Why do today’s consumers prefer private label brands instead of products from more well-known brands? Savings.
In the US, private label continues to pull ahead of their name-brand competitors. At the end of 2022, shoppers were purchasing more private-label products to try to save money.
In fact, 76% of Amazon shoppers are more likely to choose a private label rather than a name-brand product. Furthermore, around 70% of searches done on Amazon are for generic goods. Consumers’ perceptions are also changing. Instead of focusing on brand names, they’re now more likely to conduct product searches based on their needs.
According to a study published in 2023, private labels now make up an average of 35% of the total retail market share in North America and Europe.
What else is causing the growth of these private-label brands? You can chalk it up to the increase in customer awareness. They now know that private-label brands are of the same or better quality as name-brand items. Nowadays, consumers are also starting to recognize that price is more important than brand name.
So, what does all this have to do with Amazon Basics?
Well, a lot apparently.
If you’re an Amazon seller, chances are, you’ve come across Amazon Basics, one of Amazon’s most popular private-label brands. This is great news for consumers, given that they now have access to more options with lower prices. Now, if you’re a seller, having Amazon Basics products within your niche can spell a laundry list of issues and concerns.
Want to discover how Amazon Basics and other Amazon private label brands can potentially impact Amazon sellers? What can you do to rise above the immense competition that Amazon’s private label brands bring?
Amazon Basics is one of the fastest-growing private label brands in the market today, just a few points behind Kroger’s Smart Way. When it first started out in 2009, the brand sold batteries and small electronic accessories. Since then, Amazon Basics has significantly expanded its offerings. From batteries and small electronics, it now offers thousands of products under categories like pet supplies, personal care, and fitness.
Amazon Basics covers an extensive range of products and niches, including:
Amazon’s top 10 private label brands contribute approximately 81% of the eCommerce giant’s total sales. And while Amazon Basics only accounts for 5% of the products on the platform, it commands a market share of over 57%.
For Amazon customers, Amazon Basics offers several benefits, aside from affordable pricing and a diverse product range.
The products under Amazon Basics undergo rigorous testing to ensure that they’re safe and high-quality. According to Amazon, before any product is produced, it undergoes a thorough research process that covers technical standards, as well as compliance and safety requirements for a particular category. Amazon also only works with suppliers who undergo vetting through several audits and who meet the company’s supply chain standards. Furthermore, Amazon works with independent and accredited third-party labs to develop product testing protocols.
In addition to these measures taken before launching new Amazon Basics products, Amazon also closely monitors the product manufacturing process. Existing Amazon Basics products undergo audits to ensure that they meet the company’s safety, quality, and compliance standards. Furthermore, Amazon also monitors customer reviews and inquiries related to safety.
Amazon Basics products are easily accessible. They come from a trusted brand (Amazon) and Amazon Basics works well for product discovery, helping customers come across new products that they might find useful.
However, while shopping for Amazon Basics products offers several benefits to consumers, Amazon sellers are facing an uphill battle.
While Amazon Basics has enjoyed immense success over the years, it has also faced a slew of controversies. Below are some of the criticisms leveled against Amazon’s private label brands that have made the rounds.
The Wall Street Journal reported that Amazon was using data from its third-party sellers to come up with competing products.
During its investigation, the WSJ found that Amazon used third-party seller data to find bestselling items (reference or benchmark products), which it would then replicate and market under its own private-label brands.
However, according to an Amazon spokesperson, Amazon monitors aspects like consumer shopping behavior, manufacturer suggestions, and emerging retail trends to come up with a private-label strategy.
In addition to this, a report found that Amazon changed its search algorithm so that it features listings that are deemed to be “more profitable for the company,” which is another way of saying that the company’s product-search system was redesigned so that it prominently features products from Amazon’s own brands.
In 2017, Amazon Basics products were subject to scrutiny, given that several of them were reported as dangerous. For instance, an investigation concluded that an Amazon Basics product, specifically a white USB cord, was the cause of a fire in Connecticut. Aside from this, several other incidents were reported, through approximately 1,500 customer reviews, of Amazon Basics products posing significant safety risks. In a 2021 report, CNN found that at least eight of the Amazon Basics products, including battery chargers and phone charging cords, highlighted in its initial investigation were being reviewed by the Consumer Product Safety Commission.
Amazon was reported to show anti-competitive behavior against third-party sellers in its marketplace. Reports indicated that the company was leveraging its size to compete against Amazon sellers, which prompted regulators from different states, and even the European Union, to probe Amazon’s private label strategy. The US Federal Trade Commission (FTC) published a press release just last year. It stated that they, along with 17 state attorneys, sued Amazon.com for resorting to illegal methods and proliferating anti-competitive strategies to maintain its “monopoly power.”
To combat this antitrust scrutiny, Amazon has decided to let go of some of its private label brands, including Lark & Ro and Daily Ritual.
A 2016 Bloomberg article shed some light on how Amazon is apparently copying bestselling products. It showed how Rain Design, a company that sold aluminum laptop stands on the platform, saw its sales dip when a more affordable and similar-looking Amazon Basics alternative went live. A more recent case of Amazon copying a product happened in 2021. Peak Design, which has been selling on Amazon for years, found that the company’s Amazon Basics private label copied several main aspects of its popular camera bag, including the name, shape, access points, color, and even the shape of the logo. Peak Design responded with a video, which went viral with over 4.6 million views on YouTube.
What does this all mean for Amazon sellers?
There are two main factors that can potentially be a cause of concern among third-party sellers: the extensive product range from Amazon Basics and the affordability of these products. For example, searching for “coffee grinder,” will give you several results. As you can see in the image below, one of the most popular and affordable coffee grinders is from—you guessed it—Amazon Basics. It’s significantly more budget-friendly than the name-brand coffee grinders from Cuisinart. One thing that’s also worth noting is that it’s even more affordable than the coffee grinders sold by small business brands.
Now, imagine that you’re a customer who’s looking for a budget-friendly electric coffee grinder. Chances are, one of your options would probably be the coffee grinder from Amazon Basics.
For Amazon sellers, this could mean several things:
Going against a trillion-dollar company like Amazon may seem like a classic David and Goliath match, but it’s not entirely an impossible feat. Does this mean that you should leave Amazon and look for other eCommerce platforms?
The thing with Amazon Basics is that, while it is Amazon’s own private label, it’s still a business. Furthermore, not all shoppers prioritize low prices. Some prioritize other key aspects like product features and USPs.
For small businesses and other private label businesses, you can still take measures to help equip your business for success, even if you’re competing against Amazon’s private label brands. For example, you can zero in on offering high-quality products at competitive prices. These products must be relevant to your target audience and should meet their needs so that you’ll have better chances of succeeding in your niche.
Competing against Amazon in popular categories can be challenging, but there are several things you need to keep in mind. Yes, Amazon does offer a ton of products, but it doesn’t offer every product. This opens up an opportunity for you to spot market gaps and address those.
Focus on finding the right products to sell in a particular niche instead. Do your (product) research and find out what your target audience is looking for. By focusing on niche products or categories, you’re minimizing the direct competition you have against Amazon brands.
Excellent customer service can play a role in encouraging potential buyers to choose your products over Amazon Basics’ offerings. Better customer service could mean promptly responding to queries or concerns. It could also mean having a more relaxed return policy. Furthermore, exceptional customer service opens up a lot of doors. When your customers are happy, then they’re likely to leave positive reviews. These reviews could help boost your visibility. Happy customers can also recommend your brand to their friends and family. When taken together, these can put you in a better position to attract customers.
Quality can potentially make or break a brand. Providing customers with high-quality products can pave the way for positive customer experiences. Aside from encouraging customers to become repeat buyers, they may also suggest your products to others. Focusing on quality also gives you the opportunity to build customer trust and helps set your brand apart from the competition.
A good marketing strategy can help you rise above the competition. For example, if your product has better or unique features, make sure to highlight them. Show how your products’ features address customers’ pain points or meet their specific needs. This will help set your products apart from other private-label products from Amazon. Aside from this, your strategy should also focus on improving your product visibility. Consider using tactics like targeted promotions to improve your visibility and attract more customers. You can also incorporate your brand’s unique personality to make your marketing campaigns stand out and become more memorable.
Optimizing your listings helps improve product visibility and allows customers to easily find what they’re looking for on Amazon.
The key here is knowing who your target audience or ideal buyer is and what their needs are. Aside from writing killer product descriptions, you also need to focus on aspects like using relevant keywords, creating a good product title, and adding high-quality images to enhance your search ranking.
Aside from your products, this also applies to your branding. Developing a strong, consistent, and unique brand can help set you apart from the competition, including Amazon Basics, and make your brand more memorable. And your branding efforts shouldn’t just stop at your messaging or having a compelling brand story. This extends to all other aspects of your business, from customer service experiences to packaging design—basically any aspect that can help improve how customers perceive your brand.
Competing against Amazon’s private label brands can be a tough challenge for Amazon sellers. The good news is that you can find different solutions that help create a more level playing field for sellers. For example, Jungle Scout has an array of tools designed to help you manage and optimize your Amazon business. One such tool is the Opportunity Finder, which uses comprehensive data to help you discover profitable product niches. And with Jungle Scout’s Listing Builder tool, sellers are able to compete for better rankings on Amazon search results through optimized listings.
Threecolts also offers powerful tools you can use to remain competitive. For example, FeedbackWhiz is a review management tool that gives you access to complete data. This, in turn, allows you to build a good reputation based on factors like affordability, product quality, and customer service. Other nifty Threecolts tools you can use include SmartRepricer, which swiftly automates your Amazon pricing to make it more competitive, and TacticalArbitrage, which helps you find winning products to sell on the platform more quickly and efficiently.
Curious to see how a marketplace automation platform like Threecolts can supercharge your Amazon business? Register for free to get started.