Amazon is many things: online retail juggernaut, Oscar-winning studio, proprietor of the cloud that powers half the web.
Now it’s added number-one battery maker and leading baby wipes brand to the list.
The Seattle company has spent more than two decades building itself into a giant ecommerce platform to connect buyers and sellers of all manner of things. In doing so, it has turned the retail industry upside down. Few companies haven’t felt the Amazon effect in some way.
That success hasn’t blunted the company’s ambitions. Not content to just be the middleman, Amazon has begun in the past few years to slap its brand on all manner of products—dog crates, dumbbells, dried seaweed—through an arsenal of cheap in-house brands.
Not all have been hits. The company had a pretty rough time designing a diaper, for instance.
But the scattershot approach has begun to pay off recently as Amazon has gained a dominant foothold across the markets of a number of everyday goods.
The success earned it a shoutout in “Queen of the Internet” analyst Mary Meeker’s influential yearly online trends presentation last month. According to Meeker’s slides, Amazon’s brands now account for nearly a third of all online battery sales and a little over 15 percent of the internet’s baby wipes market.
Not one to rest on its laurels, Amazon is meanwhile busy pushing into more uncharted—and shakier—ground. Its ambitious new efforts include a host of higher-end fashion lines and premium food labels.
Those endeavors bring some fresh challenges. Marketing boring household commodities is one thing; people don’t tend to particularly care who makes something like a surge protector or a cutting board as long as it’s cheap.
Clothes and food are a different story.
“They could easily fail here,” Kantar Retail analyst Meaghan Werle said. “They still need to establish that credibility with shoppers.”
Success, however, could go a long way toward sealing the fate of department stores and mall outlets and further undermine traditional supermarkets.
Either way, Amazon’s private-label momentum should already spook established consumer brands watching customers trickle online, where Amazon greets them with open arms and low prices.
“[Brands] can no longer view Amazon as solely a channel and need to acknowledge them as a competitor,” Jed Alpert, senior vice president of marketing at 1010data, said in a recent report.
Amazon’s many tentacles
Private labels are standard practice for big retailers—they’re the generic names you see in supermarket aisles or the typically bland clothes on department store racks.
Stores like them because they undercut supplier markups and don’t require a ton of marketing spend thanks to guaranteed display space. That allows retailers to offer them at bargain rates.
The rationale in Amazon’s case is no different, but the company’s many-tentacled business model also affords its brands a few functions that other companies can’t offer.
For one, Amazon has the wealth of data to predict exactly what people want. Decades of accumulated knowledge on its customers’ online shopping habits inform every inventory decision.
The company is also increasingly reinforcing private-label buying with Alexa, its digital assistant installed in Amazon’s Echo home device and a handful of other gadgets. Were you to simply ask Alexa to order batteries, for instance, the command would default to the AmazonBasics brand if you’ve ever bought them in the past.
Amazon is similarly working the labels into new Dash buttons, its branded single-command remotes that automatically place a set order of a given item when pressed.
“We’re starting to see more interplay between these private-label value-oriented brands and Amazon’s own devices to lock in shopper loyalty,” Werle said.
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Amazon Prime membership is another tool for marketing private labels. The company has begun to use the cut-rate prices of its fashion and food brands as an incentive for Prime sign-ups. The exclusive placements double as a more focused testing ground for new items, since Kantar’s research shows that Prime members are more willing to take a chance on items found on the site than the average shopper.
Cheap but classy
Amazon’s private label brands might be dirt cheap, but the company has made clear that it doesn’t want its new apparel and food lines to be seen as run-of-the-mill generics.
On the food front, Amazon looks to be modeling some of its grocery offerings after Trader Joe’s brands—unique, quality items that shoppers oftentimes can’t find elsewhere, according to Werle.
One example is Wickedly Prime, a snack brand Amazon launched at the end of last year, under which you can find eclectic gourmet fare like roasted seaweed, plantain chips, and cocoa truffle spread.
“Our passion [is] to experience and share the best flavors on earth,” the company says in its opening pitch for the offshoot.
Whether or not this plunge into premium is a good idea is up for debate.
“I think they need to start with more of the basics and then move into that—to build that trust first,” Werle said. “But it doesn’t seem like that’s quite their approach.”
Analysts are also a bit skeptical about Amazon’s fashion forays. The company’s sterile tech-y brand isn’t the sort of name one associates with flashy dresses and handbags.
That may be part of the reason Amazon is currently toying with how much of its trademark branding should be woven into each new rollout.
Amazon’s higher-end dress tag Lark & Ro, men’s shoe label Franklin & Freeman, and womenswear-focused Society New York all eschew any ties with the orange arrow, as do most of its other more stylish apparel fronts. Stealth launches ensure the image of each is kept at a distance from the mothership brand.
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On the other hand, the company’s more basic apparel brand, Amazon Essentials, proudly wears the corporate badge.
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Most of these clothing brands seem to have materialized in the last several months—though it’s hard to know for sure because Amazon doesn’t really acknowledge them in public. They’ve made some headway in the time since, according to a recent research report from Slice Intelligence, but still lag far behind department-store counterparts.
Sales for all of Amazon’s in-house apparel jumped 67 percent in the final quarter of last year, the report says, after slight declines in the preceding two periods.
But flagship private-label brands at Macy’s and Nordstrom still outsell Amazon’s most popular clothing outfit—Lark & Ro—by a factor of nine and eleven times respectively. The rest of Amazon’s apparel stable only chalks up a collective fraction of those sales.
Amazon clearly has some catching up to do with the outlets it’s used to leaving in the dust.
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“Consumers are willing to buy private label apparel brands online, particularly from the brands that they are familiar with in the offline world.” Ken Cassar, principal analyst at Slice Intelligence, said. “Amazon’s new private label brands will need time to develop that familiarity.”
To that end, Werle expects the fashion slate to have a big showing next month in the marketing for Amazon’s annual discount holiday, Prime Day.
The massive ramp-up of Amazon’s long-overlooked ads business could also help accord them more publicity.
One thing’s for sure at least: If anybody has the patience to give a business the runway it needs to blossom, it’s Amazon CEO Jeff Bezos and his famous knack for far-flung timelines.
BY PATRICK KULP
