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The Customer Showdown: Amazon’s Private Brands vs. Third-Party Sellers

Amazon is an e-commerce giant that plays a dual role: it is both a sales platform for third-party sellers and a competitor through the sale of its own brands. This dual role raises many controversies and challenges, especially for smaller sellers who compete on the same platform where Amazon sells its products. This article analyzes how these circumstances affect sellers active in international markets, including Germany, and what strategies they can use to survive and succeed.

Amazon as a competitor in its own marketplace

Conflict of interest

Amazon, as a marketplace, allows third-party sellers to offer their products. However, it also promotes and sells its own brands, often in the same product categories. This situation puts third-party sellers in a difficult position, as they have to pay to promote their products in order to compete with Amazon in its own territory.

Promotion and Visibility

Third-party sellers must invest in sponsored ads and promoted listings to get their products in front of customers. Amazon benefits from these fees while also promoting its brands, which often appear as “Amazon’s Choice” or “Bestsellers,” further increasing their visibility and sales.

Amazon’s Private Labels and Their Fate

Amazon has a wide range of private labels covering a variety of products. Here are some of them:

  • AmazonBasics: A brand offering home goods, office products, and tech accessories.
  • Solimo: Kitchen and home products, including electronic accessories.
  • Amazon Elements: Everyday products like baby wipes and supplements.
  • Wag: Dog food available exclusively to Amazon Prime members.
  • Mama Bear: Baby products like diapers, wipes, and baby food.
  • Happy Belly: Snacks and other food products.
  • AmazonFresh: A grocery and everyday product delivery service.
  • Goodthreads: A men’s fashion line available to Amazon Prime members.
  • Mae: Underwear, pajamas, and other clothing for women.
  • Amazon Essentials: Basic clothing for the whole family.

Amazon has been significantly reducing its private labels lately, partly in response to rising overhead costs and antitrust pressures. As the Wall Street Journal reported late last year, Amazon is closing 27 of its 30 clothing brands, leaving only Amazon Essentials, Amazon Collection and Amazon Aware. The brands being eliminated also include furniture brands Rivet and Stone & Beam.

Critics say Amazon is not investing enough in building its own brands, in part because its product offering is too broad. In 2020, Amazon still had more than 45 different private labels.

Amazon says the decision is based on customer preferences. Matt Taddy, then-vice president of Amazon Private Brands, said the company makes decisions based on what customers want, focusing on the biggest brands, such as Amazon Basics and Amazon Essentials, which offer high-quality products at affordable prices. He added that the products that were discontinued were not popular with customers. The private label cuts are also seen as part of a broader effort to cut costs as sales fall in the wake of the pandemic, with CEO Andy Jassy focusing on eliminating less-than-proven businesses as part of a cost-cutting drive.

But private labels are also at the center of regulatory investigations in the U.S. and Europe for allegedly abusing Amazon’s dominance in online sales. Amazon has been accused of favoring its own brands in search results and copying best-sellers sold by third-party sellers based on internal sales data.

Many experts note that it’s no coincidence that the private label consolidation is coming at a time when Amazon representatives are scheduled to meet with the Federal Trade Commission (FTC), typically the last step before a vote on whether to file a lawsuit.

Last year, there were reports that some Amazon executives were open to the possibility of exiting the private label market altogether to avoid hefty fines and harsher penalties. Stacy Mitchell, executive co-director of the Institute for Local Self-Reliance and an Amazon critic, told the New York Times that the FTC should focus on Amazon’s core monopoly strategy.

Market analysts say Amazon’s decision to eliminate a number of its private labels can be seen as a logical step in its inventory management, but also as a necessary response to growing pressure from antitrust authorities. Many point out that Amazon has a history of discontinuing products that don’t meet expectations, which is consistent with its previous approach.

As Amazon gradually phases out its private labels, it may be able to focus more on more profitable areas such as advertising and logistics. In addition, the move could help reduce operating costs and public controversy over the company’s practices.