AmazonBasics has reported over $400 million in sales, and they’re continuing to grow at an unprecedented rate. AmazonBasics started as one of Amazon’s first private labels, and it’s grown stronger and stronger with Amazon’s infiltration of the private brand world. AmazonBasics could just be the beginning. With over 100 private labels, Amazon is taking over the e-commerce world one brand at a time.
Let’s take a look at the role of AmazonBasics in the e-commerce sphere and how Amazon is using private label to change the game—and what this means for your seller strategy moving forward.
Where it all Started
In 2009, Amazon gently eased its way into the private label sphere by launching AmazonBasics. They started by selling simple home goods you could get at a local hardware store, like power cords and cables.
Their biggest seller at the time? Batteries. They were offering batteries at a 30% reduced price compared to national brands like Duracell and Energizer. In just a few years, they had captured a third of the online market for batteries. On Amazon’s platform, AmazonBasics batteries were the top sellers over all other battery brands.
So this made Amazon executives stop and wonder… If it was so easy to penetrate the battery market, what other potential markets were out there ripe for the taking?
Now, AmazonBasics has expanded into a variety of product categories to simplify the “basics” of your life, including:
Kitchen and dining
AmazonBasics offers the basics… but they’re expanding quickly. In 2013, there were about 250 products available in their line. Now, there are over 2,000 products and counting.
Amazon’s goal with the basics line seems to be to permeate every area of your life, from your smart home devices to the batteries you put inside them. Amazon wants to be the product of your home.
Is their goal coming to fruition?
How have AmazonBasics and other Amazon labels expanded?
Amazon has over 100 private label brands in their arsenal, and they’re constantly adding more. Everyone knows Amazon’s Echo and Alexa, but there are so many other brands that are penetrating nearly every category of product.
Some of their brands include Wag dog food, Spotted Zebra kid’s clothing, Good Brief men’s underwear, Rivet home furnishings, and Mama Bear baby products. Their Whole Foods private label 365 Everyday Value is also incredibly popular, hitting over $10 million sales in 2017. Check out all of Amazon’s private label brands here.
The Amazon private labels that do the best are actually those that have the Amazon name in them. For example, AmazonBasics performs better than Good Brief. That’s why a lot of Amazon’s newly launched lines have their brand in the name, like Wag’s official name is Wag Dry Dog Food by Amazon.
This tells us something interesting about private labeling. Customers want to buy private labels from brands they know and trust. Seeing the Amazon name encourages them to buy because they already know the quality and service they get when interacting with Amazon. The trust Amazon has established with its customers makes them more successful in private labeling.
Why does Amazon push their private label?
Amazon has admitted that private labeling is a huge part of their retail strategy. They’re going to continue to roll out more private labels and expand their current ones, like AmazonBasics, in the coming years. What advantages does this have for their business?
First, it’s a revenue boost. There’s a lot of money in private labeling, and Amazon isn’t about to miss out on any opportunity for sales. You can always bet on Amazon following the dough—and doing so successfully.
Second, they’re using their labels to fill a gap in the market, especially if manufacturers aren’t selling on their platform, in order to better meet their customers’ needs. For example, Ralph Lauren doesn’t sell on Amazon. So you’ll find polo shirts and button downs through Amazon Essentials—and at a fraction of the cost.
Third, Amazon is all about branding. They’ve built a brand that people love and trust. It’s no secret that Amazon is looking to take over the world in every category. Customers already trust the retailer they’re patronizing, so it’s not a far leap to trust their label brands in tandem. This kind of “double loyalty” is a great way for Amazon to grab and hold their customers in every product category.
Finally, one of Amazon’s biggest moneymakers is Prime. They have over 100 million Prime members paying $99 annually (soon $119 a year) just to be part of the Prime family. = This is huge “clean” revenue for them since it is basically a subscription service with very little overhead.
Here’s the kicker: AmazonBasics is only available to Prime members. So, for customers who want to buy some of Amazon’s private brands, they need to pay to show extra to their loyalty and interest.
Amazon’s brand is so strong that customers are paying an annual premium to buy into the family and have access to Amazon-specific labels.
What is Amazon’s private labeling advantage?
The question on everyone’s mind: does Amazon have an unfair advantage on Amazon.com?
In short, probably.
First, Amazon pushes its own goods to the top of search results. Their algorithm is programmed to prefer Amazon brands along with Amazon-fulfilled third-party goods. So, if we’re looking at sheer visibility based on search, Amazon is always going to win.
An even greater advantage is that Amazon has immense knowledge about their customers and competition. They have so much data at their fingertips that they can create product and marketing strategies that almost have no chance of failure. They have word-search algorithms to deeply understand what is and isn’t trending in product categories. They can take a look at their customer-review networks to better understand their customers’ pain points. They even have access to their competitors’ sales data, because their competitors are selling right on the Amazon platform.
Amazon retains endless data points from its customers and competitors that make it easy for them to strategize their own private labels.
Plus, as voice search and ordering becomes more commonplace, Amazon is going to put their brand at the forefront even more. If you ask Alexa to buy batteries, it will automatically purchase from AmazonBasics. Amazon is the only choice for products.
Is this monopolistic? Sort of. Amazon is toeing a fine line between delivering to the customer and boxing out their competitors. If Amazon starts preventing customers from buying from other brands, there could be a monopolization suit against them within the next few years.
Can third party sellers compete with Amazon’s private labels?
Brands big and small are starting to worry about Amazon’s private label takeover. Amazon is a powerhouse, and they’re now putting themselves in direct competition with their vendors. They’re able to offer lower prices, enhanced marketing, extensive brand recognition, and a greater understanding of the customer.
So how can private sellers and big brands keep up?
It’s sort of a catch 22. In order to compete with Amazon, you need to be selling on Amazon. The millions of customers present on and loyal to Amazon means your brand has access to opportunities you can rarely find elsewhere. Amazon also offers a lot of strong seller services, making it the most streamlined sales platform for small to medium-sized businesses.
Some big brands are spending six figures every month to advertise on Amazon… but is it worth it? Or is Amazon going to start pushing these brands out in favor of their own?
AmazonBasics and other Amazon labels are constantly expanding, which is going to dramatically impact seller strategy moving forward. You can’t escape the Amazon monopoly, but you can prepare for it.
Taking action now to grow your brand awareness and loyalty could put you at a serious advantage moving into the Amazon-controlled future. The best way to grow fast and furious is to start now… and to start with Seller’s Choice. Contact us to improve your brand on and off Amazon to position you for future success. There’s never been a better time to start beating Amazon.
Learn more about how you can break into the private label sphere with the following resources: