Ecommerce giant Amazon is embarking on a strategic revamp of its private-label operation, discontinuing several in-house brands and scaling back its private-label portfolio, as reported by The Wall Street Journal.
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This decision is a response to growing antitrust concerns from the Federal Trade Commission (FTC) and a drive to enhance profitability.
Amazon has undertaken a significant downsizing in its private label business, discontinuing a staggering 27 out of its 30 brands.
Prominent labels such as Lark & Ro, Daily Ritual, and Goodthreads have been discontinued, leaving Amazon with just three apparel brands in its arsenal: Amazon Essentials, Amazon Collection, and Amazon Aware.
Furniture-focused private-label lines Rivet and Stone & Beam are also set to face the chopping block, with Amazon planning to phase them out once existing inventory is depleted. Currently, some discontinued brands remain available on Amazon’s platform as the company works to sell off remaining stock.
This strategic shift by Amazon was initiated last year, following subpar sales and mounting criticism from lawmakers and stakeholders. Concerns arose regarding Amazon’s potential bias towards promoting its own brands over those of third-party sellers.
A 2020 exposé by The Wall Street Journal (WSJ) revealed that Amazon employees utilized data from individual third-party sellers to create Amazon-branded products, which supposedly prompted the tech giant to recalibrate its approach.
In response to these allegations, Amazon told the WSJ it had adopted stringent policies to address the concerns. An Amazon spokesperson noted, “We draw a clear line against using non-public, single-seller data to determine which private-label products to launch, and our policy goes further than any retailer we know of,” emphasizing the company’s commitment to rectifying the issues.
However, in 2021, Reuters published a story doubling down on these allegations, further detailing how the company utilized a systematic effort to produce imitation products and manipulate search outcomes to enhance its own line of products.
And in 2022, Amazon reached a settlement with the European Union (EU) over its investigation into this matter, just one of many the company faced by governments and regulators regarding its private-label practices. And this may have been the beginning of the end.
Amazon Adjusts Business Practices
The overhaul apparently resulted in Amazon private-label brands experiencing a decline in visibility within search results, a strategic decision that posed challenges for the company and forced it to reduce warehousing costs associated with excess inventory.
Amazon’s recalibration also aimed to counter the accusations that it wields too much influence as a gatekeeper, stifling competition.
Critics have asserted that Amazon’s practices hinder sellers from listing products on its platform while undercutting market prices to retain customers, particularly within its Prime ecosystem.
Shopify went as far as banning its merchants from implementing Amazon’s “Buy With Prime” service on its ecommerce platform due to fears of Amazon gaining data of its best-performing merchants and their products.
The company has firmly denied any wrongdoing but faces a crucial engagement with the FTC this week about its wider business operations that could even result in a breakup of the company.
As Amazon seeks a balance between regulatory compliance, competition, and the profitability of its retail operations, the company is navigating through a transformative phase, reshaping its private-label business to adapt to evolving market dynamics and regulatory pressure.
Ultimately, this is good news for third-party marketplace sellers who have been harmed by Amazon’s practices or who have refused to list products on the marketplace.
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