What Amazon’s private label means

Amazon’s venture into private label grocery products is the latest market disruption of a company that’s all about disruption.

While grocery still makes up a relatively small share of Amazon’s business, it is likely to grow quickly, said Rich Ratcliff, senior vice president at Carbonview, the research division of Stagnito Business Information + Edgell Communications. He cited a new Carbonview research study involving 1,015 consumers, which showed that among primary grocery shoppers in a household, 97 percent shop at Amazon at least occasionally; 74 percent do so multiple times a month; and 35 percent several times a week. In addition, 55 percent of these shoppers are members of Amazon Prime, the premium service that allows unlimited free delivery with a $99 annual membership.

Now Amazon is rolling out an array of shelf-stable private brand products for Amazon Prime members, including nuts, spices, baby food, coffee, tea, vitamins, diapers and laundry detergent. Amazon has created brand names for these new private label products, including Mama Bear, Happy Valley, Presto! and Wickedly Prime.

“Anything that is shelf-stable is fair game now” for Amazon, Ratcliff said.

Ratcliff acknowledged that Amazon’s previous ventures into private label consumer packaged goods were unsuccessful. Most notoriously, it marketed a line of diapers that were pulled from the market after two months due to quality issues.

“The diapers were found to have a design flaw, and that’s not exactly a good category to have one in,” he said.

But Amazon is a company that learns from its mistakes, primarily due to the leadership of CEO Jeff Bezos, Ratcliff said.

“We have to keep in mind the way Jeff Bezos thinks,” he said. “He loves to fail at things because he knows that at some point, he will actually succeed.”

Ratcliff warned that if Amazon succeeds with its latest line of private label products, it will take sales away from brick-and-mortar retailers. According to the Carbonview study, 40 percent of primary grocery shoppers said that once Amazon makes products available, they expect to spend less in other retail channels.

The best way for retailers to counter this challenge, Ratcliff said, is to enhance and emphasize the in-store experience.

“Amazon is in the virtual world. They won’t know your current customer the way you do,” he said. “Our research has shown that shoppers will go out of their way to go to a store that offers a unique and engaging experience.” This could mean things like gourmet products, local produce and other foods, or an experiential feature unrelated to shopping such as live music.

“Experiential shopping is something that Amazon cannot currently offer, so retailers need to own that space,” Ratcliff said.

Ratcliff will be presenting some of the key findings from Carbonview's Amazon research study at Store Brands' 2016 Innovation & Collaboration Summit, which will be held on Aug. 15-17 in Orlando. To register for the summit, visit storebrands.com/summit2016. To purchase the full report on the study, e-mail Carbonview's Laura Nicklin, [email protected].