- Amazon is debuting the expansion of its private-label brands in the coming weeks, including its first major attempt to sell perishable foods, people familiar with the matter told The Wall Street Journal. The private-label products will only be available to Prime members, according to the source.
- Through private-label products, the online retail giant can capitalize on higher profit margins by cutting out the need for marketing and branding spend while also testing out new flavors and pricing strategies with less risk, Bill Bishop, chief architect of brand consultancy Brick Meets Click, told The Wall Street Journal.
- Amazon's Happy Belly line will comprise of products ranging from nuts and trail mix to tea and cooking oil, and Wickedly Prime will consist of various snack foods.
Amazon is expanding further into the private-label brand market at a good time for retailers, as consumers are more open today to buying private-label foods. In 2015, store brands' U.S. sales hit $118.4 billion, a $2.2 billion increase year over year, according to the Private Label Manufacturers Association.
The trick has been for retailers to make private-label brands a cheaper option but also one that still resonates with consumer demands. According to a 2014 Nielsen global survey, 71% of respondents had noticed improvements in private-label brands. Also, 59% of consumers globally said they would purchase more private label brands if retailers offered a wider variety of products.
Manufacturers have been battling the growth of private-label brands, but Amazon represents a challenge from a different front — e-commerce. Only a handful of major food and beverage manufacturers have made large public efforts to boost e-commerce, such as PepsiCo, Mondelez, and Snyder's-Lance. If Amazon's products are of comparable quality but can sell at a lower price and be delivered to consumers, manufacturers are right to be concerned.
Amazon had reportedly been developing private-label brands for a number of years and had worked with branding consultants and manufacturers like TreeHouse Foods, The Wall Street Journal reported last year. TreeHouse Foods became the largest U.S. private-label brands manufacturer last year after acquiring ConAgra's private-label business. If Amazon worked with TreeHouse Foods on the new lines, the retailer partnered with a proven leader in the space.