Amazon adds a new line of products
Amazon is well known for their Kindle and Fire devices, as well as the benefits of Prime membership; now they plan on expanding their brand into milk, cereal, and baby food as well as household cleaners. As The Wall Street Journal‘s Greg Bensinger stated, “private labels have become a vital business for mass-market retailers, generating stronger margins and building loyalty with consumers who no longer view generic products as lower quality.”
Amazon has sought trademark protection for more than two dozen categories, using its selected Element brand. If you are a Prime member, you may remember the Element brand being on baby wipes, and the subsequent pulling of these wipes citing a flawed design. Many customers were also complaining about quality issues, which brings us to the first concern of privately branded items: it relies on outside manufacturers to design and vouch for the product’s quality; and when these items fall short, consumers stop believing in the validity of not only the product, but the brand as a whole.
So how will this all work?
However, if Amazon can partner with a reputable manufacturer, it could yield higher profit margins, while brokering for lower prices using many of the existing vendors with which Amazon currently has a relationship. “It makes a lot of sense for any retailer to get into private label,” said Eddie Yoon, a principal at brand consultancy The Cambridge Group. “Private label has a lot of room to grow in terms of sales and can attract a new value-focused customer.”
It will be interesting to see how Amazon actually distributes their perishables; Bensinger postulates it will be through Amazon’s Fresh delivery service, already established in several states. I think it is also possible that Amazon will nix the perishable idea, in favor of shelf-stable items that can be delivered through their existing Prime Pantry service, thereby driving up their service, as well as their product. One thing is clear: Amazon wants to find a new way to boost their reach and private labels may just be the newest venture.
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