In 2018’s “The End of Conglomeration,” I explained my perspective on Amazon’s antitrust scrutiny:
垄断一词并不适合亚马逊正在实现的目标。垄断的定义是独家拥有或控制某种商品或服务的供应或交易。目前还没有公司成为供应方或交易方的说法。
The push and pull between the industries of eCommerce technologies, brands, marketplaces, and regulators continue to present surprising changes. Amazon recently announced a significant reduction in its private label brands, citing economic concerns. However, to the discerning observer, the lines are clear: it’s not just about economics. There’s strong speculation that potential antitrust enforcement might be the real driving force behind this decision. For the CPG industry and direct-to-consumer fashion, this shift offers a window of unprecedented opportunity. This excerpt from a now-two year old article in Markup expressed a farcity that was only bound to ruffle regulators’ feathers. From Amazon Puts its Brands First:
Gomez, founder of Atlanta-based consumer goods startup 4Q Brands, said he obsessively refined his photos and description, amassed reviews from happy customers, and paid Amazon $40,000 a month on advertising to boost sales, one of the elements Amazon tells sellers will increase search ranking.
Then Amazon introduced a competitor from house brand Amazon Basics and another from a brand that sells exclusively on Amazon, DR Mills.
Amazon’s expansion into the private-label business was nothing short of meteoric. From its humble beginnings with electronics to a vast range covering clothing, furniture, and daily essentials, the eCommerce behemoth had a formidable 243,000 products across 45 in-house brands as of 2020. But recent reports, as covered in detail by sources like WSJ, New York Magazine, and Insider Intelligence, hint at a retreat.
One could make the case that most of Amazon’s house brands, which the company began cutting a few years ago, remain valuable mainly as concessions to offer to regulators. (Although the FTC, at least, seems plenty aware of the real sources of Amazon’s power circa 2023.)
While disappointing sales for many of its private label items were cited as a reason, deeper insights suggest regulatory pressures and potential antitrust enforcement as the more compelling rationale. Allegations of Amazon using third-party seller data to its advantage and preferencing its products in search results have not just been a thorn in the giant’s side, but potentially a sword hanging over its head.
The same 2021 report in The Markup revealed that Amazon places products from its own house brands ahead of those from competitors, even those with higher customer ratings and more sales based on the volume of user reviews. And even as early as 2020, there were reports of these tactical decisions by Amazon to prioritize private label growth over the meritocracy of the traditional third-party marketplace. A report by The Verve cited this quote by a former employee who reportedly accessed data to “launch and benefit” Amazon products.
We knew we shouldn’t. But at the same time, we are making Amazon branded products, and we want them to sell.
A series of investigations, from Reuters’ deep dive into Amazon’s India business to The Markup’s findings on product prioritization, have stoked the antitrust flames.
The documents reveal how Amazon’s private-brands team in India secretly exploited internal data from Amazon.in to copy products sold by other companies, and then offered them on its platform. The employees also stoked sales of Amazon private-brand products by rigging Amazon’s search results so that the company’s products would appear, as one 2016 strategy report for India put it, “in the first 2 or three … search results” when customers were shopping on Amazon.in.
Amazon’s consistent dominance in multiple verticals made it a target for regulatory scrutiny. However, the bigger story here isn’t just Amazon’s retreat. It’s about the vacuum it potentially creates and the brands ready to seize this moment. As mentioned above, there is no term for a corporation becoming the supply or the trade.
Above, the private label growth is in blue. Four categories (three of which are FMCG): alcohol, snacks, home care, and personal care outpace brand volume, and revenue growth outpaces the total velocity of innovation for those categories. A few notes from the above:
- private label alcoholic beverages grew 28.7% while the entire category velocity of innovation decreased by 4.3%
- private label confectionery and snacks grew 50.8% while the entire category’s velocity of innovation decreased 20.1%
- the innovation velocity of the personal care category outpaced the entire segment in an over 3:1 ratio
The non-alcoholic beverages still show the value of brand equity in this category. The velocity of innovation outpaces that of private-label brands in this respect. And the same can be said of pet care, where it seems consumers are loyal to well-developed brands. I believe that this pattern is similar in a number of categories that have not been listed above.
The DTC and CPG Surge: An Era of Opportunity
The DTC model has grown steadily, particularly in the fashion and FMCG segments. These brands prioritize unique product offerings, authentic brand narratives, and an agile supply chain, often resulting in higher customer loyalty and retention. With Amazon’s potential pivot, many of these brands now have an opportunity to increase their visibility and market share on the platform.
For traditional CPG brands, the landscape appears equally promising. Without the looming shadow of Amazon’s private labels, CPG companies can harness the platform’s reach without the fear of direct competition from the host. The removal or reduction of in-house competition can lead to better shelf space, favorable search result placements, and possibly even improved terms of partnership. The Intelligencer article stated:
On Amazon, brands just don’t mean that much. This is evidently a lesson Amazon had to learn for itself, which is sort of funny, but not that big of a deal.
This was an overgeneralization even before Amazon’s private-label reductions, and now it’s quite the opposite. Brands, and the trust that they communicate to the consumer, will matter more than ever. In fact, the ripple effects of Amazon’s decisions might transcend the platform. DTC and CPG brands can leverage this moment not only to consolidate their positions on Amazon but to explore improved exit optionality. Of course, this assumes that the Amazon retreat convinces potential acquirers that Amazon – the largest force in eCommerce – is one less competitor to worry about.
With opportunity also comes challenges. Brands need to be ready to scale operations, maintain consistent product quality, and ensure the top-tier customer experiences that Amazon’s private label brands are each known for. The regulatory environment, while appearing to check giants like Amazon, will also be keeping a close watch on market dynamics. Brands will need to navigate this space with both ambition and caution.
A Reshaped eCommerce Ecosystem
Amazon’s shift away from many of its private labels is more than a shift in business. It’s a testament to the evolving digital commerce landscape, molded by regulatory pressures, market dynamics, and brand ambitions. For DTC, FMCG, and CPG brands, the message is clear: the stage is set, the audience is waiting, and the spotlight could be theirs for the taking.
But as they step into this light, these brands must ensure that they remain true to the values that set them apart in the first place: transparency, authenticity, and quality. The future of eCommerce looks promising, and with Amazon’s strategic retraction from the private label space, it’s paved with possibilities. Now, it’s up to the brands to turn these possibilities into realities. After all, in the world of commerce, adaptability isn’t just an advantage; it’s a necessity. As the landscape changes, those who rise to the occasion and meet challenges head-on will be the ones who define the next chapter of digital retail. And maybe, we will see more and healthier exits as a result.
作者：Web Smith
