Are private labels the key to beating Amazon?

Discussion
Source: canadiantire.ca
Sep 28, 2016

While Amazon.com has had mixed results with its own label products (Kindle and Echo, good; Fire phones and disposable diapers, not so much), it’s clear Jeff Bezos and company see these products as a means to differentiate the company’s offerings from competitors, both online and off. As it turns out, Amazon’s rivals also see private labels as one way they can level the competitive playing field with the e-tailing giant.

An article on The Globe and Mail website points to retailers, including Canadian Tire, Hudson’s Bay, Loblaws and Walmart, as using their own labels to gain an edge. By emphasizing its private labels, Canadian Tire is looking to negate any price advantage Amazon may have with its dynamic pricing model.

The retail store operator, which operates more than 1,700 locations across three core banners — Canadian Tire, FGL Sports, Mark’s and Sport Chek — has been promoting its FRANK, Outbound and Woods brands to hold onto existing customers while attracting new ones. The company, according to The Globe and Mail report, is even considering selling its private labels internationally, perhaps even on Amazon.

Canadian Tire achieved a comparable sales gain of three percent year-over-year during the second quarter.

DISCUSSION QUESTIONS: What role do you see private labels playing for retailers looking to outcompete Amazon? In which product categories do you see Amazon as most vulnerable?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Private labels will offer Amazon major competition. I see them being most vulnerable in apparel. "
"Private labels are one of the best possible ways for retailers to out-compete Amazon (and there are mighty few ways available...)"
"In an ever-commoditized retail world, retailers have to compete the way that corn, soy, wheat and other commodities producers do."

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14 Comments on "Are private labels the key to beating Amazon?"


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Max Goldberg
Guest

Private-label products are usually sold for less than comparable name brands and are unique to a specific retailer. Some retailers, like Trader Joe’s, predominately sell private label. If these products can connect with consumers for quality and price they can build retailer loyalty while providing healthy margins, and can counteract Amazon. Bezos and Co. know this and are working to build their own brands. I never count Amazon out in any category they set their mind to enter but, for the time being, brick-and-mortar retailers are winning the private-label competition.

Peter Charness
BrainTrust

Saw a recent article that noted that Amazon and Amazon Marketplace now carries over 300 MILLION products. If a customer wants it, they got it. Retail is shaping up to be a battle of the brands, since price and convenience are becoming table stakes in the customer shopping experience. If you don’t own a brand that shoppers want to buy, the reasons for them spending money with you are quickly slipping away. For longevity in retail you need to own something that no one else has and that the Customer wants. Otherwise you’re going to be lost in a sea of me-too alternatives.

Jasmine Glasheen
BrainTrust
Jasmine Glasheen
Content Marketing Manager, Surefront
5 years 9 months ago

There’s a shift from big-name labels to smaller, high-quality designs happening in the apparel industry. People aren’t willing to pay as much for a label — discovering a new designer with innovative, quality merchandise is the new pride point for shoppers.

The companies I work with are more excited about their up-and-coming designers who aren’t fast fashion, but offer very high quality merchandise at a moderate price point ($50 to $150 per piece).

Private labels will offer Amazon major competition. I see them being most vulnerable in apparel. Customers are slow to trust brands they haven’t heard of and Amazon is selling their branded merchandise at prices customers can find elsewhere.

Lee Peterson
BrainTrust

Private label is absolutely ONE of the keys to beating Amazon. Customer service, quality of said private label and (if you have stores) a great environment being some of the others. Amazon is the same as Walmart only more convenient. Remember how we discussed beating Walmart for about 20 years? Some, like Abercrombie or Whole Foods, paid no attention to them and were on top of the world. Think of those lessons: quality private label, cool stores, very distinct brand positioning, great staff (maybe not so much at A&F, other than looks) and consistency across all those factors.

Same David vs. Goliath game, different Goliath.

Richard J. George, Ph.D.
BrainTrust

Private label in food retailing has become a recognized strategic tool to deal with the competitive array. Originally, private label was used as a price diffentiator versus national branded alternatives. However, food retailers discovered that a successful private label strategy focused on product differentiation beyond simply low price. The goal was to change the store choice based on unique offerings. The classic example of private/own/control label was President’s Choice, originally a Canadian innovation (Loblaws).

Unique private label offerings become the ante in the battle with Amazon et al, who have no limit to their national brand offerings. Such offerings drive needed store visits.

Shawn Harris
BrainTrust
Shawn Harris
Board Advisor, Light Line Delivery
5 years 9 months ago

In an ever-commoditized retail world, retailers have to compete the way that corn, soy, wheat and other commodities producers do. Retailers have to innovate on product, bundle items for value pricing and target the most profitable segments while being brutally efficient. Private-label offerings with good-enough performance, and that are priced right, will add to the retailer’s profits and can lead to some customer take-backs. However, at this point, competing against Amazon is about much more than product.

Tom Redd
Guest

Private label is a way to have items that shoppers can only get at your stores and also protect margins. That is a given. The key is to make sure it is what the shopper wants or needs and then really promoting the new brand to take some mindshare. It will work and Jeff Bezos will have problems with private label. Amazon still is packed full of millions of knock-off trash products, so the time is now to create quality brands and push them over all reliable channels — not Amazon. Amazon will have more of a mess on their hands with their 300 million products if they do not dump the trash knockoff items. The returns alone and massive negative reviews will do more damage than Jeff ever imagined.

Tom Dougherty
Guest

Sure, private labeling may help Amazon’s competitors, but it’s not the silver bullet. Retailers are floundering for other reasons that go beyond tactics. Few are actually building differentiating brands that would compel consumers to seek out the retailer over the convenience of Amazon.

Having said that, if retailers get smart about it, Amazon could find itself in a similar spot as Netflix. Netflix just announced that 50 percent of its content will eventually be Netflix programming. Amazon might see that kind of future too (although nowhere near 50 percent) but I kinda doubt it. Retailers need to change the paradigm much more than simply private labeling to force Amazon to aim for that.

Naomi K. Shapiro
Guest

Private labels are one of the best possible ways for retailers to out-compete Amazon (and there are mighty few ways available for “beating” or at least “confounding” Amazon). Private label makes comparison and competitive pricing of the competing private label product difficult, if not impossible. Disclaimer: As a price intelligence and price optimization provider to major retail companies, we are on the front lines to provide support to our own clients on these very subjects. Our most recent blog post, 6 Ways Retailers Gain Control By Using Private Labels, talks about retailer control over branding, pricing, design, customer preferences, value perception and competitive maneuvering.

Ryan Mathews
BrainTrust
There’s a significant difference between how you think about, resource, manage and promote a “label” and a “brand” and, while I don’t think private labels are a way to beat Amazon, I am extremely bullish on the topic of proprietary (or retailer controlled) brands. This just isn’t semantics. Amazon is a great brander and to be better than they are one needs to beat them at their own proprietary brand game. What categories are they vulnerable in? Depends on the uniques, quality and value of the proprietary brand items we are talking about. Areas relying on design as a key value component — fashion, home furnishings, etc. — are obvious choices. So is food, assuming the logistical hurdles can be cleared. Health & Beauty may be another area ripe for the picking. But thinking about it in terms of categories really misses the point. If you want people to buy things they have to be good. So the emphasis should be on improving the quality of the products — irrespective of category — and moving… Read more »
Ben Ball
Guest

Is it completely impossible for us to learn that a “private label” is simply another brand owned by a retailer instead of a manufacturer or third party? That the sole differentiating factor of that brand — beyond all of the elements of quality, design, price, etc. that are common across all brands — is that it is exclusively available at one retailer? And the most commonly exploited of the common elements by private label is price (though some retailers know and do better to be sure!).

Now we are discussing the advantages of expanding distribution of a private brand to other retail outlets — and perhaps even the great Satan itself Amazon?!?! (BTW, that isn’t necessarily a bad strategy IF you have a good brand. Sears Holdings is probably making more profit off Craftsman brand sales in other outlets than they are in their own stores.)

But how is this going to provide differential advantage against Amazon’s core benefits of instant accessibility and near-infinite selection? All with “free” delivery? I just don’t see it, folks.

John Karolefski
BrainTrust

This is simple. Private label is the key to out-competing ANY retailer, either in physical stores or online. But the key is offering quality private label goods; that is, products that obtain and maintain the loyalty of shoppers. Run-of-the-mill house brands don’t have an impact.

Tom Dougherty
Guest

The power of the private label is tied to the value the parent brand holds on the consumer. But to make a private label to fend off Amazon is going to be a difficult challenge. By definition, the consumer expects to pay less for a private label and thus the margins are less. Sears discovered that their parent brand and their private label (Kenmore) was not strong enough to compete with an onslaught of competitors so they added other name brands to their lineup of appliances.

Whose parent brand is strong enough now to do this is the question.

“The logical end of defensive warfare is surrender.” – Napoleon.

Jenn Markey
Guest
5 years 9 months ago

During this year’s back-to-school season, many retailers focused on private label, exclusive products and various assortment ploys to remain relevant with shoppers and avoid head to head price competition with Amazon and others. In a recent study by 360pi, we observed 44% of Staples’s curated shopping list for 3rd-5th graders during back to school was private label. Likewise, 48% of all clothing featured in Target’s Labor Day ad was its private label, Cat & Jack. For the upcoming holiday season, we expect to see similar assortment tactics applied by retailers seeking to remain competitive and protect margins at the same time. 

wpDiscuz
Braintrust
"Private labels will offer Amazon major competition. I see them being most vulnerable in apparel. "
"Private labels are one of the best possible ways for retailers to out-compete Amazon (and there are mighty few ways available...)"
"In an ever-commoditized retail world, retailers have to compete the way that corn, soy, wheat and other commodities producers do."

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