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Supply Chain News: Amazon Cutting Poor Performing Private Label Efforts Way Back


Claim Amazon Considered Exiting the Business to Relieve Regulatory Heat Disputed by the Company

July 19, 2022
SCDigest Editorial Staff

When Amazon first launched a private label business in 2009, there were certainly concerns that not only was Amazon dominating on-line sales, it would expand that position by featuring its own brands, perhaps using lower prices than those of brand companies on its sites.

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The Journal article notes that Amazon founder Jeff Bezos, now in an executive chairman role, has been a long-time backer of the private label strategy.

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That concern, it now seems, was way overblown, at least in terms Amazon private label’s marketshare, amid disappointing sales for many of the items. Example brands include Basics, Goodthreads and Solimo.

The private label business has over that time expanded dramatically in terms of SKU counts, with something like 243,000 products across 45 different house brands as of 2020, according to an article in the Wall Street Journal. There are private label SKUs representing everything from consumer packaged goods to apparel to furniture.

Now, Amazon is going to pare back that SKU count dramatically, sources say. It even considered leaving the private label business entirely to address a related regulatory concerns.

In the first half of 2022, Amazon executives Amazon directed its private label managers to significantly reduce the SKU counts and bring an end to many of them.

The private label business has simply been unable to move the needle, with the company in the recent past saying that its private label brands only account for about 1% of its retail sales.

Then there are the regulatory headaches.

In 2020, a Wall Street Journal investigation found that some Amazon employees used data from sellers on its Marketplace platform to develop Amazon-branded products that compete with those sellers.

The Journal also noted that it reported that same year how some major brands were upset about products Amazon developed for its own private label lines that closely resembled the original items.

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After the Wall Street Journal reports, Amazon said it was opening an internal investigation into how its private label employees use seller data and if they were violating a company policy not to use such data.

Amazon’s handling of such competitive issues has been the subject of regulatory and Congressional scrutiny. For example, the Federal Trade Commission has been investigating Amazon’s competitive practices. Some US lawmakers have proposed legislation that would bar dominant tech platforms from favoring their own products.

As noted above, the Journal initially reported over the weekend that the company has discussed the possibility of exiting its private label business entirely to alleviate regulatory pressure that could also impact other areas of government concern.

However, after the article, Amazon issued a statement that “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.”

The Journal article notes that Amazon founder Jeff Bezos, now in an executive chairman role, has been a long-time backer of the private label strategy and that he has bristled at times at criticism of its low sales.

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