Amazon is quickly — and quietly — developing private label brands
Amazon has released a new line of private label products called Solimo, according to Yahoo Finance. The line features many everyday items including coffee pods, which have earned the “Amazon’s Choice” badge in just a few days.
The Seattle-based company has only a few private label grocery brands available on its site, including Happy Belly, a line of snacks, coffees; Single, a frozen-food line; Single Cow Burger, a premium meat brand; and Mama Bear, a line of baby foods. The e-tailer also offers the Wickedly Prime snack brand, which includes products like chips, nuts, and tea.
According to Coresight Research, the company is still in the process of developing its private label grocery offerings. It notes that grocery products are among the most-reviewed items in Amazon's private label portfolio.
Amazon has been attempting to gain share in the grocery industry for years with the release of Amazon Fresh, Prime Now delivery, and its acquisition of Whole Foods in 2017. But the company’s private brand food offerings are slim — a major shortcoming when looking at current grocery trends.
According to a Nielsen report, private labels posted dollar growth of more than three times the rate of branded products in Q4 of 2017. Store brands now make up 17% of all grocery sales, according to the Private Label Manufacturers Association, and could grow market share by as much as 10% over the next decade.
Private labels will increase dramatically over the next four or five years, Matt Sargent, SVP Retail at Magid recently told Food Navigator. This is because retailers will recognize that store brands sell at a higher profit margin, offer points of differentiation and improve customer loyalty. For Amazon, private labels give the company more control over shipping and distribution so they can reliably ship products to Prime members within the promised two days.
Amazon currently has many of its own private label brands — just not in grocery. As Coresight points out, that's quickly going to change, especially now that it owns Whole Foods. The grocer's 365 Everyday line contributed an estimated $11 million to Amazon's online grocery sales last year, according to The Wall Street Journal. There's no doubt Amazon wants to harness some of that same demand by selling its own brands on its site as well as in Whole Foods stores.
By investing heavily in private label development, Amazon hopes to eventually catch up to industry leaders like Albertsons and Kroger. The e-tailer recently released its new private label brand, Solimo, without much promotion or noise. This may seem odd, given its aspirations to sell more of its own products, but Amazon’s discretion may be a sign it's still testing the market.
“We take the same approach with private label as we do with anything here at Amazon: we start with the customer and work backwards, aiming to bring them products we think they will love,” an Amazon spokesperson told Recode. “We continue listening and learning from customers as we expand our selection.”
Consumers no longer correlate value just with low prices. Other factors such as ingredients, durability and manufacturing techniques also factor in. Millennials — Amazon's biggest online grocery shopper — don't have as much brand loyalty as older generations, meaning the e-tailer has a chance to quickly grow sales with its own grocery brands.
Amazon's robust review system is an asset for existing food brands, and could be its greatest weapon in selling its private label products going forward. If a consumer is between a store brand and a mainstream one, the store brand's high ratings could nudge them towards that item.
Ultimately, Amazon has the upper hand in creating private label brands because it owns the most powerful online distribution channel in U.S. retail, and now it owns Whole Foods, too. The e-tailer also has the ability to collect and analyze data about competitor brands it sells, which products do well, and how much it sells for. It also has the ability to gain insight into the food and beverage development through Whole Foods with complete access to its Whole Foods 365 brand.
So while Amazon may lag other supermarkets in private label food offerings, don't expect that disadvantage to last much longer.
- Yahoo Finance Amazon's in-house brands are quietly taking over the site
- Coresight Research Deep Dive: Slicing and Dicing Amazon’s Private-Label Offering
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