Ever came across these brands – Solimo, Presto, Vedaka, Symbol, House & Shields, Eden & Ivy, Jam & Honey, Myx, Inkast Denim, Arthur Harvey, Symactive, Cloudtail choice. Many of you might have heard about these brands if not own some products of these brands
The above brands are some of the private label brands of Amazon India. Amazon is currently the leading e-commerce platform in India for consumer products. As per Findly.in, there are over 100 million registered users in India with Prime (premium offering of amazon) users alone being 10 million out of them and 218000 sellers actively selling on Amazon India.
What are Private Labels?
Private labels products are products outsourced or contracted to be manufactured by a third party to be sold under a specific brand. Private labels are almost sold by all the major retailers both offline and online. Usually, the retailers have control over most of the aspects related to the product like its packaging, its specification besides other features. Typically, private-label brands introduce products in categories such as grocery, clothing, electronics, and home furnishings.
The advantages that Private labels can provide retailers are:
- Flexibility for fulfilling demand as per market requirements or needs
- Generally Higher profit margins because of lower marketing costs.
- Manage and/or control price due to availability of a wider range of profit margin
- Control over Production and other product specifications
- Expand product range.
On the other hand, some disadvantages associated with private label brands are:
- Perception of lower quality as compared to established brands
- Difficulty in building brand loyalty
- Exclusivity of products in terms of availability in shops
- Control over Quality
- No returns to manufacture leading to dead inventory.
Any retail business should look at these advantages and disadvantages before opting for starting and/or expanding their private label business. Here is an interesting read from Mckinskey on how to turn private label brands into powerhouse brands
Considering the success Amazon has gained in the e-tailers space in various countries especially in the USA, Germany Japan, and India, it was imperative for their growth and to realize better profit prospects, that they start private label brands to be sold through their marketplace. They have launched several private-label brands in various countries. As Per marketplace pulse they have more than 400 such brands with 23000+ product categories. Below are a few of the brands that have been launched in several countries since 2009.
Recently Amazon has been amidst a huge controversy due to its private-label brands and has been accused of employing unfair practices to provide a boost to its private label brands ahead of mainstream brands. In a recent report by Reuters The Imitation game it was mentioned that they have accessed some internal documents related to Amazon India’s private label strategy. As per Reuters, these internal documents divulge that Amazon has been involved in minting exclusive data from its platform and using it to create duplicates or knockoff products to be sold under its own brands at a much cheaper rate. It is also revealed that they have been manipulating the search results in favor of amazon’s own brands to be shown in the top 3 results on the very first page of search results.
The document points out that Amazon copied the brand John Miller (owned by Kishore Biyani) specifications to the finest detail and replicated it on its clothing brand Xessentia to be sold on Amazon India. It mentions that the products released as part of the Solimo strategy in India were replicated by identifying good products and using them for benchmarking. The success of this Solimo strategy led to its imitation in US markets as well. Amazon chief Jeff Bezos had outrightly rejected these claims. Investigations are still going on in US and India against Amazon for following anti-competitive policies to extract undue advantage.
Earlier also, there have been several cases against Amazon for copying products and selling knockoffs. In December 2020 they were accused of banning a Pirate trading brand that sold Tripods. In 2011 Amazon had started selling tripods similar to that of Pirate trading under its Amazonbasics brand at a cheaper price due to which the market share of Pirate trading tripods eroded. However, Amazon has refuted these claims and asserted that they are not in violation of any intellectual property rights.
In 2018 Williams-Sonoma, a home-goods retailer had filed a federal lawsuit against Amazon. They alleged the e-tailer had copied its proprietary designs for chairs, lamps, and other products to be sold under its private brand-named Rivet.
Marketplace Pulse research carried out a study which in some way refutes the allegations leveled against the e-commerce giant. They point out that the success of Amazon in private label brands has been exaggerated and its advantageous position concerning access to proprietary data has been blown out of proportion. As per them, Amazon has tasted success only in a few products of Amazon basics and Amazon Essentials.
Marketplace Pulse points out that the success of Amazon Basics and Amazon Essentials cannot be attributed to a complex data-driven strategy but to a simple retailing strategy followed by any retailer for its private brands. They cement this fact by mentioning thousands of products that didn’t taste success and also by stating that amazon’s private label brands constitute just 1% of its total sales.
Amazon claims that they have access to the same data that is publicly available for all the other brands and are not privy to any proprietary data. Major retailers like Walmart, Target, and D-Mart in India have successfully sold several private label brands especially in groceries and home furnishing products using basic PoS and in-store data. These retailers have never faced backlash for their private labels like amazon had to face. The primary reason could be the assumption that Amazon can utilize loads of exclusive consumer and products data to drive profits.
Amazon has been accused of altering search results in favor of its private brands. A basic search on Amazon India, especially searching some generic products would prove these accusations to be false. Not all search throws results with Amazon private labels on top. However, Amazon does have this advantage where they put up sponsored products on top of the page. Also, they have top-of-the-line advertising where it suggests checking out these products for a targeted search of specific brand products. Other brands would have to pay up if they have to feature in these sponsored products/top of the page section, which clearly benefits amazon. This is similar to a private label brand in an offline retail store where the store can conveniently place their products in positions of maximum visibility to customers or near to the leading brands.
In 2020, India had come up with a draft policy for regulating e-commerce in India which could tighten the noose on e-commerce players like Amazon and Flipkart. The draft e-commerce policy prohibits these marketplace players from misusing data generated from their platform to launch their own products that compete with other sellers’ products. It also asks the players to ensure that the entities enlisted as sellers for sale directly to consumers are not related parties or associated enterprises of the players. There are further provisions that regulate e-commerce in India and can be read here: Ecommerce rules 2020
Are the mainstream brands ready to challenge the competition posed by private label brands of Amazon? It is expected that they might already have a strategy for offline retail store private labels. They might soon have to do the same in the online space given the potential of e-tailers owned brands to eat into their profit share.
Mainstream brands could take the following actions to stem their market share erosion to Private labels:
- Concentrate heavily on Product Quality and Marketing
- Enhance Brand equity
- Thoughtful Brand Stretching and/or Brand Extensions
- Effective Sales promotion strategies.
Online retailers can level up their private label game by following some of these:
- Consistently improve private label products
- Develop premium offerings and not just low-cost items
- Leverage the brand name of the retailer to positively favor its private labels if law of the land doesn’t put any restriction on the same.
- Continue to explore and expand their product categories
It is quite evident that there exists a threat for national/mainstream brands from private labels in both online and offline space. It is a fact that online shopping has been on the rise in India and the economic and technological advancement has further enhanced online shopping capabilities and experiences. Therefore, brands should not only be present in the online space but also have effective strategies in place to counter competition not just from its traditional competitor brands but also from private label brands. Mainstream/national brands should also be wary of imitation and immediately take necessary steps to thwart the threat from such products.
Online retailers like Amazon also should put a proper strategy in place and manage their private label through ethical means and following the law of the land. They should stick to using data available publicly. They do have the option to make further data available for everyone so that they can also use it freely without fear of law since mainstream brands might not be in a position to leverage that data much. At the end of the day, retailers be it online or offline cannot afford to cast off mainstream brands as these bring customers to their website/stores.
