Should Amazon ax its private labels to appease regulators?
Amazon.com has considered exiting its private label business altogether in order to alleviate regulatory pressures, according to multiple reports.
The company, downplaying the conversations, said in a media statement, “We never seriously considered closing our private label business and we continue to invest in this area, just as our many retail competitors have done for decades and continue to do today.”
Amazon’s in-house brands, however, are at the core of investigations launched by U.S. and European regulators over the alleged abuse of its dominance in online shopping.
Amazon has faced criticism that it sometimes gives advantages in search listings and other ways to its own brands at the expense of products sold by other vendors on its marketplace. The company has also been accused of using in-house sales data to select and copy best-selling products sold by third-party merchants.
Recode reported that as recently as last year, several top executives, including Amazon’s new CEO of Worldwide Amazon Stores, Doug Herrington, and general counsel David Zapolsky, were open to exiting private labels as a negotiating tactic with U.S. and European regulators to avoid extensive fines and more constrictive penalties.
The Wall Street Journal and Bloomberg also reported that Amazon had considered the exit option. In Europe, Amazon has already offered to refrain from using sellers’ data for its own competing retail business and its private label products.
In-house brands reportedly account for about one percent of Amazon’s revenues and include its Amazon Basics all-purpose line and numerous others. As of 2020, Amazon’s private label business offered 45 house brands across 243,000 products. The exits would not include Amazon’s tech gadgets, such as Kindle, Echo and Fire TV.
The Journal reported Friday that Amazon has also been significantly reducing its private label assortments due to disappointing sales. The goal includes culling its in-house label assortment in the U.S. by well more than half.
Reports from 2019 indicated that much of Amazon’s private label program, started in 2009 with consumer electronics accessories, was underperforming. One shortcoming seen at the time was that Amazon doesn’t invest significantly in private label brand building, instead focusing on price and basic descriptions.
- Amazon Has Been Slashing Private-Label Selection Amid Weak Sales – The Wall Street Journal
- Amazon reducing its private-label items as sales fall – WSJ – Reuters
- Amazon Considered Ending Private-Label Sales to Appease Regulators – Bloomberg
- Amazon considered ending private-label sales to appease regulators – Los Angeles Times/Bloomberg
- Amazon executives have discussed ditching Amazon Basics to appease regulators – Recode/Vox
- Are Amazon’s private labels falling short or just getting started? – RetailWire
DISCUSSION QUESTIONS: Is Amazon’s use of national brand data to inform its private label decisions different from the way other retailers handle that information? Should Amazon consider exiting its private label business to end charges and overall speculation that it unfairly favors its own brands on its platform?