automotive
  • Baby
  • Beauty
  • Business & Industrial
  • Consumer Electronics
  • Food & Beverages
  • Health & Wellness
  • Home & Kitchen
  • Household & Personal Care
  • Lawn & Garden
  • Office Supplies
  • Pets
  • Shoes
  • Sporting & Outdoors
  • Tools & Home Improvement
  • Toys

We expect the acceleration we have seen in Amazon’s private label and exclusive brand efforts to continue over the coming years.

As always, follow TJI for the latest.

 

Amazon Launches Solimo Private Label Brand Crackers, Tea, and Granola Bars

Amazon continues to broaden its Solimo private label brand. Solimo thus far has been positioned as a value brand option for household essentials like toilet paper. Now, Amazon is expanding it further into the food and grocery category with the launch of Solimo brand crackers, tea, and granola bars.

1. Crackers

First, Amazon is going after a product category occupied by powerful brands in the cracker market with the launch of 4 Solimo brand cracker products.

At $2.45 to $2.51 each, the array of Solimo crackers are attractively priced vs grocery store retail for the name brand items.

Currently, top cracker advertisers on Amazon.com US include Pepperidge Farm, Keebler, and Nabisco, with Pepperidge Farm and Nabisco performing strongly in organic search results.

2. Teas

Second, Amazon has launched Solimo Tea Pods, Compatible with 2.0 K-Cup Brewers in English Breakfast, Green Tea, and Chamomile flavors. The English Breakfast version is selling for $12.34 for a 42-count pack (about $0.51 each).

 

In addition, Amazon has launched 8 flavors of Solimo brand tea bags, ranging from Black Tea Bags, 100 Count (for $4.99) to Mint Green Tea Bags, 20 Count (for $2.29). All tea bag options are available only through Prime Pantry.

Top tea advertisers on Amazon.com include Southern Breeze, Bstean, Good Earth, and Vahdam, with Twinings and Bigelow performing well in organic search results.

3. Granola Bars

Finally, Amazon has launched 2 granola bar products under the Solimo brand. Solimo Chewy Chocolate Chip Granola Bar, 12 Count (Pack of 12) is selling for $25.00 (about $0.17 each) while Solimo Sweet & Salty Peanut Granola Bars, 48 Count are selling for $17.77 (about $0.37 each).

Likewise, these are attractively priced vs name brands in retail grocery stores.

Annie’s, Quaker, Clif Bar, KIND Bars, and others are currently top sponsors on Amazon.com US for granola bars, with Nature Valley ranking prominently in organic search results.

As always, follow TJI for the latest as we continue to track Amazon’s private label efforts.

Amazon Expanding its Eono Essentials Private Label Brand in Europe

Both around the world and in the US, Amazon’s broadest and most category-agnostic private label brand has always been AmazonBasics. With thousands of items across dozens of categories, it’s become the most “generic” Amazon private label brand out there.

However, over recent months, we’ve seen Amazon expanding a second general private label brand in the UK and Europe: Eono Essentials.

Amazon registered the EU trademark for Eono on June 14, 2018. Around that time we were seeing about 10 items listed under the brand. Now, just 3 months later, we’re seeing over 80.

For instance, there’s the Eono Essentials Junior Waterproof Jacket, the Eono Essentials Universal Projector Ceiling Mount Bracket, the Eono Essentials 12 Pieces Paint Brushes Set with Palette, and the Eono Essentials Lightweight 21″ ABS Hard Shell Travel Trolley Carry On Hand Cabin Luggage Suitcase, just to name a few.

On some Eono items, Amazon says, “Eono Essentials is an Amazon brand licensed to third party manufacturers.”

Does Amazon plan to expand the Eono brand more broadly and create a second category-agnostic private label brand that perhaps has more emotional appeal than AmazonBasics?

As always, follow TJI for the latest on all of Amazon’s private label efforts.

5 New Amazon Exclusive Apparel and Accessories Brands Identified

As we continue to track Amazon’s private label and exclusive brand efforts, we have identified 5 new Amazon Exclusive apparel brands that appear to have launched in recent days. These are all labeled “Our Brands” by Amazon but all appear to be owned by third parties.

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