Is Amazon set to become the next big CPG powerhouse?
Amazon, as most know, got off to a rough start in developing its Elements premium private label line for Prime members. Shortly after launching baby wipes and disposable diapers under the brand, the e-tailing giant pulled the plug on the diapers due to complaints about the poor quality of the product. In true Amazon fashion, the diaper fiasco has not deterred the company as it is pursuing a broad launch of food and non-food items.
The expansion of the Elements private label follows a familiar path for most traditional retailers in the CPG space: use the private label to offer consumers an equivalent quality product at a better price while delivering higher margins to the seller. According to reports, Amazon is looking at more than two dozen product categories for the Elements line including baby food, cereal, coffee, dog food, household cleaning products, milk, pasta, vitamins and water.
According to Information Resources Inc., via The Wall Street Journal, private label sales ticked up 2.1 percent last year, representing 18 percent of total CPG sales.
A RetailWire poll in January, found 58 percent were somewhat (42 percent) or much less (16 percent) optimistic about Amazon’s prospects in private label CPG following its decision to discontinue the sale of its diapers.
- You may soon be able to buy Amazon-branded milk, cereal and baby food – Fortune
- Amazon Plans to Add Its Own Line of Food – The Wall Street Journal (sub. required)
- Amazon dumps its private label diaper line – RetailWire
- Will Amazon’s new private label give Pampers a run for its money? – RetailWire
How important will CPG private label be to the eventual success or failure of Amazon’s online grocery business? What will Amazon need to do to have its private label stand out from rival national brands and private labels offered by other retailers?