Some Amazon vendors are learning the hard way that selling their wares through the retail giant is a double-edged sword.

As detailed by Bloomberg's Spencer Soper, Amazon's private label brand, AmazonBasics, has grown to more 900 products.

And its expansion appears to be driven by insights the mega-retailer has gleaned from its troves of sales data:

At first, AmazonBasics - launched in 2009 - focused on batteries, recordable DVDs and such. Then for several years, the house brand 'slept quietly as it retained data about other sellers’ successes', according to the report.

But in the past couple of years, AmazonBasics has stepped up the pace, rolling out a range of products that seem perfectly tailored to customer demand.

Soper points to Rain Design, maker of a best-selling laptop stand, as an example of Amazon's strategy.

Last year, AmazonBasics began selling a similar laptop stand, but at half the price, cutting into Rain Design's sales.

Unfortunately for Rain Design, because Amazon's stand doesn't infringe on the company's patent, there isn't much it can do.

According to Chad Rubin, who runs ecommerce firm Skubana, Amazon "know[s] what people want and they're going to mop it up."

By Skubana's count, Amazon is increasingly doing just that, and added nearly 300 products to its AmazonBasics portfolio last year alone.

Beyond AmazonBasics, the 800-pound gorilla of online retail has launched a number of private label apparel brands, including Lark & Ro, Scout + Ro, Franklin & Freeman and Franklin Tailored.

These are now estimated to sell more tham 1,800 different products, putting Amazon directly in competition with former partners like Gap and Eddie Bauer.

Amazon's advantages

While sellers like Rain Design hope that customer loyalty will help them weather the competition from AmazonBasics, Amazon has a number of major advantages.

The biggest: it owns the data.

That gives Amazon the ability to identify the ripest opportunities, including those that others don't even know about, and attack them with a level of insight that competitors don't have access to.

Amazon also owns the customers and customer experience, making it more difficult for sellers like Rain Design to build the kind of loyalty that might encourage customers to pay significantly more for a product.

Finally, Amazon has the wherewithal to experiment and fail quickly. As Soper notes:

Amazon's size gives it an advantage over so-called direct-to-consumer startups such as mattress seller Casper and eyewear merchant Warby Parker because Amazon can experiment with one product rather than having to build out an entire line. If an item flops, it's no big deal.

It's not just ecommerce

Of course, Amazon isn't the only company that's seeking to take advantage of ownership and control of data and customers.

Publishers are increasingly being pushed to abandon themselves to Facebook, which is working to get more and more publishers to publish their content directly on Facebook using Instant Articles and Facebook Live

Other popular social platforms, like Pinterest, are also taking advantage of the willingness of third parties to publish content outside of the channels they own and control.

Obviously there's no guarantee that platforms will eventually look to cut out these publishers – Snapchat's retreat from original content reveals numerous challenges in doing this.

But the rise of Amazon's private labels and the impact it is having on Amazon sellers like Rain Design serves as a powerful reminder to all companies: if you don't control your data and customers, you can't really control your future.

Patricio Robles

Published 21 April, 2016 by Patricio Robles

Patricio Robles is a tech reporter at Econsultancy. Follow him on Twitter.

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Comments (3)

Pete Austin

Pete Austin, CINO at Fresh Relevance

To put this in proportion, Amazon sells over 480 million products in the USA (December 2015 figure, see link). Compared to Amazon Basic selling about 900 products. That's 500,000:1. So I don't think many Amazon sellers will have this problem.
https://export-x.com/2015/12/11/how-many-products-does-amazon-sell-2015/

about 2 years ago

Patricio Robles

Patricio Robles, Tech Reporter at Econsultancy

Pete,

There's a very, very long tail on Amazon. Most of the products on Amazon don't sell much at all, so the 480 million figure is a red herring. The big money is in the head of the demand curve.

The top-selling products on Amazon generate significant sales. Thanks to all of the data it has, Amazon can opportunistically target the lowest hanging fruit among the top-sellers, displacing companies like Rain Design with modest effort and investment.

about 2 years ago

Adam Pritchard

Adam Pritchard, Director at Project Octo

Of course Amazon will roll this strategy out to more than 900 products - research, business case & manufacturing take time. Exactly what supermarkets have been doing with their budget/economy ranges too. eCommerce is progressively about customer data and Amazon has loads of it. They want to become a one-stop global supermarket selling their own label items where possible.

almost 2 years ago

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