Amazon Is Taking The Axe to Its Private-Labels

Product Sprawl

For over a decade, Amazon (AMZN) has built up its private-label business, which as of 2020 boasted 243,000 products under 45 different labels. The segment was previously identified as a key driver of growth. Former CEO Jeff Bezos once challenged the division’s team to capture 10% of company sales by 2022.

Initially just electronics were offered under the house brand. But as the team responded to the growth initiative, thousands of items from coffee to clothing were added to the collection.

The Thrill is Gone

It seems company executives are starting to sour on the division. This is likely due in part to the division’s mixed success with numerous items languishing unsold on warehouse shelves. In recent months, company executives did an analysis to identify low profitability items to be axed.

The product line has also attracted regulatory scrutiny and allegations of antitrust behavior and questionable business practices that allegedly gave the tech giant an unfair advantage as it competed with merchants on its platform. These accusations include using data on third-party sellers to create copycat versions. The company has also clashed with both the SEC and the EU.

Strategic Shift

For consumers who look to save by shopping store brands such as those offered by Target’s (TGT) “Up & Up” product line or Walmart’s (WMT) “Great Value,” Amazon’s shrinking private-label product line may disappoint. Still, Amazon executives assert they will not unwind the operation entirely, but rather focus on those products that are most popular with online shoppers.

With fewer products under the house label, the company plans to stock remaining product options at warehouses across the country where they can be quickly delivered to customers.

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