November 20, 2013
Is Amazon Developing Its Own Grocery Label?
In a 2009 discussion on this site regarding Amazon.com’s development of its own proprietary brands, one member of the RetailWire community said the e-tail giant might find it difficult to pursue own-brand groceries because it would be hard pressed to compete with:
- National CPG brands on quality;
- Discounters on prices and;
- Local markets on convenience.
Respondents to a RetailWire poll appeared to share this opinion as groceries (10 percent) fell below home and garden (31 percent), consumer electronics (26 percent), and health and beauty care (14 percent) as the categories offering Amazon the greatest opportunities for developing private labels.
Moving to present, AllThingsD has published a report suggesting Amazon is developing its own private grocery brand(s). As evidence, the site pointed to recent "Help Wanted" ads placed by the company seeking a "Senior Product Manager, Consumables Private Label" as well as the mention of Amazon launching a "Private Label Business in Consumables" in another advert for a financial analyst.
Amazon declined to comment on the AllThingsD report.
BrainTrust
Recent Discussions
Discussion Questions
What would Amazon.com launching its own brand(s) mean for its grocery business and AmazonFresh? What would the development of Amazon brands mean for its grocery competitors?
Poll
Selling branded goods, not its own brands (with the exception of the Kindle), is central to the Amazon brand. (Not to mention great execution, competitive prices and broad assortments.) So I’m not certain that a foray into private brands is as critical to the success of Amazon’s grocery business as the competitive advantages it has already developed.
The most important step Amazon can take to have an impact in the shop-from-home (and home delivery) grocery business is to focus on logistics. While Amazon is busy building huge distribution centers around the country, it may also want to consider the wisdom of buying an existing food distribution company as a partner.
Amazon has created Private Label with the Kindle e-reader, so why not groceries? Private Label continues to grow in market share. Unless Amazon creates Private Label groceries, they will be at a competitive disadvantage.
I await the responses from those more in the know than I am. In the meantime, I am left to wonder how to factor in own-brands for Duane Reade/Walgreens, Target, Costco, et al.
Unless Amazon can show they have better quality private label for less cost, I don’t see this having much of an impact. Few competitors are losing sleep over groceries sold online. After all these years, market share of online grocers has been minimal.
The only two attributes currently missing from Amazon’s grocery business are the sensory experience (physical stores) and own label.
Given the success of bricks & mortar retailers with own label, e.g., Target’s Archer Farms, an Amazon own label appears to make sense. Plus own label provides Amazon with alternatives to defend against manufacturers limiting assortments to Amazon in response to pressure from conventional retailers.
Amazon has always experimented with new concepts as evidenced by its 17 initiatives relative to the ‘final mile’. Own label will represent the latest experiment. Manufacturers and retailers would be well advised to pay attention to this issue.
Amazon has a built-in advantage to keep an eye on. User ratings will be a powerful source of brand image for these offerings. If Amazon does launch such brands and the ratings start coming back positive, they will be able to build brand image faster than traditional retailer-based private label.
It’s difficult to develop the brand recognition that persistently successful private labels require. Underlying any true success will be high quality. Once tried, the brand must deliver the perception of “quality for the price.”
That said, Amazon has many things in its favor that might lead to success. It has a loyal customer base, and it has a well-earned reputation for delivering quality for the price. It doubtless also has a relatively “adventurous” customer base – a large fraction of its customers are willing to try new things (or they would not have become addicted to Amazon). Amazon also has the advantages that come with being an e-retailer. It can control and personalize the user experience, and if it does this wisely, this will also lead to a high rate of customer explorations into its private brand. Hence, if the quality of the product is there, Amazon potentially can be very successful in having a large number of its customers find out that this is so.
Okay, here we go from your friendly neighborhood grocery guy. Amazon, like Walmart, feels it can sell anything to anyone, and grow their private label brand like wildfire. On select goods they could do well, but the basics could be a tough sell, as shipping all that weight (canned goods, flour, drinks) could get expensive, and we give most of that product away in our stores. However, high-end chocolates, coffees, and gourmet sauces could be successful, as consumers would consider buying them at a fair price.
Amazon would probably roll out some of these goods at very small margins to gain some traction, but the caveat for them is, will the customer love the products, and if they do, when can Amazon raise the price over time to actually make a profit?
I wouldn’t put anything past Amazon, so let’s see who they hook up with to produce these high-end goods, and actually turn a profit on them. I wouldn’t bet against them.
Amazon should not underestimate the challenge of building a wide private label program in grocery across many consumable categories with different attributes.
But we should not underestimate Amazon either. If it applies its empirical skills to choose its store brand products wisely, it may surprise us. Why not begin with the most frequently repurchased categories, the ones that lend themselves to “never run out” service levels?
Oh, it’s already doing that with diapers and batteries. Is it possible that the advertised job is more of an evolutionary step than a revolutionary one?
Look out, traditional grocers, Kroger, and for that matter, Walmart.
Big question: where does this leave Target? If Amazon gets in the grocery game in a big way, that leaves the fledgling grocery business at Target hanging on a cliff, doesn’t it?
But safe from all this are the higher end grocers, like Whole Foods, Wegmans and HEB. Further proof; the best way to ‘beat’ Amazon is through experience, not price.
While they may have a learning curve on own brands for grocery, I wouldn’t underestimate them. I do think some items will lend themselves to this effort better than others, and Tony makes some good points in this regard. But this is a logical extension for them especially given their propensity to try lots of things and see what sticks. And as a side note, the Amazon-branded shredder I have works better than the brand name I bought before it.
Let’s see, hmmm….maybe they just might call it Amazon Fresh…and it means the end of retail life as we know it in America. They’re sitting on what’s soon to be the most highly valued brand name in the world. Coke is done and gone.
You’re either Amazon or you’re trying to be like Amazon, or you’re trying to be the complete opposite and even that is not a safe position. Most likely you are too late to do any of the above.
Amazon will try to become everything to everybody until they find the boundary lines on all sides and move them as far out as they can. Retail world…We’re about to be Amazoned.
As far as profit goes, quit worrying about their profit. Profit is not a problem. They are reinvesting profit into expansion into EVERY thing as they are The EVERYthing Store in the near future.
To the consumer, Amazon represents the lowest price for what you want. It is no secret that the leadership style in Amazon possesses a level of self confidence that is often discovered amongst the suddenly departed in businesses of any kind. Most analysis will demonstrate to that and all leadership a high risk for keeping a price leadership in place with the burden and expenses of branding product. Filling warehouses with overstock of any kind is a mistake Amazon can not afford if they wish to stay in front of the lowest price race.
More Discussions
How Timely Is the Planned Lowe’s Website Renovation Focusing on Personalization?
Is Lowe’s being timely with its website reno, and is it right to be placed as…Should Costco Be Opening Members-Only Gas Stations?
Is this the right move for the warehouse club?As Boomers ‘Age Out of Peak Purchasing,’ How Can National Brands Retain Interest With Gen Z?
According to a recent First Insight study titled “Is Gen Z Still Choosing Your Brand,” while…
Selling branded goods, not its own brands (with the exception of the Kindle), is central to the Amazon brand. (Not to mention great execution, competitive prices and broad assortments.) So I’m not certain that a foray into private brands is as critical to the success of Amazon’s grocery business as the competitive advantages it has already developed.
The most important step Amazon can take to have an impact in the shop-from-home (and home delivery) grocery business is to focus on logistics. While Amazon is busy building huge distribution centers around the country, it may also want to consider the wisdom of buying an existing food distribution company as a partner.
Amazon has created Private Label with the Kindle e-reader, so why not groceries? Private Label continues to grow in market share. Unless Amazon creates Private Label groceries, they will be at a competitive disadvantage.
I await the responses from those more in the know than I am. In the meantime, I am left to wonder how to factor in own-brands for Duane Reade/Walgreens, Target, Costco, et al.
Unless Amazon can show they have better quality private label for less cost, I don’t see this having much of an impact. Few competitors are losing sleep over groceries sold online. After all these years, market share of online grocers has been minimal.
The only two attributes currently missing from Amazon’s grocery business are the sensory experience (physical stores) and own label.
Given the success of bricks & mortar retailers with own label, e.g., Target’s Archer Farms, an Amazon own label appears to make sense. Plus own label provides Amazon with alternatives to defend against manufacturers limiting assortments to Amazon in response to pressure from conventional retailers.
Amazon has always experimented with new concepts as evidenced by its 17 initiatives relative to the ‘final mile’. Own label will represent the latest experiment. Manufacturers and retailers would be well advised to pay attention to this issue.
Amazon has a built-in advantage to keep an eye on. User ratings will be a powerful source of brand image for these offerings. If Amazon does launch such brands and the ratings start coming back positive, they will be able to build brand image faster than traditional retailer-based private label.
It’s difficult to develop the brand recognition that persistently successful private labels require. Underlying any true success will be high quality. Once tried, the brand must deliver the perception of “quality for the price.”
That said, Amazon has many things in its favor that might lead to success. It has a loyal customer base, and it has a well-earned reputation for delivering quality for the price. It doubtless also has a relatively “adventurous” customer base – a large fraction of its customers are willing to try new things (or they would not have become addicted to Amazon). Amazon also has the advantages that come with being an e-retailer. It can control and personalize the user experience, and if it does this wisely, this will also lead to a high rate of customer explorations into its private brand. Hence, if the quality of the product is there, Amazon potentially can be very successful in having a large number of its customers find out that this is so.
Okay, here we go from your friendly neighborhood grocery guy. Amazon, like Walmart, feels it can sell anything to anyone, and grow their private label brand like wildfire. On select goods they could do well, but the basics could be a tough sell, as shipping all that weight (canned goods, flour, drinks) could get expensive, and we give most of that product away in our stores. However, high-end chocolates, coffees, and gourmet sauces could be successful, as consumers would consider buying them at a fair price.
Amazon would probably roll out some of these goods at very small margins to gain some traction, but the caveat for them is, will the customer love the products, and if they do, when can Amazon raise the price over time to actually make a profit?
I wouldn’t put anything past Amazon, so let’s see who they hook up with to produce these high-end goods, and actually turn a profit on them. I wouldn’t bet against them.
Amazon should not underestimate the challenge of building a wide private label program in grocery across many consumable categories with different attributes.
But we should not underestimate Amazon either. If it applies its empirical skills to choose its store brand products wisely, it may surprise us. Why not begin with the most frequently repurchased categories, the ones that lend themselves to “never run out” service levels?
Oh, it’s already doing that with diapers and batteries. Is it possible that the advertised job is more of an evolutionary step than a revolutionary one?
Look out, traditional grocers, Kroger, and for that matter, Walmart.
Big question: where does this leave Target? If Amazon gets in the grocery game in a big way, that leaves the fledgling grocery business at Target hanging on a cliff, doesn’t it?
But safe from all this are the higher end grocers, like Whole Foods, Wegmans and HEB. Further proof; the best way to ‘beat’ Amazon is through experience, not price.
While they may have a learning curve on own brands for grocery, I wouldn’t underestimate them. I do think some items will lend themselves to this effort better than others, and Tony makes some good points in this regard. But this is a logical extension for them especially given their propensity to try lots of things and see what sticks. And as a side note, the Amazon-branded shredder I have works better than the brand name I bought before it.
Let’s see, hmmm….maybe they just might call it Amazon Fresh…and it means the end of retail life as we know it in America. They’re sitting on what’s soon to be the most highly valued brand name in the world. Coke is done and gone.
You’re either Amazon or you’re trying to be like Amazon, or you’re trying to be the complete opposite and even that is not a safe position. Most likely you are too late to do any of the above.
Amazon will try to become everything to everybody until they find the boundary lines on all sides and move them as far out as they can. Retail world…We’re about to be Amazoned.
As far as profit goes, quit worrying about their profit. Profit is not a problem. They are reinvesting profit into expansion into EVERY thing as they are The EVERYthing Store in the near future.
To the consumer, Amazon represents the lowest price for what you want. It is no secret that the leadership style in Amazon possesses a level of self confidence that is often discovered amongst the suddenly departed in businesses of any kind. Most analysis will demonstrate to that and all leadership a high risk for keeping a price leadership in place with the burden and expenses of branding product. Filling warehouses with overstock of any kind is a mistake Amazon can not afford if they wish to stay in front of the lowest price race.