In 2009, Amazon announced it would start selling private-label products under its own name: a line of simple electronics accessories branded as Amazon Basics. They sold well, and Amazon spent the next decade quietly expanding its house brands under dozens of inconspicuous names — Goodthreads, Solimo, Pinzon, Lark & Ro, Mama Bear, and Presto, to name a few — targeting thousands of high-demand categories with mostly budget-conscious items.
Selling private-label products is standard practice for major retailers — think Costco’s Kirkland, Target’s Good & Gather, or 365 at Amazon-owned Whole Foods. But Amazon is no standard retailer, and its particular twist on the practice drew suspicion, especially from outside brands that were already worried about Amazon’s dominance, many of whom found the Everything Store, with its visual sameness, unpredictable and gameable search algorithms, nagging issues with knockoffs, and hugely influential review system, to be a punishing environment to start with. It didn’t help that, early on, Amazon was less than up-front about labeling its own products, earning its house brands a starring role in attempts to regulate the company, some of which are coming to a head today — Amazon is scheduled to meet with the FTC ahead of an expected antitrust lawsuit next month.
Now, according to The Wall Street Journal, the company is shutting down a big chunk of its private label business:
Amazon.com is jettisoning dozens of its in-house brands as part of a significant reduction of its private-label operation as it works to fend off antitrust scrutiny and shore up profit.
The Seattle-based company in the past year has decided to eliminate 27 of its 30 clothing brands, such as Lark & Ro, Daily Ritual and Goodthreads, according to people familiar with the matter. Some of the brands remain on Amazon’s site for now as the company sells off remaining inventory, but when completed its house-label clothing division will have just three brands: Amazon Essentials, Amazon Collection and Amazon Aware.
One way to look at this is as a story of a minor corporate misadventure by a company that tends to try a lot of things at once. Dozens of brands that most customers neither knew nor particularly cared were owned by Amazon have now come and gone with little effect on its vast, churning, and indifferent retail cascade. So? The company claims that house brands represent a tiny percentage of total sales; lately, with regulators watching closely, it has had to be careful about how it promotes them, eating into any advantage it may have had. Besides, Amazon has always had a strange relationship with brands, and not just its own. It’s a single storefront with tens of millions of products all accessible through the same blank search box, listed in the same simple format. On Amazon, everything is rendered effectively brandless by the ambient Amazonity of it all: Amazon Prime, two-day Amazon shipping, Amazon boxes, Amazon reviews, Amazon returns. Some big-name consumer brands have long worried that selling on Amazon would devalue their products or hurt their reputations — LVMH, Ralph Lauren, and Patagonia don’t sell on the platform, for example — and while their concerns aren’t unfounded, they’re probably slightly misplaced. 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.
The rise and fall of Amazon’s in-house brands is, however, related to a defining part of the company’s story over the last 15 years. At the same time that Amazon was launching its own brands in popular product categories, it was aggressively recruiting outside sellers — merchants who operate storefronts on its platform and who pay fees to Amazon for selling, advertising, and in many cases warehousing and shipping their products, many from overseas — to invest in and market private-label brands of their own. Today, more than half of all sales made on Amazon flow through third-party sellers, the most successful of which market products under brands that exist solely on Amazon, of which there are at least hundreds of thousands, with utterly forgettable names.
The initial antitrust criticism of Amazon’s house brands was simple: A company with such comprehensive data about what products its customers are buying from outside brands and sellers would seem to have an unfair advantage in sourcing and marketing products of its own. The appearance of products in suddenly popular product categories fed the perception (which Amazon has consistently disputed) that the company was pursuing such a strategy. But on Amazon as it exists today, such a strategy, while still unfair to outside brands and sellers, is less relevant.
Sourcing, manufacturing, and marketing your own products — Amazon at one point disclosed that it sold 243,000 product variations of its own — is, even with the best proprietary data, expensive, labor intensive, and inherently risky. Amazon entered some of its most competitive categories and sold lots of stuff, but its focus on affordable products means margins were never going to be huge, and besides, the company had found a better arrangement in third-party sellers and their de facto Amazon brands. Rather than chasing ephemeral trends with long-lead manufacturing contracts, Amazon could let sellers do their own research and absorb those risks. Rather than committing its finite warehouse space and logistics capacity to store and ship its own products, Amazon could sell that space and capacity to sellers and get paid whether or not the products sold well. Rather than taking up valuable storefront space — search results, category pages, ad units — with its own low-margin offerings, Amazon could let third-party sellers compete and pay it for advertising. 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.)
At the same time that Amazon was pursuing the incremental advantages of store-brand merchandise, it was discovering the much larger advantages of turning itself into something less like a store and more like a marketplace with exclusive access to an unparalleled logistics operation. From the perspective of 2009, an Amazon filled with data-driven house brands selling alongside more recognizable products was a plausible and, for Amazon, hopeful prospect. It ended up with something weirder and more lucrative.