retail news in context, analysis with attitude

The Wall Street Journal is reporting that Amazon "has started drastically reducing the number of items it sells under its own brands, and the company has discussed the possibility of exiting the private-label business entirely to alleviate regulatory pressure, according to people familiar with the matter."

The story notes that Amazon has some 243,000 SKUs in its private label portfolio, using 45 different house brand names.  Across the board, with a few exceptions, sales are said to be "disappointing," and not worth the grief that Amazon gets from regulators who have accused the company of giving preferential treatment to own-label items at the expense of outside brands.

"Over the past six months," the Journal writes, "Amazon leadership instructed its private-label team to slash the list of items and not to reorder many of them, the people said. Executives discussed reducing its private-label assortment in the U.S. by well over half, one of them said."

The Journal reports that Amazon's private label business accounts for about one percent of its sales, though a few years ago, then-CEO Jeff Bezos challenged employees to drive private label sales to 10 percent by 2022.  It didn't work.

The story notes that "US lawmakers have proposed legislation aimed at big tech companies including Amazon that would bar dominant tech platforms from favoring their own products and services. On Thursday, Amazon proposed concessions to settle two antitrust cases against it in the European Union. Amazon promised not to use nonpublic data about sellers on its marketplace, after the EU accused Amazon of violating competition law by using nonpublic information from merchants to compete against them."

KC's View:

To be honest, I've long believed that Amazon's portfolio of private label brands is way too extensive and unfocused.  I think it would make a lot of sense not just to cut back on the SKUs, but on the brand names that don't really add up to much other than confusion;  I'm not sure that Amazon has effectively communicated the value of the various brands, and so what's the point.  (Actually, the poor sales numbers would suggest that Amazon hasn't been effective at all in doing this.)

If I were Amazon, I'd boil much of it down to Amazon Basics - it is a name that makes sense, the items can be cherry-picked so that only the ones that make sense are kept.  (Ironically, Amazon Basics batteries always have been held out as an example of how private label can work well.)

And sure, this likely would assuage some of the regulators and legislators hostile to Amazon's approach to private label.  I've never really bought into the accusation that it is wrong for Amazon to be able to give preferential treatment to own-label items - that's what every retailer is able to do - but sometimes you have to do what you have to do.