Amazon has made significant investments in its own private label brands, in areas such as diapers, dog food, and paper towels. The company’s private label strategy could be indicative of a burgeoning trend in retail, which mid-market ecommerce companies could try.
But competing with Amazon and other large retailers that have created private label brands is not easy. To help us understand, I recently spoke with Ojastro Todd, marketing analyst at One Click Retail, a provider of ecommerce data measurement, sales analytics, and search optimization for brand manufacturers in North America and Europe.
What follows is the full audio interview and its transcript, edited for length and clarity.
Armando Roggio: Tell us about your background and your company.
Ojastro Todd: My background is mainly in statistics and data analytics. I’ve been with One Click Retail for a little over a year. We’re a company that focuses on ecommerce analytics. One of our main metrics is Amazon “Sales and Share,” which measures, for any item on Amazon, weekly sales, trends, and goings on in the marketplace.
Merchants are interested in competitive snapshots, especially on private brands. We’re tracking a majority of those private label items over time to see what approaches Amazon is using.
Roggio: What is Amazon’s strategy with private labels?
Todd: Amazon has been expanding its private labels very rapidly. Amazon releases a wide variety of brands in many categories. It’s a massive expansion but a little bit in a lot of areas.
Amazon tracks these private label items to see how they sell. Then they expand into the categories that would make the most revenue.
Roggio: How many products are we talking about?
Todd: Amazon doesn’t advertise some of these products and brands as openly as others. But there are easily over 80 private labels brands. Among them are likely hundreds or thousands of items.
Roggio: How does Amazon identify a private label opportunity?
Todd: If we look at some of Amazon’s earlier private labels — Amazon Basics, for example — they expanded into batteries and cable chargers back when those categories didn’t have major brands. The categories weren’t as packed.
As a result, Amazon has now taken over those categories. The largest battery brand by far on Amazon is Amazon Basics. However, with recent brands such as Wag [pet supplies], Mama Bear [baby products], and Presto [household and health items], they’ve moved into categories where they might not end up being the largest brand. There’s still a lot of revenue potential for Amazon in these categories and a lot of sales and traffic that they can drive from them.
Roggio: Does Amazon seek a particular price point for its private labels?
Todd: We did some price analysis on Mama Bear when the diaper brand came out. In general, it was slightly cheaper than most the comparable lead brands. This is the case with a lot of Amazon Basics’ items as well. A large number of Amazon private brands do have that generic low cost feel to them. But that’s not always the case across all of Amazon labels.
Roggio: What are some of the advantages to a private label brand?
Todd: One of the big advantages of private label brands, especially for Amazon, is that it generates customer loyalty. If customers are used to buying Amazon Basics, they could end up subscribing to monthly shipments of Wag dog food, for example, which will keep them in the Amazon ecosystem.
Amazon is becoming a household name. It realized that it could leverage that name in its own brands.
Roggio: What are the lessons for mid-market businesses?
Todd: For a retailer of any size or any company that’s trying to launch a brand online, make sure to get reviews early. Your sales aren’t going to take off until you have a large number of high-quality reviews. At the same time, that requires quality control. Minimize negative reviews with excellent service and quality. Respond to questions. Make sure that your product page is clear and direct.
Roggio: Say I’m a mid-market company selling through multiple channels. Should I be concerned about Amazon’s private label strategy?
Todd: Amazon’s private brands tend to drive traffic to that category in general. Even though the traffic may be biased towards a private brand, it could help all the brands in that category. Certainly many sales may go to Amazon’s private labels that would otherwise go to other companies.
Roggio: So it’s sort of the “rising tide lifts all boats” approach?
Todd: Yes. If more coffee pods are sold on Amazon, for example, then all coffee pod brands on Amazon should benefit.