To date, Amazon has introduced roughly 70 private label brands. This has rattled many observers, who fear Amazon’s growing influence.
But private label products are not new. The only difference between Amazon and other retailers, such as Target and Walmart, is that consumers shop on their computers instead of physical stores. Retailers have had private label products for decades, in seemingly any category you can think of. I’m not aware of any national brand that has gone out of business due to private labels.
Nonetheless, some retail experts claim that Amazon’s private labels will cause a devastating shift in the market, killing brands.
My company manages products in several categories that have been affected by Amazon’s private labels. In most cases, our sales have increased. The amount of advertising Amazon is doing to promote its private label brands brings attention to the categories. It leads to more choices for shoppers.
Retailers have had private label products for decades, in seemingly any category you can think of.
4 Myths about Amazon’s Private Label Brands
Myth 1: Amazon’s private label items will take over their respective categories. When Amazon launched its Solimo brand of razors and shaving products, I began getting calls from people as far away as Australia. This was because my company works closely with a major razor brand on Amazon, a competitor to Solimo. The callers were more or less offering their condolences.
Amazon’s launch of Solimo was similar to other retailers rolling out a private label item. With lots of ads, competitive pricing, enhanced brand pages, and prime real estate on the search page, you would think all the other razor companies were doomed on Amazon’s marketplace.
Instead, the category received more attention, and the sales for the products we managed increased over 20 percent month over month.
Myth 2: Amazon will suppress competitors in favor of its brands. I hear this from small sellers and major brands. Most don’t understand what Amazon is and what its goals are. Amazon wants more third-party brands, not less. Amazon wants to provide shoppers with the most variety available at the best prices. Suppressing brands works against its ultimate goals.
If Amazon sold only private label products, overall revenue would plummet. Don’t believe the hype that consumers are becoming less loyal to brands, and thus are more willing to switch to private labels. That argument has been occurring for decades. But brands such as Apple, Coca-Cola, Disney, and Toyota sell more products every year.
Myth 3: Millennials aren’t brand loyalists. Millennials are just as materialistic as previous generations. Materialism isn’t dead in the age of the selfie!
For example, Cardi B is one of today’s most popular musical artists. She has 34 million followers on Instagram. If she would post a video of herself eating Kellogg’s Frosted Flakes, some of her followers would log on to Amazon and buy a box. If Amazon had a private label Frosted Flake-type cereal, none those followers would choose it for, say, $2 less.
Millennials are just as materialistic as previous generations.
There is also a concept that millennials are more into frugality than flash. Yet, 50 percent of Gucci’s customers are millennials. Yves Saint Laurent has a 65-percent millennial customer base.
In short, brand loyalty is alive and well.
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Fashion Nova v. Cable Stitch
Instagram has become the primary source of inspiration for millennials who follow celebrities and influencers. If a celebrity is wearing a particular type of makeup or brand of clothing, many of her followers will do the same.
Fashion Nova is the most searched for clothing company on Instagram. Fashion Nova is “an Instagram brand,” according to its CEO. Celebrities wear the clothing and insert @fashionnova in their Instagram feed, prompting millennials to purchase their own Fashion Nova garments, post, and add the hashtag #novababe. The result is a viral brand.
Fashion Nova is not going to lose business to an Amazon “Cable Stitch” private label tank top.
Similar examples apply to yoga clothing, lipsticks, makeup application sponges, pore cleansers, face masks, and tea. Just because Amazon offers a lower cost version of these products does not mean that the current brands are at risk of losing sales.
Amazon is the new, convenient superstore. Like its physical-stores predecessors, the merchandise is displayed side-by-side. The difference is that on Amazon shoppers use site search to locate an item instead of walking the aisles.
Amazon’s private label products won’t do any more damage than the private labels of grocery stores or big-box chains. There is no innovation that will destroy brands any time soon.