Amazon is reducing the number of products sold under its in-house brands, including AmazonBasics, Amazon Essentials, and Solimo. It’s a major shift in the company’s strategy, and according to the Wall Street Journal, it’s due to poor sales.
At the time of writing, Amazon offers over 250,000 products through at least 88 private-label brands. But inside sources tell the WSJ that a large portion of these products are on the chopping block. Additionally, Amazon executives have considered dissolving around 50% of its brands.
Poor sales seem to be the driving force behind this change. But external factors, like the economy, aren’t to blame. It appears that Amazon simply over-extended itself and lost its sense of focus in this area. After a review of Amazon’s private-label brands in 2021, former consumer chief Dave Clark reportedly told the private-label team that it should focus on easy-to-sell commodities, citing Walmart’s “Great Value” brand as an example.
In a way, it’s a return to form. Amazon initially launched the AmazonBasics brand in 2009, focusing entirely on commodity goods like rechargeable batteries. The race to offer an uncountable number of private-label brands only began in the mid-2010s, likely encouraged by the success of AmazonBasics.
But poor sales may not be the only factor here. Amazon’s private-label brands are constantly the subject of regulatory discussion, as many critics believe that the handling of these brands constitutes anti-competitive behavior.
Because Amazon is the world’s biggest digital storefront, it’s in a unique position to collect data on products and customers. It can then use this data to dominate a product category, such as rechargeable batteries, with low prices and highly-targeted advertising. Critics also claim that Amazon features its brands over competing products.
Still, regulatory pressure probably isn’t the driving force for Amazon’s decision. Nearly all retailers offer in-house brands, and sales data is often the deciding factor in what these brands sell. Additionally, if Amazon’s private-label brands are selling poorly, regulators would have a hard time making an anti-competitive case against the company.
If there’s anything to take from this story, it’s that Amazon failed to take over the world with its in-house brands. It seems that Amazon is still most successful as a retailer, not as a manufacturer.
Source: The Wall Street Journal