Retail

Amazon Turns To Manufacturers For ‘Exclusive’ Brands

Amazon

Amazon is taking a new approach to its brands, extending beyond its AmazonBasics and other private-label lines: The retailer is rolling out brands that are exclusive to the site, but are not actually owned by the company. While expansion of private-label brands has been a top priority, One Click Retail noted in a report, Amazon is reportedly now focusing on bringing Amazon-exclusive brands made by manufacturers such as First Quality.

First Quality’s Amazon-exclusive brand, Earth + Eden, differs from Amazon’s private-label brands because it is both owned and manufactured by First Quality. Yet the move may seem unusual, as First Quality is working with the very retailer that offers a competing private-label brand for diapers, called Mama Bear. That brand saw explosive growth in the beginning of the year, as its sales rose by more than 40 percent from the second to third quarter.

Instead of competing against Amazon, however, First Quality decided to join forces with the eCommerce retailer by launching Earth + Eden. It’s too early in the game to gauge how sales of Earth + Eden will play out in the long term, but early results are promising. “Sales for these diapers tripled within a few weeks of its late-August launch,” according to the report.

In another case, Perrigo both owns and manufactures an Amazon-exclusive line of over-the-counter (OTC) products to treat ailments like allergies and indigestion called Basic Care. At the same time, Perrigo also owns a brand called GoodSense. The advantage of being an Amazon-exclusive brand is illustrated by the weekly sales between the two brands. As of the third quarter, Basic Care is now responsible for 15 percent of over-the-counter sales. GoodSense, however, has fallen from more than 20 percent market share to a low point of 9 percent during the third quarter.

The benefits of being an Amazon exclusive seem clear for brands, but what’s in it for Amazon? According to One Click Retail’s Peter Andrews, “It truly wants to be a part of its customers’ spending, and while it offers the manufacturers its platform to sell on Amazon … it is also on the lookout for opportunities that allow it to expand into new sectors.” He added that Amazon can take the place of smaller brands, but the retailer sees that brands that have been around for years can help bring shoppers onto its platform. To help attract these brands, Amazon has reportedly been at work on an accelerator program.

According to a web page called “Our Brands,” per a CNBC report, the company is opening the door for other companies to “join the Amazon family of brands.” The page contains a link for manufacturers to have their products become a part of the Amazon private brand collection. Amazon also has a job posting that calls for a program leader for private brands, described as a “seasoned leader who can help build a new program to rapidly expand our selection.” But what about the private-label brands that Amazon itself owns?

Amazon’s Private-Label Brands

When it comes to Amazon’s own brands, SunTrust Robinson Humphrey is projecting that Amazon’s private-label business could see revenues of a whopping $25 billion by 2022. In a June note, SunTrust analyst Youssef Squali said that “private label is one of the highly under-appreciated trends within Amazon, in our view, which over time should give the company a strong … competitive advantage.”

Amazon’s private-label goods first launched in 2009, and include thousands of products in a wide range of categories. As of 2017, Amazon boasted more than 30 private-label brands in nine categories. And Morgan Stanley analyst Brain Nowak noted that Amazon’s private-label merchandise sales could add $1 billion to Amazon’s bottom line, making up 5 percent of retail sales by 2019, Barron’s reported in October.

The leader of Amazon’s private-label pack is AmazonBasics, which contributes 85 percent of the company’s private-brand sales. In fact, AmazonBasics is so powerful and popular that, in some cases, it is also the main competitor for Amazon’s other brands.

Last week, it was reported that Amazon is getting into the online mattress business with an AmazonBasics firm mattress, which sells starting at $130, as found by TJI Research. Overall, Amazon brand products include kitchen goods, clothing, batteries and electronics, showing that the company’s branded products can encompass a range of product categories from, well, A to Z.

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