Amazon have taken the decision to scrap most of their fashion private labels created to sell own clothing according to the WSJ. Dozens will go, reducing the number from 30 to just 3, although some popular items will be rebranded to enable Amazon Fashion to carry on selling them.
Ostensibly, this appears to be a move to placate the US Federal Trade Commission and stave off an anti-trust case which accuses the marketplace of unfair competition with third party sellers. Amazon are accused of using third party data to create popular products and then give them higher visibility in search results.
Unpacking this, while Amazon are most certainly experts in knowing what sells on the marketplace, much of the data is freely available to anyone and everyone that wants to go looking for it – Amazon freely displays top selling products in each category so if you want to know you just have to start browsing.
Also, everything sold by Amazon is also shipped by Amazon, so it’s no surprise that they get high visibility in search, especially to those customer signed up to Prime giving them free expedited shipping. If you’re a third party seller with Merchant Fulfilled Orders, you’re less likely to get the save search visibility as a similar product in FBA…. unless you’re in Europe where Amazon recently made changes to solve issues the EU raised.
The truth is that Amazon probably don’t care that much and their fashion private labels have probably already served their purpose and are no longer needed. Amazon say that their private labels account for less than 1% of sales on the marketplace and so in the grand scheme of things aren’t that important anyway.
We need to look at why Amazon created fashion private labels, or indeed why they got into manufacturing goods in any category and batteries are a great case study to examine. In years gone past, major battery brands were pretty expensive, 8 AA batteries for about £12 was the norm. Amazon created their own range of Amazon Basics batteries slashing the price and selling in larger cases (12, 20, 40 batteries etc) and this led to a readjustment of battery pricing across all brands.
Amazon’s reasoning was that if you’re buying a product on their site that needed batteries they wanted you to be able to get them at a reasonable price, and as none of the manufacturers were lowering their costs the only way that they could move the market was make their own. Today on Amazon, prices for major brands are markedly lower and that’s the outcome Amazon wanted.
So, Amazon might introduce products because they want to readjust the market price, but the other reason is when they see a gap in the market with short supply. But they really don’t want to manufacture products at all – their business is to get other people to manufacture and stock products leaving Amazon to sell (and often fulfil orders from FBA). The can’t possible stock everything and certainly can’t manufacture everything, that’s what they empower third party sellers for.
So cutting back on fashion private labels probably won’t hurt Amazon and indeed they’re probably even relieved in some ways that they can scrap them. Having purchased a decent pair of jeans for a tenner from Amazon Fashion, they’ve hooked me into buying fashion on the marketplace and now they’ve stopped selling that own brand other sellers have introduced offerings at similar quality and price point. Job done, and if closing most of their private labels keeps the Federal Trade Commission off their back that’s probably all that was needed to make the decision one they take today instead of in a year or so’s time.