Walmart And Amazon Up Their Private-Label Retail Game

Among the hottest battles for eCommerce market share involves private label products, with a recent move from Walmart among the latest developments in that particular arena. But the growing use of those brands to attract sales is also leading to more focus on potential challenges for online, private label retail over the next few years.

Private brands, of course, are hardly new, and their use in retail predates the birth of eCommerce. But those brands are increasingly being deployed in the ongoing effort to win over online shoppers who benefit from seemingly endless product choice and the fierce competition among digital merchants.

Walmart’s Move

Walmart — one of the top competitors to Amazon, one whose expertise in logistics, supply chain and other areas at least gives it a solid footing when going against the Seattle-based eCommerce behemoth — stands as the latest example of the private label push. In early February, Walmart debuted MoDRN, an online-only furniture brand with a focus on mid-century styles, a broad category of design but one highly desired by many consumers.

The launch of MoDRN follows the retail chain’s push to get more consumers to shop online from their homes, an effort that included a website revamp about a year ago — work that led to a 35 percent increase in site visits, according to Walmart.

The general idea behind MoDRN — indeed, the general idea behind most of the private label online push in recent years — is to offer what the retail chain called a specialty shopping experience. Consumers can buy furniture anywhere. But offering a private brand tied to a specific style or styles can provide a sense of exclusivity to online shoppers, which in turn can promote consumer loyalty and sales.

Private Label Pivot

Evidence of the utility of private label online retail comes in part from Nielsen. It found that while “private label’s dollar share of the U.S. CPG market has hovered stubbornly around 18 percent in recent years, things started to change in 2017,” with store brands experiencing a “complete reversal in growth trajectory compared to manufacturer branded items.” Dollar growth for private label has increased as much as three times the rate of other products, according to FoodNavigator-USA.com.

Amazon is doing its part to help drive that growth, work that is fueling the private label efforts of other retail operators.

In the fourth quarter of 2018, Amazon launched seven private label brands along with 150 exclusive “Our Brands” products lines, according to TJI Research. In total, there exist some 450 Amazon brands — 135 Amazon private label brands and more than 330 Amazon exclusive brands.

“Some brands, like Solimo, are in use by Amazon globally,” TJI said. “Others, like Alkove (one of Amazon’s furniture brands in the U.K./European Union) or Silly Apples (one of Amazon’s children’s clothing brands in the U.S.) are only in use in one of Amazon’s country stores.”

Private Label Impact

As the use of private label brands increases on Amazon, so do concerns from marketplace sellers about the increasing competition from those product lines.

Evidence of that comes from forums and blogs dedicated to marketplace sellers, along with surveys of those third-party merchants. For example, a recent Feedvisor survey of Amazon marketplace sellers found that the biggest seller concern — cited by 38 percent of sellers — was “Amazon competing with me.” That beat out such worries as the fees Amazon charges to sell on its marketplace, and negative feedback and reviews from consumers.

But that’s not the whole story, at least not according to some analysis, including one from late 2018 by PracticalEcommerce. While “some retail experts claim that Amazon’s private labels will cause a devastating shift in the market, killing brands,” it has found that those private labels don’t always work against third-party sellers.

“When Amazon launched its Solimo brand of razors and shaving products,” other merchants operating in that product category began to express their worries about their prospects for survival, the eCommerce research company said. Instead, the launch of Solimo — and the online advertising and other marketing tactics associated with that — sparked an overall increase in consumer attention for that product category. That led to an increase in sales — up to 20 percent in the immediate aftermath of the Solimo launch — for some of the other merchants selling similar products.

Get ready for more private label activity in the months to come as retailers strive to win over consumers and stand taller in the crowded, fiercely competitive world of online retail.