Amazon Upending Private Branding. Will Others Follow?

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I'm often asked how "traditional" retailers (if they even exist anymore) can compete against Amazon. The simple answer is to do something Amazon isn't doing...yet. Over the past few years, I've touted private brand development as a way to distance from Amazon while its sights were temporarily set elsewhere, with the caveat that the advantage would be short-lived. After all, Amazon can't be blind to the margin benefits, and the power to bestow preferential awareness to brands or products is ingrained in its platform.

Fast forward a few retail seconds and Amazon has procured hundreds of trademarks and launched piles of private brands across all kinds of categories practically overnight, and it has more on the way. Amazon’s brand team recruitment efforts offered the first hints that it would be all over private brands, but it hasn't had to venture into this brave new world alone. Countless brand marketers and retailers have since started to view Amazon as a newfound frenemy and growth engine. National brand players like Carter's, known for its choosy approach to distribution, aren't just selling their wares on Amazon, they are also creating special brands for the platform.

On the surface, it might seem as though Amazon is just playing its usual over-the-top version of retail wake-riding, taking a conventional retail practice to a scale-bending level. But Amazon is also defining the evolution of private brands themselves. Private brands have come a long way since the original "generics" hit the market decades ago, with their black-and-white labels and purely price-driven premise. The progression in terminology, from generics to private labels and from private brands to owned brands, attests to retailers' shifting sensibilities. Retailers got dead serious about creating brands that would compete alongside, and even above, their national brand counterparts – brands that could be treated as assets. Many retailers built up highly developed brand teams and sourcing operations to support these efforts. Along the way, consumer affinity has steadily grown, as quality has improved and retailers proudly market their brands both in store and online. Retailers now see private brands not just as a margin-building opportunity, but also as an important expression of their corporate brand identity. 

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By contrast, most Amazon-owned brands are presented just like any others on the Amazon site. Check out a Lark & Ro-branded dress, for example, and you'll find standard-issue brand purpose statements under "from the manufacturer". No proud declarations touting Amazon's high-standards, great prices or approach to sourcing, and nary a mention of Amazon in the copy.

Even Amazon's eponymous Basics line of household items and gadgets follows this low-key approach. On its brand page, an easy-to-miss headline statement, "Amazon Basics offers quality and value on everyday products straight to your door," is dwarfed by its featured products. Amazon doesn't seem to care if shoppers associate its brands with the mothership. In fact, in stark contrast to other retailers, it might even prefer that they don't. Although Amazon stands alone in this large-scale, stealth attack approach, I can see four main advantages to taking such a contrarian path to owned-brand identity marketing, particularly in the digital space:

1.    Proliferation without peril - Unlike most brand marketers, Amazon can, and has, cultivated a massive stable of brands, in innumerable unrelated categories, across thousands of items and price points without being accused of "over-extending" its brand or going "off brand". With its brand associations blurred and a reputation for delivering everything from appliances to zippers to customers' homes in record time, Amazon is free to expand on its own private brand-palooza unfettered. Most of Amazon's competitors are far more constrained, if only because they can't match the sheer breadth of category assortment that Amazon offers.

2.    Unobstructed affinity - When shoppers aren't encouraged to think about brand association or mull over private brand economics, they are free to focus on other attributes that play to Amazon's strengths, like quick delivery, no-hassle returns, and competitive pricing. With names like Arabella in lingerie and Beauty Bar in cosmetics, Amazon's brand monikers sound good enough on their own. Why risk hesitation, or even aversion, by getting all braggy about the banner?

3.    Margin multiplication - Private brands are known to bring higher profitability to retailers, and some retailers have taken pains to justify higher prices through the creation of premium private brands. Amazon isn't carefully carving out "good, better, best" propositions and agonizing over pricing architecture, simply because it doesn't have to. Its online marketplace is a democratic bazaar where shoppers define what value means to them during every visit. Amazon can throw out new brands at profitable price points at will, then track and tweak the details based on shopper response and competitors' offerings. When it comes to private brand creation, Amazon is armed and dangerous.

4.    Platform Loyalty - When operating at their peak, private brands can drive loyalty to their retailer owners. In fact, national brands become ubiquitous, private brand creation is only one of a handful of ways to stand out these days. Amazon knows that its authority stems from the benefits inherent in its platform, which don't necessarily parlay into products. Amazon's inconspicuous brand portfolio ensures that the spotlight stays fixed on its established loyalty-drivers. 

Nothing prevents Amazon's competitors from following its example, particularly as more retailers try their hand at monetizing their own digital platforms through online assortment expansion and third-party seller arrangements. In fact, plenty of retailers have years of private brand development experience over Amazon. Will more retailers forego bragging rights to populate their online platforms with secret brands? Will we even know when and if they do?

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Carol Spieckerman