Amazon’s private labels

Amazon is a big and very aggressive company, that’s radically changing how retailing works, and that attracts a lot of scrutiny and a lot of criticism. Some of this is entirely justified. However, there’s one strand of criticism that fascinates me because it attacks Amazon for something that’s been part of retail for 150 years - the private label business.

Amazon looks at data on what sells on its site, both the first party operation and, perhaps, the third party marketplace (which is 60% of volume), and uses that to commission its own products, which it sells in competition with its suppliers and without necessarily any obvious indication that they come from Amazon. There are hundreds of these ‘Amazon’ brands and thousands of products, competing with the products from Amazon’s suppliers. Some people feel very strongly that this is bad.

The trouble is, this model has been part of retail for generations. Today, most big retailers have a double-digit percentage of revenue from private label. This is a set of charts I’ve collected over the last few months showing how universal this model is. The best estimates I’ve seen, incidentally, put this at perhaps 1-2% of Amazon sales.

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These charts are recent, but the model is not new at all. In 1932 the US FTC produced a 130 page report on ‘chain store private brands’ (available here on Google Books). 80% of stores in America sold private label (Read more...)