Brands are simply guests on Amazon’s platform and that’s okay
Through a special arrangement, presented here for discussion is an excerpt of a current article from the blog of Kiri Masters, founder and CEO, Bobsled Marketing. The article first appeared on Forbes.com.
Amazon.com’s rapid private label expansion is making many branded manufacturers uncomfortable. According to Scrapehero, Amazon’s private label offerings now encompasses 6,825 products across 100 distinct labels. Of these, nearly 70 percent are in the apparel category.
Beyond anxiety over Amazon’s emerging “frenemy” status, brands are vexing that tactics being used to promote those private labels run counter to the site’s “open marketplace” promise.
In early October, for instance, CNBC reported that Amazon had started promoting its private brands at the bottom of brand seller’s listings. Last week, Bloomberg reported Amazon was distributing free samples to incentivize reviews of its private label goods — ironically, on the same platform it initially developed to reduce review manipulation.
None of this is a cause for panic. Scrapehero found 40 percent of Amazon’s private label are priced below $20. In apparel, food, home and kitchen, most private labels are under $40. Generally speaking, Amazon’s in-house brands are the “cheap” alternative to national brands. They’re filling gaps in the assortment.
Meanwhile, Amazon can make 15 percent from marketplace sellers and avoid the design, sourcing, marketing and other hassles of developing in-house labels. Amazon’s best interest is to keep sellers around.
Moreover, Amazon doesn’t have to play fair. They spent years building a platform that is now responsible for about 50 percent of online sales. It’s their house. You have to play by their rules.
At the same time, every brand can make smart choices around products, presentation and relationship building that minimize the threat from Amazon’s private labels.
Brands shouldn’t try to undercut Amazon’s pricing but give shoppers a good reason to choose their brand. Patent innovations, unique features or even an extended warranty can be a differentiator.
Most importantly, brands need to remember to follow the data. Use Amazon sales data, customer reviews and even off-platform reviews to understand why customers are buying. Drive awareness and build social influence to encourage buyers to come to them first. This is the long-term defense against Amazon private label.
- Brands Are Simply Guests On Amazon’s Platform, And That’s OK – Forbes
- Everything You Need To Know about Amazon Private Labels – ScrapeHero
- Amazon Doles Out Freebies To Juice Its Own Brands – Bloomberg
DISCUSSION QUESTIONS: Is Amazon overstepping its bounds in giving preferential positioning to its private brands? How should brands and third-party sellers respond to Amazon’s private-label expansion?