According to sources familiar with the situation, Amazon Inc. AMZN 0.21 percent has begun dramatically decreasing the number of products it sells under its brands and has considered the prospect of completely quitting the private-label sector to reduce regulatory pressure.
With 243,000 products across 45 distinct home brands as of 2020, Amazon’s private-label business has generated criticism since it competes with other merchants in its marketplace. People said the decision to reduce home producers was partially driven by most of the items’ underwhelming sales. It also came about because the retail and technology giant has recently come under fire from politicians and others for frequently favoring its manufacturers at the price of goods sold by other distributors on its website.
According to the people, Amazon management told its private-label workers to cut back on the list of items and to avoid placing many reorders during the past six months. One of the executives discussed cutting its private-label product line in the U.S. by more than half.
According to the sources, the decision was made following an evaluation of the company by Dave Clark, a senior Amazon executive. He was appointed to lead the company’s worldwide consumer division in January 2021. Last month, Mr. Clark departed the business. After reading that assessment, Mr. Clark encouraged the team to concentrate on commodities that were in high demand, similar to Target Corp.’s “Up & Up” or Walmart Inc.’s
The participants said that Amazon should stop offering its wide selection of products and focus on “Great Value” companies.
Beginning with consumer electronics items like cables in 2009, Amazon’s private-label business has extended to other industries. It includes everything, including brands like Amazon Basics, Goodreads, and Solimo, ranging from vitamins and coffee to apparel and furnishings. However, according to Amazon, its house brands only represent roughly 1% of its retail revenue. The entire income generated by Amazon in 2017—including its other companies and cloud computing division—was $469.8 billion.
Amazon gradually competed with other merchants on its platform due to the size of its products, which infuriated those retailers and led to an antitrust investigation.
The Wall Street Journal described in 2020 how Amazon staff exploited information from its platform on specific third-party merchants to create items under the Amazon brand that compete with those businesses. The Journal also covered how several well-known businesses were upset with things Amazon created for its labels that looked a lot like their goods and accused the tech titan of stealing their concepts.
At the time, Amazon declared it had started an internal inquiry into whether or not its private-label workers were using seller data in violation of company rules. However, then-CEO Jeff Bezos admitted to Congress, “I can’t assure you that policy has never been broken.”
The Securities and Exchange Commission, which the Journal revealed in April, was looking into how the firm disclosed some information about its business methods, as well as a congressional committee looking into major internet companies that have all been watching how Amazon handles such competition problems. In addition, Amazon’s competitive tactics have been under investigation by the Federal Trade Commission.
Nearly two million small and medium-sized businesses sell on Amazon, and the company claims that it competes fairly and in a way that benefits its consumers.
According to the sources, Amazon executives have been considering ways to entirely abandon private brands over the last year due to the scrutiny. But, according to several participants, the management chose not to act until it was essential, maybe as a concession they might make if the FTC or another regulatory body threatened or brought legal action.
In response to a version of this item that appeared online, Amazon issued a comment: “We never seriously contemplated discontinuing our private label business and continue to invest in this sector, just as our numerous retail competitors have done for decades and continue to do today.
A spokesperson declined to clarify whether the company had considered the issue or how many private label products it was eliminating.
American legislators have passed legislation preventing major digital corporations, such as Amazon, from preferring their goods and services. However, Amazon made concessions on Thursday to resolve two antitrust complaints brought against it in the European Union. After the EU accused Amazon of breaking competition law by utilizing nonpublic information from merchants to compete against them, Amazon committed to refrain from using nonpublic data on sellers on its marketplace.
Mr. Bezos, who gave up his position as CEO to become executive chairman last year, has long supported the private-label industry. However, some people said that he had become irritated by the product’s modest sales in the past.
According to the Journal, Mr. Bezos set the private-label team’s objective to attain 10% of Amazon sales by 2022 a few years ago. According to some involved, the crew quickly added hundreds of goods to boost sales.
Many products ended up needing to be discounted or waiting in warehouses.
Under Mr. Clark, private-label teams reviewed the profitability of every private-label product, identifying the ones that didn’t sell well enough to reach their profit threshold and identifying them as potential phase-out candidates. As a result, some sources claimed that the approach has changed from producing tens of thousands of low-selling items to producing private-label products that sell quickly and can be stored in warehouses around the nation for swift delivery.
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