Amazon’s private label business is a losing proposition

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Big business: An employee enters the Amazon.com Inc fulfillment centre in Sydney. Since launching in 2009 with AmazonBasics batteries, Amazon’s private label has ballooned to '243,000 products across 45 different house brands' per the Wall Street Journal. Bloomberg

LAST month, comedian John Oliver delivered a scathing episode on tech monopolies for his show “Last Week Tonight”.

Between jokes, he laid out some key Big Tech antitrust concerns.

Apple Inc controlling the App Store. Alphabet Inc’s Google favouring its own properties in search results. Amazon.com Inc reportedly using third-party seller data to create knock-off private label products.

However, a look at the revenue profiles for each example shows that one of these things is not like the others:

> Apple’s App Store grossed US$70bil to US$85bil (RM311.64bil to RM378.42bil) in 2021

> Google search ads brought in US$149bil (RM663.35bil) in 2021

> Amazon says its private label brands account for 1% of sales, which equates to US$4.7bil (RM20.92bil) in 2021.

This is why you should read news that Amazon may be moving away from its private label business to appease regulators with a healthy dose of skepticism: Getting rid of it entirely would hardly represent much of a reform of its anticompetitive practices.

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It’s also just not that important of a business for the eCommerce giant – in fact, it’s been a breeder of bad PR. But at a minimum, scaling it back could be good for both consumers and its larger universe of third-party sellers.

Since launching in 2009 with AmazonBasics batteries, Amazon’s private label has ballooned to “243,000 products across 45 different house brands” per the Wall Street Journal.

And some of these products – including a laptop stand, a chair and a backpack – have been subject to high-profile rip-off allegations over the years.

When asked about the practice in a 2020 congressional hearing, former Amazon CEO Jeff Bezos gave a not-great answer: “we have a policy against using seller-specific data to aid our private label business, but I can’t guarantee you that policy has never been violated.”

Since a private label business is basically a rite of passage for any major retailer, it’s understandable why Amazon would want one.

As the tech analyst Benedict Evans has noted, private label revenue share is sizeable for other industry players, including Target Corp (33%), Kroger Co (25%), Costco Wholesale Corp (20%), The Office Depot Inc (20%) and Walmart Inc (15)%.

The WSJ notes that Bezos once wanted Amazon’s in-house brands to achieve 10% of sales. But after more than a decade, that share still hovers at 1% and the negative PR persists.

Juozas Kaziukenas, the CEO of eCommerce analytics firm Marketplace Pulse, tells me that while Amazon’s knock-off products are “captivating,” there are more “impactful anti-competitive issues” that sellers and regulators should worry about.

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