Amazon’s role as both a marketplace and a competitor creates challenges for smaller sellers. This article examines its impact on international markets, like Germany, and suggests strategies for sellers to succeed.
Amazon is an e-commerce giant that plays a dual role: it is both a sales platform for third-party sellers and a competitor through the sale of its brands.
This dual role raises many controversies and challenges, especially for smaller sellers competing on the same platform where Amazon sells its products. This article will analyze how these circumstances affect sellers active in international markets, including Germany, and what strategies they can use to survive and succeed.
Amazon, as the marketplace host, allows third-party sellers to offer their products. However, it also promotes and sells its brands, often in the same product categories. This situation puts third-party sellers in a difficult position because they have to pay to promote their products to compete with Amazon on its turf.
Third-party sellers must invest in sponsored ads and promoted listings to get their products seen by customers. Amazon earns these fees while also promoting its brands, which often appear as “Amazon’s Choice” or “Bestseller,” further increasing their visibility and sales.
Looking for the latest Amazon insider tips, get them from the experts at EXPANDO. Schedule a free consultation today!
Amazon has a wide range of private labels that cover a variety of products. Here are some of them:
• AmazonBasics: A brand offering household products, office products, and technical accessories.
• Solimo: Kitchen and home products, including electronic accessories.
• Amazon Elements: Everyday products like baby wipes and nutritional supplements.
• Wag: Dog food is available exclusively to Amazon Prime members.
• Mama Bear: Baby items such as diapers, wipes, and baby food.
• Happy Belly: Snacks and other food products.
• AmazonFresh: Grocery and daily product delivery service.
• Goodthreads: Men's clothing line available to Amazon Prime members.
• Mae: Underwear, pajamas, and other clothing items for women.
• Amazon Essentials: Basic clothing for the whole family.
Amazon has been significantly reducing its private label brands recently, also in response to rising overhead costs and antitrust pressures. As the Wall Street Journal reported late last year, Amazon is closing 27 of its 30 apparel brands, leaving only Amazon Essentials, Amazon Collection, and Amazon Aware. Furniture brands Rivet and Stone & Beam are also among the brands being eliminated.Critics say Amazon isn’t investing enough in building its own brands, in part because its product lineup is too broad. In 2020, Amazon still had more than 45 different private labels.
Amazon suggests the decision is driven by customer preferences. Matt Taddy, then vice president of Amazon Private Brands, said the company makes decisions based on what customers want, and they look for the biggest brands, such as Amazon Basics and Amazon Essentials, that offer high-quality products at affordable prices. He added that the products being discontinued were not popular with customers. The reduction in private labels is also seen as part of a broader effort to cut costs as sales slump in the wake of the pandemic, with CEO Andy Jassy focusing on eliminating less-proven businesses as part of a cost-saving drive.
But private labels are also at the center of investigations by regulators in the U.S. and Europe into alleged abuses of Amazon’s dominance in online retail. Amazon is accused of favoring its brands in search results and copying bestsellers sold by third-party sellers based on internal sales data.Many commentators note that it is no coincidence that the private-label consolidation comes just as Amazon representatives are set to meet with the Federal Trade Commission (FTC), typically the last step before a vote on whether to file a lawsuit.
Last year, reports emerged that some Amazon executives were open to pulling out of the private-label market altogether to avoid hefty fines and more stringent sanctions. Stacy Mitchell, co-executive director of the Institute for Local Self-Reliance and an Amazon critic, told the New York Times that the FTC should focus on Amazon’s core monopoly strategy.Market commentators say Amazon’s decision to eliminate many of its own brands could be seen as a logical step from an assortment management perspective, but also as a necessity in the face of growing antitrust pressure. Many note that Amazon has a history of making decisions to discontinue products that do not deliver the expected results, consistent with its past actions.At the same time, phasing out private labels allows Amazon to focus resources on more profitable areas, such as advertising and logistics. In addition, the decision could help reduce operating costs and public controversy over the company's practices.
Overall, Amazon’s reduction in private labels is seen as a move to improve profitability, simplify its offering, and comply with regulatory requirements.
In the first quarter of 2024, Amazon lost 6% of its private label market share compared to the previous year. Declines were seen in key categories such as office supplies and home and kitchen products.
The declines in various categories are as follows:
• Office supplies: Amazon's own-brand share fell from 2.5% to 2.1%.
• Home & Kitchen: Share fell from 0.9% to 0.6%.
• In 16 of 20 key categories, Amazon saw declines in the share of its own brands.
Not all categories saw declines. In some, such as health and household, baby products, cosmetics, and sporting goods, Amazon’s own brands held their positions or even saw growth.
Are you a private label looking to make your mark on Amazon? Take it to the next level with the expertise at EXPANDO. Schedule a consultation here!
Amazon’s decline in private label shares means a bit more space for competing products. This is an opportunity to gain more market share. Sellers can better leverage promotional campaigns to make their products more visible now.
Amazon’s previous dominance in certain categories discouraged many sellers. Now, the risk is somewhat lower, allowing for more niche and specialized products to enter the market. Amazon is increasingly focusing on less differentiated products, such as simple shirts or baby items, which opens up opportunities for more unique or personalized products.
The decline in the number of products marked as “Amazon’s Choice” or “Bestseller” increases the chances that products from competing sellers will earn those designations. For example, Amazon’s “Bestseller” products fell by 47% in the toy category, and “Amazon’s Choice” products in the home and kitchen category fell by 61%.
☝️ Are you a private label looking to make your mark on Amazon? Take it to the next level with the expertise at EXPANDO. Schedule a consultation here!
Sellers should focus on offering high-quality products with unique features that stand out from the competition. Innovation and specialization can attract customers who are looking for unique and unrepeatable products.
Using advanced marketing strategies such as SEO, sponsored ads, and promotions can help increase product visibility. It is important to optimize your advertising campaigns and use analytics to maximize the effectiveness of your marketing efforts.
Professional customer service, fast order fulfillment, and customer satisfaction can help build loyalty and trust. Satisfied customers are more likely to make repeat purchases and recommend products to others.
Sellers should definitely consider diversifying their sales channels. In addition to Amazon, it is worth investing in other e-commerce platforms, such as eBay, Allegro, Kaufland, or even your own online stores. This will reduce dependence on one platform and minimize risk.
Personalization of offers and excellent customer service can be key differentiators. Understanding the needs and preferences of customers and then adapting your offer to those needs can increase customer loyalty and satisfaction.
Sellers should also explore local markets. In every country, there is a “world next to Amazon” where sellers can have a competitive advantage. Using the opportunities provided by these additional platforms can contribute to increased security, sales, and profits.
Merchants should stay up to date with any changes to e-commerce platform policies and algorithms. Tracking such changes will allow you to quickly adjust your strategy and avoid potential issues with product visibility and positioning.
Amazon, being both a host and a competitor, puts third-party sellers in a difficult position. However, the reduction of Amazon's own brands creates new opportunities for sellers, especially those offering high-quality and unique products. Sellers should focus on innovation, effective marketing strategies, and building relationships with customers to succeed in the international market. Diversification of sales channels, personalization of offers, and monitoring changes on platforms can additionally contribute to increasing competitiveness and profitability in the dynamically changing e-commerce environment.
☝️ Amazon is a complex platform but also a powerful e-commerce giant to launch your sales growth. Get advice from the experts who know it best. Reach out to EXPANDO today by clicking here!
Share this article on a social media.
