Amazon has been the intermediary of the digital business and by picking up brands to vend on Amazon’s site and also lets buyers receive and pay for the items efficiently. Amazon has accepted that private label strategy is one of the key areas of their vending strategy. But what the strategy is exactly about? Why is it so profitable? In this guide, we will discuss the private label strategy of Amazon and learn how it works.
- Inthe private label strategy, the Amazon offers the cheapest prices on good products, often dragging the smaller merchant who doesn’t have more than two offerings from the market. It has launched the private label strategy for almost all categories such as apparel, electronics, and even furniture.
- Apart from the online sales, it has been making a lot of profit from organic searchers, since more than 50% of total results from online product search are from the Amazon.
- The TJI Research says Amazon has 234 brands alone in the US, along with 140 private labels. It’s assessed that by the beginning of 2002, only the private label business will reach up to $25 billion yearly.
- In June 2019, the private label offering of Amazon consisted of 7,217 products, witnessing an increase of 5% in products since the month of September 2018.
- The private label of Amazon has several categories, but clothing makes the highest share of products with a number of 5.2k. Most private label brand offers less than a hundred products.
- There has been an average rating for Amazon’s private label products. The rating is of 4.04/5 stars, with around 30% of total products rated with 4 or 4.5 per cent. Though the clothing section has the largest number of products, most of the brands are rated less than 4 stars. Only 6 clothing companies carry the rating of above 4.5 stars.
- No matter how many dresses are lying in our closet, women are in constant need of clothes and they continuously invest in them. This is the reason why it’s a major category in Amazon. Only women’s clothing companies account for 41% of all the private label brands.
- After years of customer data collection and dominance in e-commerce, Amazon has the exact idea of why, how and when people are purchasing. The collection of data has made Amazon realise that people prioritize price before buying. So, Amazon is offering products which can compete with popular brands but at affordable rates.
- Most of the brands are struggling to figure out products which could be successful, whereas, Amazon exactly knows which product will bring profit. Another reason for Amazon’s success is, it’s market dominance makes sure the launched products become successful.
If the private labels are rightly executed, private label products can generate high margins. Unfortunately, currently, they’ve Kroger and Walmart as competitors. Comparatively, these companies sell a huge number of private label products than the Amazon. Considering the growth of Amazon, it’s expected that Amazon would take over the other two companies soon.