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Amazon plans to roll out a multitude of new private lines over the next few weeks, encompassing categories ranging from fresh food to diapers, coffee to detergents, according to a story this morning in the Wall Street Journal.

The piece says that the new brands could start popping up on Amazon within a month, and are the result of a development process that has taken several years. The program "is aimed at winning sales in niches with generally higher profit margins, as well as giving the Seattle retailer a potential edge in crafting new products ahead of its own vendors," the story says. At this point, it is unknown whether Amazon will identify the own-label items as being upscale or value-oriented products.

There is some expectation, the Journal writes, that Amazon will use its more than 50 million Prime members as an engine to drive the private label initiative, either offering them exclusive access to the products or better prices; it is an approach that Amazon is uniquely able to take since virtually every person who signs onto its site sees a different home page and different featured offerings. It also is possible that Amazon will somehow connect the private label items to either its Prime Now same-day service or Amazon Fresh - or both.

While private label has a growing presence in US supermarkets - the Private Label Manufacturers Association (PLMA) estimates annual private label sales at more than $118 billion last year, up $2.2 billion from the previous year - the Journal notes that "Amazon has stumbled in private labels before. Its Elements line, which promised greater transparency about where and how goods were made, initially included diapers, but Amazon pulled them weeks after launching in late 2014, citing design flaws." That said, its Amazon Basics line is said to be up to more than 900 SKUs.

And, the story notes, "Food production carries particular risks. For its new brands Amazon will depend on manufacturers that may have varying quality controls. Any health-related recalls could damage Amazon’s reputation."
KC's View:
I can see both advantages and pitfalls in the private label strategy, but in the end, I think, long-term success will depend on the degree to which Amazon can develop products with a clear differential advantage over national brands beyond just price. If these are just national brand-equivalent with a small price advantage, I'm not sure that'll be enough to make them game changers. But if Amazon really is trying to be innovative and make these items better than national brands, then it'll be able to move the needle.

I'd suggest that Amazon has to think like Costco in terms of private label strategy; Costco, after all, has such a strong private label that in some cases its own-label items are priced higher than national brands. Or, Amazon needs to emulate its own private label strategy in the video segment - coming up with a variety of offerings ("Transparent," "Catastrophe," "The Man in the High Castle") that is is clearly different from what others are offering.

Private label groceries is something that Amazon has been flirting with for years, but it seemingly has been unable to come up with the secret sauce that would make it work on a broad scale. It'll be interesting to see if they get it right this time ... though, as Jeff Bezos has said, Amazon is nothing if not a place where it is possible to make big bets and fail, because that's how big successes are achieved.