Profitero Blog
Amazon to Expand Private-Label: From Food to Diapers

A box from Amazon.com is pictured on the porch of a house in Golden, Colorado in this July 23, 2008 file photo. Amazon.com Inc's quarterly earnings beat Wall Street's most bullish expectations as the world's largest Internet retailer brought costs under control, sending its shares up almost 15 percent. REUTERS/Rick Wilking/Files (UNITED STATES - Tags: BUSINESS)

According to a report in The Wall Street Journal, Amazon is planning to launch multiple private-label lines across a wide variety of product categories (including perishable goods like baby food, tea, coffee, vitamins, nuts and spices, and non-perishables like laundry detergent) in just a matter of weeks.

The sale of Amazon’s new own labels, with names including Happy Belly, Mama Bear, Presto! and Wickedly Prime, will be exclusive to Prime members, as Amazon seeks to add yet another perk to becoming a Prime member – the $99-a-year unlimited shipping program that is helping to fuel Amazon’s retail growth. A report in Re/code suggests that Amazon could have between 60-80 million Prime subscriptions worldwide.

At the beginning of 2015, Amazon was forced to recall its Elements own-brand diapers due to a design flaw, but with edible goods the stakes are even higher.

According to Profitero’s VP Strategy and Insights Keith Anderson, “As the Elements diaper launch proved, premium private-label is hard — especially for high-involvement consumables like food and baby products. People care a lot about what they eat and put on their babies.

“The economics of CPG eCommerce suggest high potential for private-label. Just as they do offline, shoppers are looking for value. And Amazon and other online retailers are looking for margin.

“With its third-party marketplace, position as the number one product search engine and premier repository of customer ratings and reviews, Amazon has an amazing insights and analytics engine to drive new product development based on customer demand and preferences.

“The challenge will be in building trust and meeting or exceeding shopper expectations. This is a high-commitment business, and Amazon is comfortable with long-term, high-commitment investments. I don’t expect overnight success, but Amazon likely doesn’t either.”

With Amazon accounting for 60% of all US online sales growth in 2015 (according to Forrester) Amazon’s continued move into private-label will put even further pressure on grocery retailers. While food is a low-margin business compared to other product categories, retailers increasingly recognize that grocery holds the key to achieving the market penetration needed to succeed in eCommerce.

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